Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_15-cv-00934/USCOURTS-almd-2_15-cv-00934-0/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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IN THE UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF ALABAMA 

NORTHERN DIVISION 

CHERYL SUTTLES, ) 

) 

 Plaintiff, ) 

) 

v. ) CASE NO. 2:15-cv-934-WHA-TFM 

) 

VENDOR RESOURCE MANAGEMENT, ) 

et al., ) 

 ) 

 Defendants. ) 

REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE 

 Pursuant to 28 U.S.C. § 636(b)(1), this case was referred to the undersigned United States 

Magistrate Judge for review and submission of a report with recommended findings of fact and 

conclusions of law (Doc. , entered ). Now pending before the Court is a Motion for Remand 

(Doc. 8). The motion is fully submitted and ripe for review. For good cause shown, the 

Magistrate Judge recommends that the Motion for Remand be GRANTED as discussed within 

this opinion. 

I. Facts and Procedural History 

Cheryl Suttles (“Suttles”) took out a home loan in September of 2007. The loan was 

secured by a mortgage by Anchor Mortgage Services, Inc. (“Anchor”), with Mortgage Electronic 

Registration Systems, Inc. (“MERS”) as nominee. The loan was transferred to CitiMortgage, 

Inc. (“CitiMortgage”). The mortgage was then transferred to Vendor Resource Management 

(“VRM”), the agent of Secretary of Veterans Affairs. On May 13, 2014, CitiMortgage 

foreclosed on Suttles’ home. 

On August 11, 2014, VRM filed a complaint against Suttles in the Circuit Court of 

Elmore County, Alabama for ejectment. Suttles filed a counterclaim against VRM and named 

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CitiMortgage, MERS, and Anchor as “Counterclaim-Defendants.” (Doc. 1-9). Suttles’ 

counterclaims include claims against CitiMortgage under the federal Fair Debt Collection 

Practices Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, the 

Truth in Lending Act, and violation of state law. While the case was pending in state court, 

CitiMortgage filed an Answer. On November 23, 2015, the state Circuit Court dismissed 

VRM’s claims against Suttles. On December 18, 2015, the Circuit Court dismissed Suttles’ 

claims in Counts 1 through 15 against VRM with prejudice. (Doc. 1-2 at p. 376). The one 

remaining counterclaim against VRM was dismissed after a Joint Stipulation of Dismissal was 

filed. (Doc. 1-2 at p. 408). 

CitiMortgage filed a Notice of Removal in this court on December 18, 2015. 

CitiMortgage states in the Notice of Removal that the case is properly removable under 28 

U.S.C. §1441 because the United States District Court has original jurisdiction over this case 

under 28 U.S.C. §1331. 

 

 II. MOTION TO REMAND STANDARD 

 Federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co. 

of America, 511 U.S. 375 (1994); Burns v. Windsor Insurance Co., 31 F.3d 1092, 1095 (1994); 

Wymbs v. Republican State Executive Committee, 719 F.2d 1072, 1076 (11th Cir. 1983), cert. 

denied, 465 U.S. 1103 (1984). As such, federal courts only have the power to hear cases that 

they have been authorized to hear by the Constitution or the Congress of the United States. See

Kokkonen, 511 U.S. at 377. Because federal court jurisdiction is limited, the Eleventh Circuit 

favors remand of removed cases where federal jurisdiction is not absolutely clear. See Burns, 31 

F.3d at 1095. 

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 Because this case was originally filed in state court and removed to federal court, the 

Defendants bear the burden of proving that federal jurisdiction exists. Williams v. Best Buy Co., 

Inc., 269 F. 3d 1316, 1319 (11th Cir. 2001). 

 III. DISCUSSION 

Title 28 of the United States Code §1441(a), provides for removal by the “defendant or 

the defendants.” Federal law determines who is a plaintiff and who is a defendant for purposes 

of removal. Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580 (1954). A majority of federal 

courts have held a third-party defendant is not a “defendant” within the meaning of §1441. See

Interior Cleaning Sys., LLC v. Crum, No. CIV.A. 14-0199-WS-N, 2014 WL 3428932, at *3 

(S.D. Ala. July 14, 2014). 

Consistent with this majority view, Suttles contends that because CitiMortgage was not a 

defendant in the original action, it is not a party that can remove the case to federal court. 

