| Litigation Practice |
January 15, 2014 |
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| Supreme Court Rules that State AG Parens Patriae Suits Are Not Mass Actions under CAFA |
The Supreme Court yesterday issued an important decision that limits the ability of defendants to remove lawsuits brought by state attorneys general from state to federal court.
In Mississippi v. AU Optronics Corp, No. 12-1036, the Court unanimously held that a price-fixing action brought by Mississippi Attorney General was not a “mass action” because the state was the sole named plaintiff, and therefore the case could not be removed from state court to federal court under the Class Action Fairness Act of 2005 (CAFA).
Congress passed CAFA in order to address the potential for manipulation of class action lawsuits to keep certain cases in state courts when litigation in a federal court would be more appropriate. CAFA provides for federal jurisdiction for “mass actions” when any class member and any defendant are from different states. “Mass actions” are defined as civil actions other than class actions “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law and fact.” 28 U.S.C. § 1332(d)(11)(B)(i).
The Mississippi action seeks to recover damages resulting from purchases by the state and by consumers in Mississippi of allegedly price-fixed LCD panels. The defendants removed the case to federal court under CAFA, on the ground that the lawsuit sought to vindicate the claims of 100 or more individual consumers. The Mississippi Attorney General moved to remand. The district court concluded that the case is a “mass action” under CAFA, but it ruled nevertheless that the case should be remanded based on the so-called “general public exception.” Under that exception, CAFA does not apply to claims “asserted on behalf of the general public.” 28 U.S.C. § 1332(d) (11)(B)(ii)(III).
On appeal, the Fifth Circuit agreed that the action was a “mass action,” but it held that the general public exception did not apply because the individual consumers in Mississippi were the real parties in interest. Thus, the Fifth Circuit reversed the district court’s remand order and held that CAFA permitted removal to federal court. The Supreme Court granted certiorari to resolve a split of authority between the Fifth Circuit on the one hand and the Fourth, Seventh, and Ninth Circuits on the other, which held that similar lawsuits could not be removed to federal court under CAFA.
In a decision issued yesterday, the Court rejected the Fifth Circuit’s approach. It held that because Mississippi was the only named plaintiff, the action did not meet the “100 or more persons” requirement for mass actions. The Court reasoned that “100 or more persons” did not include unnamed parties in interest and that the statute’s use of “persons” could only mean named “plaintiffs” in the context of the statute. Accordingly, the action could not be removed under CAFA.
For defendants, this decision eliminates a potential avenue for obtaining a less state-focused forum in parens patriae actions, where state attorneys general seek to litigate the claims of many state consumers on a collective basis. In the future, parens patriae actions brought by state attorneys general on behalf of state consumers seeking damages will likely remain in state court and be litigated separately from related civil lawsuits for which removal to federal court remains possible. |
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| Winston & Strawn Contacts |
| Jeffrey J. Amato, Author |
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Linda T. Coberly, Co-Chair, Appellate and Critical Motions practice |
| Gene C. Schaerr, Co-Chair, Appellate and Critical Motions practice |
| Jeffrey L. Kessler, Chair, Antitrust/Competition practice |
| Neal R. Marder, Chair, Class Actions practice |
| Paul Victor, Partner |
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