Supreme Court Resolves Circuit Conflict on Removal of Parens Patriae Suits Under CAFA

The US Supreme Court has held in a unanimous opinion that a parens patriae suit for restitution brought by Mississippi on behalf of its citizens does not constitute a “mass action” under the Class Action Fairness Act of 2005 (CAFA).1 The ruling means that the defendants do not have the right under CAFA to remove the case to federal court.

Background

CAFA was enacted to minimize forum shopping and heighten courts’ scrutiny of settlements in multidistrict class action lawsuits. To accomplish the former, CAFA grants federal jurisdiction to class action or mass action lawsuits meeting certain minimal diversity and amount in controversy requirements.2 This case turned on whether mass action includes a parens patriae suit, in which a State Attorney General acts as the sole plaintiff suing on behalf of the citizens of a state. The suit arose from a massive antitrust multidistrict litigation accusing LCD display makers of price-fixing and other anticompetitive behavior. A $539 million settlement was reached with the indirect purchaser plaintiffs, who bought finished products (such as televisions and computer monitors) that contained allegedly price-fixed LCDs. Mississippi, like several other states, decided not to take part in the settlement and instead filed aparens patriae action on behalf of its citizens under its own state antitrust laws. Mississippi filed suit in state court seeking, among other things, restitution for purchases by Mississippi citizens of LCD finished products. Defendants then sought to have the case removed to federal court under CAFA. The district court remanded the suit to state court,3 and the Fifth Circuit reversed, holding that CAFA required a mass action to be removed to federal court.4 The Fifth Circuit ruling created a conflict with the Fourth, Seventh, and Ninth Circuits, which had all recently refused to remove similar suits to federal courts under CAFA.5

Court’s Analysis and Ruling

Defendants argued that Mississippi’s suit qualified as a mass action, which CAFA defines as a “civil action … 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 or fact.”6 The defendants contended that by using “persons” instead of “plaintiffs,” lawmakers intended to capture in the definition the “parties in interest to the claims,” including the citizens on whose behalf the Mississippi Attorney General had sued.7 Moreover, they argued, parens patriae suits are “similar” to class actions, which are removable to federal court under a separate provision of CAFA.8 The Supreme Court agreed with Mississippi, holding that “persons” does not mean “named or unnamed real parties in interest,” a distinction that lawmakers could have easily made clear in the statute had they intended it.9 Considering its usage throughout the statute and in Rule 20 of the Federal Rules of Civil Procedure guiding joinder of parties, “persons” could only mean “plaintiffs” – that is, “the actual named parties who bring an action.”10 Even though Mississippi’s suit was brought on behalf of well over 100 individuals, it has only one named plaintiff – the Attorney General – and thus does not qualify as a mass action under CAFA. The Court noted that the primary purpose of the provision was to prevent plaintiffs from using mass actions to circumvent the part of CAFA that permits defendants to remove a class action to federal court.11 The specific concern was that plaintiffs could avoid having a class action removed to federal court under CAFA by instead filing a state court action as a large multi-plaintiff suit.

Effect on Class and Mass Litigations

In several ways, the Supreme Court’s ruling benefits State Attorneys General and plaintiffs’ attorneys, while exposing defendants to higher liability and litigation costs. By ensuring that parens patriae cases can remain on home turf, the Supreme Court’s ruling is likely to encourage suits brought by State Attorneys General – not only in the antitrust context but more broadly under state consumer protection laws. Some commentators predict an increase in cases where, as in Mississippi’s LCDs suit, plaintiffs’ attorneys partner with the state in exchange for contingency-based compensation. Plaintiffs’ attorneys stand to benefit from these arrangements because class or mass action claims that would have been removed to federal court under CAFA can, if filed as parens patriae suits, remain in state jurisdictions perceived to award larger damages to plaintiffs. This could lead to higher damages awarded at trial, or higher settlement payouts from defendants seeking to avoid that risk. Defendants, in turn, will be unable to seek a federal safe harbor via removal from such “plaintiff-friendly” state jurisdictions. Moreover, not being able to consolidate parens patriaesuits with similar federal cases means that state and federal cases arising out of the same conduct will proceed in parallel, potentially resulting in higher defense costs and inconsistent rulings. And if courts are not careful, defendants could end up paying for the same damages twice in situations where plaintiffs who are members of a class in a federal case are simultaneously being represented in a state parens patriae suit arising out of the same facts. Finally, parallel state and federal proceedings could complicate the settlement process because of the need to settle multiple actions simultaneously and obtain adequate releases.

Endnotes

Endnotes    (↵ returns to text)
  1. Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp. et al., No.12-1036 (USSC Jan. 14, 2014).
  2. See28 U.S.C. §1332(d).
  3. 876 F. Supp. 2d 758 (S.D. Miss. 2012).
  4. 701 F. 3d 796 (5th Cir. 2012).
  5. SeeAU Optronics Corp. v. South Carolina, 699 F. 3d 385 (4th Cir. 2012); Nevada v. Bank of America Corp., 672 F. 3d 661 (9th Cir. 2012); LG Display Co. v. Madigan, 665 F. 3d 768 (7th Cir. 2011).
  6. 28 U.S.C. § 1332(d)(11)(B)(i).
  7. Mississippi ex rel. Hood, slip op. at *6.
  8. at *11; see 28 U.S.C. § 1332(d)(2).
  9. Mississippi ex rel. Hood, slip op. at *6.
  10. at *6-7, *9-10.
  11. at *11.
Kaj Rozga

Kaj Rozga

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