Binding precedent in the Eleventh Circuit, however, has recognized exceptions to the general 

rule relied on by Suttles, and one of those exceptions is relied on by CitiMortgage in removing 

this case. 

The former Fifth Circuit took the minority view and allowed removal by a third-party 

defendant in Carl Heck Engineers, Inc. v. Lafourche Par. Police Jury, 622 F.2d 133 (5th Cir. 

1980).1

 

Suttles questions the continued vitality of Carl Heck and asserts that the controlling law 

on the issue is Holmes Group, Inc. v. Vornado Air Circulation Sys., 535 U.S. 826 (2002), which 

she suggests stands for the proposition that third-party defendants should never be able to 

remove cases. 

 

1 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), the Eleventh 

Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down prior 

to October 1, 1981. 

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In this court, Carl Heck has been interpreted post-Holmes Group to mean that a thirdparty defendant, but not a counterclaim defendant, can remove a case to federal court. Bank of 

New York Mellon v. Reaves, No. 3:15cv311-WKW, 2015 WL 5736395, at *3 (M.D. Ala. Sept. 

30, 2015) (Watkins, C.J.). This court has reasoned that the better course, given that removal 

statutes are to be construed strictly, is to remand “rather than to guess what this circuit might do 

if presented with the unsettled issue of whether Carl Heck should be extended to removals by 

counter-defendants.” Id. at *4 (citing Citibank (S. Dakota), N.A. v. Duncan, No. 2:09cv868-

WKW, 2010 WL 379869, at *2 (M.D. Ala. Jan. 25, 2010)). This court is persuaded by Reaves

that an exception to the general rule against removability by third-party defendants should not be 

expanded. 

In the instant case, CitiMortage does not rely on the exception in Carl Heck, but instead 

relies on a different exception, applied in Central of Georgia Ry. Co. v. Riegel Textile Corp., 426 

F.2d 935 (1970). (Doc. 10 at p.11). In Riegel, the defendant employer of the plaintiff filed a 

third-party complaint against a third-party. The former Fifth Circuit concluded that where the 

third-party complaint had been severed by the state court, it was properly removed by the thirdparty defendant. 426 F.2d at 938. 

This court has applied the Riegel exception and determined that a third-party defendant 

may remove the claims asserted against him when the state court has severed third-party claims 

from those in the original complaint prior to removal. See Title Pro Closings, LLC v. Tudor Ins. 

Co., 840 F. Supp. 2d 1299, 1304 (M.D. Ala. 2012); Roberson v. Alabama Trucking Ass'n 

Workers' Comp. Fund, No. 3:11cv933-SRW, 2012 WL 4477648, at *1 (M.D. Ala. Sept. 27, 

2012). In Title Pro Closings, the court held that a third-party defendant could remove a case to 

federal court when the original plaintiff was severed from the claim. 840 F. Supp. at 1304. The 

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right of the third-party defendant arose when the state court severed the claims brought by the 

original plaintiff, leaving only the original defendant and the third-party defendant. Id. The court 

found that the severance “transforms the original defendant into a plaintiff and the third-party 

defendant into a defendant capable of removing the action.” Id. 

Another district court in this circuit has examined the application of the Riegel exception 

in a case in which claims were not severed by the state court, but instead, the plaintiff was 

granted judgment. See Interior Cleaning Systems, 2014 WL 3428932, at *3-*4. In Interior 

Cleaning Systems, the court explained that where third-party claims have been severed, removal 

by a third-party defendant does not cause any interference with the plaintiff’s choice of forum. 

Id. at *3. In that case, however, where there were post-judgment issues, the court foresaw 

continued litigation of the original plaintiff’s claims, which would have to occur in federal court, 

because there had been no severance of the claims by the state court. Id. The court concluded, 

therefore, that Riegel did not apply, and that removal was improper. Id. at *5.

CitiMortgage takes the position that a case in which claims are severed by the state court, 

as in Riegel, and a case in which the claims are dismissed by the state court, as in the instant 

case, should be treated the same, citing Johns, Pendleton & Assoc. v. Miranda, Warwick & 

Milazzo, No. 02-1486, 2002 WL 31001838, at *3 (E.D. La. Sept. 4, 2002). The Johns case relied 

on by CitiMortgage is acknowledged by district courts in the Fifth Circuit to recognize an 

exception where claims are dismissed rather than severed. See, e.g., F.L. Crane & Sons, Inc. v. 

