Clash of the Sovereigns I: The Class Action Fairness Act and State Parens Patriae Actions

Abstract

This article canvasses the issues and significance of the appeal in State of Mississippi, Jim Hood AG v. AU Optronics Corp., to be heard by the Supreme Court in November 2013. The Mississippi Attorney General instituted an action under Mississippi antitrust and consumer protection statutes against liquid crystal display panel manufacturers. After the defendants removed the litigation to federal court under the Class Action Fairness Act (“CAFA”), the Fifth Circuit held that the litigation was properly removable. This appeal concerns whether state parens patriae actions are an exception to CAFA removal provisions and therefore the litigation must be remanded to Mississippi state court.

CAFA defines a mass action as any action that joins the monetary claims of 100 or more persons to be tried jointly on the grounds that the plaintiffs’ claims involve common questions of law or fact. 28 U.S.C. § 1332(d)(11)(B)(i). However, each plaintiff in a mass action must satisfy the $75,000 amount in controversy requirement that exists for regular diversity plaintiffs. Mass actions do not include claims that the defendant joins; actions where all claims are asserted on behalf of the general public pursuant to a state statute authorizing the action; or claims that are consolidated or coordinated solely for pre-trial proceedings. 28 U.S.C. § 1332(d)(11)(B)(ii). If a mass action is removed to federal court, it cannot be transferred to a multidistrict litigation court unless a majority of the plaintiffs request the transfer to the MDL forum. 28 U.S.C. § 1332(d)(11)(C).

Since CAFA’s enactment, federal courts have split concerning whether state AG parens patriae actions constitute CAFA mass actions subject to CAFA removal. Courts have taken two approaches to this question. Thus, some courts have looked to the entire complaint to determine whether an action is a true parens patriae action brought by the AG on behalf of state citizens for a recovery accruing the state’s benefit. If the court takes this “whole complaint” approach and finds a true parens patriae action, then the court will conclude that the action is not a mass action subject to CAFA removal and the case will remain in state court.

On the other hand, some federal courts apply a “claim-by-claim” approach, which requires the court to pierce the pleadings and evaluate whether the AG has asserted claims on behalf of individual citizens. If the complaint includes claims for the benefit of individual persons — especially claims for monetary relief — then the court will assess whether more than 100 claims have been asserted to constitute a mass action, subject to CAFA removal. In cases where state AGs have alleged parens patriae claims on behalf of the state, but included claims for restitution to individual citizens, these courts have found such actions to be mass actions subject to removal under CAFA.

The Mississippi AG’s appeal focuses attention on a significant problem that has emerged since CAFA’s enactment in 2005, because numerous defendants sued in state parens patriae actions have attempted to remove these actions to federal court under CAFA. Consequently, the stakes are high for all state attorneys general who desire to retain their authority over parens patriae litigation in their own state courts. Like a band of brothers, 46 AGs have filed an amicus brief in support of the Mississippi AG. In addition, consumer advocate groups, the AARP, and Public Citizen have all weighed in on the side of the Mississippi AG.

There is no unanimity among federal courts concerning whether such parens patriae actions are immune from removal and should remain in state courts. Moreover, CAFA makes no specific reference to parens patriae actions; the decisional law is unclear; and the drafters’ intentions are muddied by CAFA’s questionable legislative history. Furthermore, CAFA’s additional exemption for litigation concerning the “general public” adds another dollop of confusion to the CAFA cauldron.

Keywords: Class Actions Fairness Act, parens patriae actions, CAFA, CAFA mass actions, removal of mass actions, Hood v. AU Optronics, State of Mississippi v. AU Optronics, claim-by-claim removal, whole complaint removal