United States: What’s Next For The Class Action Plaintiffs’ Bar? Getting Deputized By State Attorneys General

Last Updated: January 23 2013
Article by Kevin S. Ranlett

Keywords: AT&T Mobility LLC v. Concepcion, Class Action Fairness Act, due process, ERISA, Inc. v. Dukes, parens patriae, removal, RICO, standing, Wal-Mart Stores

Some academics and commentators have been reading the tea leaves in Wal-Mart Stores v. Dukes (pdf) and AT&T Mobility LLC v. Concepcion (pdf) as spelling doom for consumer and employment class actions. That's overwrought; Dukes rejected an extremely adventuresome application of the class action rules by the Ninth Circuit, and Concepcion merely reminded courts that they can't get around the Federal Arbitration Act by insisting that arbitration agreements permit expensive aspects of judicial litigation that are completely alien to arbitration in its traditional form. The continuing flood of class action filings is proof that the spigot hasn't been shut off. But companies should pay attention to where the plaintiffs' bar thinks they should move next if filing class actions stops being a viable business model.

In a recent article—After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion (pdf), 79 U. Chi. L. Rev. 623 (2012)—law professor Myriam Gilles and plaintiffs' lawyer Gary Friedman shine the spotlight on state attorneys general:

In our view, the "private attorney general" role assumed by class action lawyers over the past several decades should give way to a world in which state attorneys general make broad use of their parens patriae authority—far greater use than they have in the past—to represent the interests of their citizens in the very consumer, antitrust, wage-and-hour, and other cases that have long provided the staple of class action practice.

And to tackle complex cases, we would hope to see underfunded AG offices making use of the lawyers who have acquired expertise in originating, investigating, and prosecuting class actions, as well as financing them.

The linchpin of this strategy is, of course, the money. If a state AG can't give the deputized class action lawyers a big chunk of the money recovered for citizens, the model falls apart. Of course, money was one of the main problems with the biggest experiment with deputizing private lawyers as state AGs—the states' lawsuits against the tobacco industry. Then-Texas AG Dan Morales was sentenced to four years in prison for attempting to steer millions of dollars from the proceeds of the tobacco settlement to a Houston lawyer.

So what should businesses do if they face one of these parens patriae lawsuits from a faux "acting AG"? Here are a few thoughts:

  • Parens patriae lawsuits that are class actions in disguise should be removable under the Class Action Fairness Act in some jurisdictions. See Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008). But see West Virginia ex rel. McGraw v. CVS Pharm., Inc. (pdf), 646 F.3d 169 (4th Cir.2011).
  • The agreement deputizing plaintiffs' lawyers as prosecutors under a contingency-fee arrangement may be an ultra vires delegation of the state AG's public function under state law.
  • Similarly, the fact that the prosecutor has a personal stake in the outcome—by virtue of the contingency-fee arrangement—may violate due process. Cf. Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787 (1987) (adopting "a categorical rule against the appointment of an interested prosecutor" to pursue a criminal contempt action on behalf of the government).
  • State AGs may lack standing to sue parens patriae if they're merely suing on behalf of individual citizens, rather than vindicating a "sovereign or quasi-sovereign interest" in the health or safety of their citizens. Pennsylvania v. New Jersey, 426 U.S. 660, 666 (1976).
  • Statutory remedial schemes may preempt parens patriae lawsuits. For example, because the federal antitrust laws limit standing to direct purchasers, suits by states arguably are barred. And RICO and ERISA forbid parens patriae suits. See, e.g., Illinois v. Life of Mid-Am. Ins. Co., 805 F2d 763, 766 (7th Cir. 1986) (RICO); Conn. v. Physicians Health Servs. of Conn., Inc., 287 F3d 110, 120-21 (2d Cir. 2002) (ERISA).
  • Even if parens patriae lawsuits aren't subject to the class-certification requirements of Federal Rule of Civil Procedure 23, the defendant's due process right not to be subjected to excess liability should entitle it to present individualized defenses to claims. Similarly, it's hard to see how a state could have parens patriae standing to assert disparate claims that can't be tried by common proof.

Originally published January 22, 2013

Edited by Archis A. Parasharami and Kevin S. Ranlett

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