Supreme Court Hears Argument in CAFA Case

The U.S. Supreme Court heard argument in a case raising the issue whether a parens patriae group action by a state attorney general -- a class-like litigation without the procedural protections of a class action -- is removable as a mass action under CAFA.  See Mississippi ex rel. Hood v. AU Optronics Corp.,  No. 12-1036 (U.S., oral argument 11/6/13).

The Fifth Circuit, 701 F.3d 796 (5th Cir. 2012), had announced a claim-by-claim analysis to determine the real party in interest for purposes of CAFA jurisdiction in such parens patriae actions; the Fourth, Seventh and Ninth Circuits have taken a different, more “whole case” approach, considering the entire complaint to determine the real party in interest.  See AU Optronics Corp. v. South Carolina, 699 F.3d 385 (4th Cir. 2012); LG Display Co. v. Madigan, 665 F.3d 768 (7th Cir. 2011); Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2012).

CAFA allows removal of certain mass actions, even if not styled as class actions, but contains an exception that a suit is not a mass action if all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a state statute specifically authorizing such action; but when specific individual consumers, in addition to the state, are the real parties in interest, there is no way that all of the claims are asserted on behalf of the general public.

Mississippi, of course, argued for "state sovereign prerogatives.”  And Mississippi focused on the statutory language about a mass action seeking a joint trial, and contended that the parens patriae action did not propose a joint trial for 100 or more plaintiffs' claims. On the other hand, defendants noted that the use of the word “persons” in CAFA's mass action provision clearly required the court to engage in a fact specific claim-by-claim analysis, rather than take a whole-claim approach. CAFA could have, but did not focus on “named plaintiffs.”  It was clear that the Mississippi consumers allegedly harmed by defendants' prices were the real parties in interest.  Regarding the federalism concerns, defendants noted that this was only a question of forum, and federal courts can faithfully enforce state law.

The Washington Legal Foundation, in one of multiple amicus filings, argued that CAFA was enacted to enhance the ability of defendants to remove interstate mass actions to federal court.  The Chief Justice raised the most compelling issue, asking “So the answer is, that there is nothing to prevent 50 attorneys general, from saying, every time there is a successful class action as to which somebody in my State purchased one of the items, we are going to file a parens patriae action, the complaint is going to look an awful lot like the class action complaint, and we want our money” -- in state court, out of the reach of CAFA?

 

Supreme Court Takes CAFA Parens Patriae Issue

The U.S. Supreme Court granted cert last week to address whether a state attorney general's parens patriae antitrust action is removable as a mass action under the Class Action Fairness Act of 2005.  See Mississippi v. AU Optronics Corp., No. 12-1036 (U.S., certiorari granted 05/28/13).

As noted in the respondents' papers, CAFA expands federal diversity jurisdiction for both “class actions” and “mass actions.” A “mass action” is defined as any civil action in which monetary relief claims of 100 or more persons are proposed to be tried jointly.  The definitions of “class actions” and “mass actions” are connected, as a mass action is deemed to be a class action removable to federal court if it otherwise meets the provisions of a “class action,” including CAFA’s unique minimal diversity.

Determining whether the 100 person level is satisfied requires consideration of whose claims are actually being asserted, as the Court has held that diversity  jurisdiction must be based upon the citizenship of
real parties to the controversy. E.g.,  Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980).  Where the action filed by the State seeks monetary relief claims on behalf of more than 100 unnamed persons who are among the real parties in interest and any one of them is diverse from any defendant, CAFA applies.  This was the approach of the 5th Circuit here, 701 F.3d 796, 800 (5th Cir. 2012), under the so-called “claim-by-claim" approach.  In contrast other courts look to the "state’s complaint as a whole." E.g., AU Optronics Corp. v. South Carolina, 699 F.3d 385, 394 (4th Cir. 2012).

It will be interesting to see if the Court applies the notion from the unanimous CAFA decision in Standard Fire that treating a nonbinding stipulation (on damages) from the class rep before a class is even certified as if it were binding on the later class would “exalt form over substance, and run directly counter to CAFA's primary objective: ensuring federal court consideration of interstate cases of national importance.”