Oral Argument Analysis for January 15—Defendant Removal & Rule-Making Authority

On January 15, the Court heard oral arguments for two cases: Home Depot v Jackson and Azar v. Allina Health Services. Justice Ginsburg is recovering from lung cancer surgery she underwent last month and was not in attendance.

In Home Depot, Citibank sued George Jackson in North Carolina state court for debt collection. Jackson then brought a counterclaim against Citibank but also added third-party class action claims against Home Depot and Carolina Water Systems, Inc. (CWS). Jackson’s counterclaim asserted that Citibank, Home Depot, and CWS were misleading customers about their water treatment systems and financing thereof.

When Citibank dismissed its original claim against Jackson, Home Depot petitioned to remove its counterclaim to federal court under the Class Action Fairness Act of 2005. But then the federal district court granted Jackson’s request to remand the case back to state court, on the basis that since Home Depot was not technically a defendant, it could not remove the case to federal court. Meanwhile, Jackson dropped his counterclaim against Citibank, eliminating them from the case. Home Depot and CWS appealed the district court’s decision to remand to state court to the Court of Appeals for the Fourth Circuit. Home Depot based its appeal on two arguments: that the term “defendant” should be read to allow third-party defendant’s to remove a case from state to federal court; and that since Citibank was no longer a defendant, Home Depot should be recognized as the “defendant” rather than a “third-party defendant.” The Fourth Circuit affirmed the district court ruling, and Home Depot petitioned the Supreme Court for a writ of certiorari, which the Court granted.

Oral arguments revealed a Supreme Court with mixed opinions on the case. Justice Kagan indicated disagreement with Home Depot’s argument. She went so far as to state that the plaintiff’s complaint doesn’t have any claims that belong in federal court and questioned the authority of Home Depot to remove under 28 U.S. Code § 1441 (a). Justices Sotomayor and Breyer echoed Kagan’s comments. But Chief Justice Roberts and Justice Alito seemed to lean in the other direction, pressing Jackson’s counsel. “But in the ordinary sense of the term are they not defendants?” Alito asked, adding, “They are some kind of defendants.”

Audio of the oral arguments is available here; a transcript can be accessed here.

In Azar, the Court is asked to determine whether or not the Department of Health and Human Services (HHS) erred by not providing public notice and comment on a rule change which altered the calculations used in Medicare reimbursement payments. Medicare, which helps provide Americans over age 64 with health insurance, is divided into several parts. They inclue Part A, in which the government directly administers health insurance to enrollees, and Part C, in which the government subsidizes enrollees to obtain private insurance plans. HHS issued a rule that provided that Medicare Part C enrollees are entitled to benefits under Part A. After the United States Court of Appeals for the District of Columbia ruled that an opportunity for public notice and comment was required before issuing such a rule. the Court granted petition for writ of certiorari by HHS Secretary Alex Azar.

Justices Kagan, Sotomayor, and Gorsuch questioned the government’s interpretation of statutory language regarding substantive changes and public notice and comment requirements. Justices Breyer and Gorsuch pointed out that the legislative history of the Medicare Act is “confused.” HHS pointed to the negative consequences for the agency if it would have to go through the public vetting process for all substantive changes, stating there are “thousands of pages of regulations, but the Court has recognized that [it] can’t answer all questions that come up.” Counsel for Allina and other hospitals dismissed the government’s warnings, arguing that the provision in question would only apply to roughly 35 pages of Medicare manuals.

Justice Kavanaugh has recused himself from the case because he wrote a circuit court decision invalidating the HHS formula.

Audio of the oral arguments is available here; a transcript can be accessed here.

This Post was Written by ISCOTUS Fellow James O’Brien, Chicago-Kent Class of 2021, and edited by ISCOTUS Editorial Coordinator Matthew Webber, Chicago-Kent Class of 2019, and ISCOTUS Co-Director and Chicago-Kent Faculty Member Christopher W. Schmidt.


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