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WASHINGTON, D.C. — (Mealey's) A state’s lawsuit seeking restitution for itself and its citizens, in which it is the only named plaintiff, does not qualify as a mass action under the Class Action Fairness Act (CAFA), the U.S. Supreme Court ruled unanimously Jan. 14 (State of Mississippi, ex rel. Jim Hood, Attorney General v. AU Optronics Corp., et al., No. 12-1036, U.S. Sup.) [enhanced opinion available to lexis.com subscribers] [lexis.com subscribers may access Supreme Court briefs for this case].
“According to CAFA’s plain text, a ‘mass action’ must involve monetary claims brought by 100 or more persons who propose to try those claims jointly as named plaintiffs. Because the State of Mississippi is the only named plaintiff in the instant action, the case must be remanded to state court,” Justice Sonia Sotomayor wrote for the court.
In addition, the high court opined that its reading is reinforced by the statutory context. “First, the provision of CAFA governing transfer motions confirms our view that the term ‘plaintiffs’ refers to actual named parties as opposed to unnamed real parties in interest. . . . The context in which the mass action provision was enacted lends further support to our conclusion. Congress’ overriding concern in enacting CAFA was with class actions. . . . The mass action provision thus functions largely as a backstop to ensure that CAFA’s relaxed jurisdictional rules for class actions cannot be evaded by a suit that names a host of plaintiffs rather than using the class device. Respondents’ argument fails to recognize this key distinction,” the court held.
State Court Complaint
The State of Mississippi sued nearly two dozen liquid crystal display (LCD) companies in the Hinds County, Miss., Chancery Court, alleging that the defendants’ conduct artificially inflated prices, which harmed consumers, who were forced to pay higher prices. The defendants removed the case to the U.S. District Court for the Southern District of Mississippi, claiming that the action was a class action or a mass action under CAFA.
The state moved to remand the case to state court, and the District Court granted the motion. The defendants appealed to the Fifth Circuit.
Reversing the District Court’s remand order, the appellate panel opined that not only are there more than 100 consumers, resulting in more than 100 claims at issue in the case, but also that CAFA’s general public exception is inapplicable. “It provides 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.’ 28 U.S.C. § 1332(d)(11)(B)(ii)(III). But this public exception does not exempt this case from the CAFA and federal jurisdiction. The requirement that ‘all of the claims’ be asserted on behalf of the public is not met here,” Judge E. Grady Jolly wrote for the panel.
However, the panel added that it acknowledged “the concern that finding the general public exception inapplicable here may render such statutory exception a dead letter (because finding a suit to be a mass action negates the possibility of the exception applying), and we welcome congressional clarification of this issue.”
Judge Edith Brown Clement joined in the opinion.
Judge Jennifer Walker Elrod concurred, but only in judgment. “I concur in judgment because the majority opinion is a fair application of our binding precedent, namely Louisiana ex rel. Caldwell v. Allstate Insurance Co., 536 F.3d 418 (5th Cir. 2008). I write separately, however, to express my concerns with Caldwell. Caldwell’s claim-by-claim approach is problematic when applied to CAFA’s ‘mass action’ provision in parens patriae suits such as the instant case. Moreover, and just as troubling, applying Caldwell’s reasoning to CAFA’s general public exception may render the exception a dead letter in this circuit. We should reconsider Caldwell and correct our course in this area of the law,” the judge said.
High Court Appeal
Hood petitioned the U.S. Supreme Court, which granted the petition on May 28.
In oral arguments held Nov. 6, Jonathan S. Massey of Washington, representing the State of Mississippi’s attorney general, told the Supreme Court justices that “the attempt to force State actions into the mass action definition is a square-peg-round-hole kind of problem. The mass action definition addresses the situation of mass consolidation or mass joinder when there are 100 individual plaintiffs or more in a case. . . . But that does not apply to this situation. CAFA refers to real plaintiffs asserting concrete claims and further provides that those claims must be proposed to be tried jointly. None of that happens in a parens patriae case where the State is the only Plaintiff.”
Arguing on behalf of the LCD companies, Christopher M. Curran of White & Case in Washington told the justices that the attorney general’s definition of a mass action is incorrect.
“The attorney general’s interpretation of the mass action definition requires this Court to conclude that a mass action can only be one of the actions with 100 or more named plaintiffs, and can never be a representative action. This interpretation cannot be squared with the statutory language, the purpose of the Act and the structure of the Act,” Curran argued.
Cory L. Andrews of Washington Legal Foundation in Washington filed an amicus curiae brief on behalf of Washington Legal Foundation. Charles J. Cooper of Cooper & Kirk in Washington filed an amicus brief on behalf of Access to Courts Initiative Inc. and National Association of Manufacturers. Richard L. Fenton of Dentons US in Chicago filed an amicus brief on behalf of Allstate Insurance Co. Stephen D. Houck of Menaker & Herrmann in New York filed the amicus brief on behalf of The Center for State Enforcement of Antitrust and Consumer Protection Laws Inc.
Noah A. Levine of Wilmer, Cutler, Pickering, Hale & Dorr in New York filed an amicus brief on behalf of Pharmaceutical Research and Manufacturers of America and American Bankers Association. Scott L. Nelson of Public Citizen Litigation Group in Washington filed the amicus brief on behalf of Public Citizen. Julie Nepveu of AARP Foundation Litigation in Washington filed the amicus brief on behalf of AARP. Mary M. Ross of DRI – The Voice of the Defense Bar in Bloomfield Hills, Mich., filed an amicus brief on behalf of DRI – The Voice of the Defense Bar. Solicitor General Michael A. Scodro in Chicago filed the amicus brief on behalf of Illinois and 45 other states.
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