The U.S. Supreme Court today unanimously held that suits filed by State AGs based on harm to consumers are not removable to federal court under the Class Action Fairness Act (CAFA).
The decision in Mississippi ex rel. Hood v. AU Optronics Corp, an antitrust case brought by the State of Mississippi in state court against makers of LCD displays, resolves a circuit-split between the Fifth Circuit, which held such cases are mass actions removable under CAFA, and the Fourth, Seventh, and Ninth Circuits, which held they were not. The Court determined that the plaintiff language of CAFA's mass action provision, which refers to suits by "100 or more persons," referred to the named plaintiffs bringing a case jointly, and could not be read, as the Fifth Circuit had held, to also include unnamed consumers alleged to be the real parties in interest in AG-filed litigation.
As we noted last year, state consumer protection and antitrust laws empower AGs to file suit seeking damages for alleged violations on behalf of all citizens in their state, a doctrine sometimes referred to as parens patriae after the common law power of the state to protect a quasi-sovereign interest for the public good. As AGs have filed such suits under state laws post-2005, some defendants have attempted to remove those cases (which are almost always filed in state court) to federal courts under CAFA, which Congress enacted in 2005 to institute procedural safeguards to limit perceived abuses of the class action device. These include permitting certain class and mass actions—defined as actions involving the claims of 100 or more persons for monetary relief that involve common questions of law or fact—to be removed to federal court if they meet diversity and amount-in-controversy requirements.
Forty-six states filed an amicus brief urging the Court to reject the applicability of CAFA to AG actions, urging that it would interfere with states' sovereign right to bring parens patriae actions in their own courts and draw cases involving state law away from state courts best positioned to interpret those laws, as well as create administrative headaches for federal courts.
The consequences of the Court's decision remain to be seen, but one immediate consequence is that defendants in AG antitrust litigation—and almost certainly consumer protection actions as well—will lose the ability to attempt to force an AG into federal court to pursue such claims. As a result, AGs will retain the advantage of having such cases, many of which are filed using outside contingency fee counsel retained by AGs and heard by judges in their own states under their own rules of procedure.
We will continue to monitor the fallout from this decision and provide insight and analysis on related developments as they occur.
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