IKBI, Inc., 630 F. Supp. 2d 718, 721 (S.D. Miss. 2009) (referring to the “Johns exception.”). 

This court is persuaded by reasoning in Interior Cleaning Systems that there is a reason 

for distinguishing severance of third-party claims from dismissal of those claims by the state 

court. In that case, the court pointed out that there were questions about the enforceability of a 

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judgment on the plaintiff’s claims, and reasoned that if the removal were allowed, the original 

plaintiff would be forced to litigate those issues in federal court, which was not the state forum of 

its choosing. 2014 WL 3428932, at *5. Applied in this case, even though the claims by and 

against the original plaintiff, VRM, were dismissed in the state court, there may be 

circumstances warranting judicial oversight over the state court’s dismissal and which, because 

the claims were not severed, would cause the original plaintiff to litigate in this court, a forum 

that the original plaintiff did not choose. See id. at *4.2 Because dismissal is not the same as 

severance of third-party claims in this significant way, applying Riegel in a case involving 

dismissal would be an extension of the Riegel exception. 

Federal courts are directed to construe removal statutes strictly and to resolve all doubts 

about jurisdiction in favor of remand to state court. See Univ. of S. Ala. v. Am. Tobacco Co., 168 

F.3d 405, 411 (11th Cir. 1999). When applying the Carl Heck exception, as discussed above, 

this court has declined to extend the exception, and instead resolved the doubt about jurisdiction 

in favor of remand. Reaves, 2015 WL 5736395 at *4. This court concludes that the same 

reasoning should be applied in the context of the Riegel exception. Other courts bound by the 

Riegel decision have reached a similar conclusion. See, e.g., ConocoPhillips Co. v. Turner 

Industries Group, LLC, No. G-05-516, 2006 WL 213956, at *2 (S.D. Tex. Jan. 24, 2006) (stating 

that “[c]onstruing the Riegel decision strictly requires its limitation to cases where the claim 

sought to be removed has been severed from the original claims.”). 

Riegel allows for removability when a third-party which was not an original defendant 

became a defendant entitled to removal because the original plaintiff’s claims were severed by 

 

2

 CitiMortgage cites to this decision as support for treating dismissal and severance of claims by 

the state court the same way for purpose of removal, but Interior Cleaning Systems only

distinguished the facts of a judgment from both a dismissal and severance, and did not address 

whether there was a difference between a dismissal and a severance of claims by the state court. 

2014 WL 3428932, at *3.

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the state court. Severance did not happen in this case, so Riegel does not apply. Accordingly, 

the case was improperly removed to this court from state court, and the Motion to Remand is due 

to be GRANTED. 

 IV. CONCLUSION 

 For reasons discussed, it is the RECOMMENDATION of the Magistrate Judge that the 

Motion to Remand (Doc. 8) be GRANTED. 

 It is further ORDERED that the parties shall file any objections to the said 

Recommendation on or before March 16, 2016. Any objections filed must specifically identify 

the findings in the Magistrate Judge’s Recommendation to which the party objects. Frivolous, 

conclusive or general objections will not be considered by the District Court. The parties are 

advised that this Recommendation is not a final order of the court and, therefore, it is not 

appealable. 

 Failure to file written objections to the proposed findings and recommendations in the 

Magistrate Judge's report shall bar the party from a de novo determination by the District Court 

of issues covered in the report and shall bar the party from attacking on appeal factual findings in 

the report accepted or adopted by the District Court except upon grounds of plain error or 

manifest injustice. Nettles v. Wainwright, 677 F.2d 404 (5th Cir. 1982); Stein v. Reynolds 

Securities, Inc., 667 F.2d 33 (11th Cir. 1982); see also Bonner v. City of Prichard, 661 F.2d 1206 

(11th Cir. 1981, en banc) (adopting as binding precedent all of the decisions of the former Fifth 

Circuit handed down prior to the close of business on September 30, 1981). 

DONE this 1st day of March, 2016. 

 /s/Terry F. Moorer 

 TERRY F. MOORER 

 UNITED STATES MAGISTRATE JUDGE

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