United States: US Supreme Court Opens Loophole For Potential Influx Of State Court Suits

On January 14, 2014, the United States Supreme Court unanimously reversed the Fifth Circuit and held that the Class Action Fairness Act's ("CAFA") mass action provision did not provide for jurisdiction over a parens patriae suit filed by the attorney general of Mississippi.

This ruling has important consequences for corporations that face class action litigation because it effectively opens up a loophole in CAFA that will allow private class action lawyers to file what are essentially private class actions through state attorneys general and keep those cases in state courts that are viewed as plaintiff-friendly. Indeed, the state attorneys general that most often use the parens patriae device in this manner represent some of the same states whose court systems were subject to the class action abuses that led to CAFA's passage in the first place. Thus, this recent decision is likely to encourage an increase in the filings of such lawsuits, which have already experienced an uptick in recent years particularly in the pharmaceutical and financial industries as well as in the antitrust context.

The Mississippi v. AU Optronics Corp. decision.

The AU Optronics case was filed by the attorney general of Mississippi following the settlement of a private class action alleging essentially identical claims based on the defendants' alleged price fixing conspiracy in the liquid crystal display (LCD) market. The defendants removed the case to federal court arguing that the monetary recovery sought belonged to individual purchasers, not the state, and therefore the parens patriae suit was essentially a "mass action" involving the claims of "100 or more persons" that would be jointly tried. The district court rejected that argument and ordered the case remanded to state court, but the Fifth Circuit reversed. Based on its prior precedent in Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), the Fifth Circuit held that the real parties in interest were indeed the individual purchasers that the attorney general sought to represent. Thus, CAFA's "mass action" provision—"a civil action . . . involving the monetary claims of 100 or more persons that is proposed to be tried jointly . . . ," 28 U.S.C. § 1332(d)(11)(B)(i)— applied to the complaint. Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796, 799-800 (5th Cir. 2012). According to the Fifth Circuit, the claims and damages sought were:

  • monetary claims;
  • that belonged to more than 100 purchasers; and
  • the attorney general sought to have those claims tried jointly. Id. The Fifth Circuit did not address the alternative ground of whether the case was also removable as a class action under CAFA. Id.

In reaffirming its prior precedent, the Fifth Circuit declined to follow the reasoning of the Fourth, Seventh, and Ninth Circuits, which had rejected the Caldwell rule and adopted a rule known as the "whole case" approach under which any independent interest of the state is sufficient to bring the parens patriae action outside of CAFA's scope even if private individual monetary claims were also sought within the same complaint. See AU Optronics Corp. v. South Carolina, 699 F.3d 385, 393-94 (4th Cir. 2012) (holding CAFA mass action provision did not apply to parens patriae complaint because the state also had a sovereign interest at stake); Nevada v. Bank of Am. Corp., 672 F.3d 661, 671 (9th Cir. 2011) (similar principle); LG Display Co. v. Madigan, 665 F.3d 768, 772 (7th Cir. 2011) (similar principle).

The United States Supreme Court granted certiorari in the AU Optronics case in order to consider this circuit split regarding whether CAFA's mass action provision could apply to parens patriae actions filed by state attorneys general. On January 7, 2014, the Supreme Court reversed the Fifth Circuit in a unanimous ruling authored by Justice Sotomayor. Mississippi ex rel. Hood v. AU Optronics Corp., Case No. 12-1036 (U.S. Jan. 14, 2014). The Supreme Court's analysis focused on the specific text of the mass action provision, and in particular the requirement that mass actions involve the claims of at least "100 or more persons," which the Supreme Court equated with "plaintiffs" based on the context of that language and the similarity of the interchangeable usage of the terms "plaintiffs" and "persons" in CAFA and in Federal Rule of Civil Procedure 20 which deals with joinder of parties. Slip Op. at 6-7. The Supreme Court also concluded that reading the term "persons" to mean something other than "plaintiffs" led to incongruities in the statutory text because one of the requirements of the mass action provision was that the claims of the 100 or more "persons" must be proposed for joint trial with the "plaintiffs." Id. at 7. As the Court put it, "[i]t is difficult to imagine how the claims of one set of unnamed individuals could be proposed for joint trial on the ground that the claims of some completely different group of named plaintiffs share common questions. The better understanding is that Congress meant for the "100 or more persons" and the proposed "plaintiffs" to be one and the same." Id.

The United States Supreme Court also recognized an inherent problem with the defendants' reliance on the mass action provision, which—unlike the class action provision of CAFA—only provides for federal jurisdiction over claims that individually meet the $75,000 amount in controversy requirement. Id. at 8-9. As the Supreme Court correctly noted, it is unlikely that any of the claims in these cases would meet that threshold and thus would remain in state court anyway, and determining which claim is which would involve an "administrative nightmare that Congress could not possibly have intended." Id. at 8.

For all those reasons the United States Supreme Court determined that the plain reading of the mass action provision meant that the 100 or more persons must be named plaintiffs, not absent parties or real parties in interest. Id. at 9-10. The Supreme Court further reinforced its conclusion based on a discussion of the statutory context of the mass action provision, which, as noted above, it determined was intended to play a limited and specific role "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." Id. at 10-11.

Finally, the Court also rejected the Fifth Circuit's decision to engage in a real party in interest inquiry. Id. at 11. While the Supreme Court recognized its prior precedents often look to the substance of the action and not merely labels in determining if jurisdiction exists in a variety of contexts, it held that such an inquiry was improper in this case because it was being misused to alter and trump the specific statutory text in a way that the Supreme Court held Congress did not intend. Id. at 11-14.

Potential Arguments to Close the Parens Patriae Loophole in Specific Cases

Although the Supreme Court's decision soundly rejected any argument that CAFA jurisdiction exists under the mass action provision for parens patriae actions, other potential arguments and strategies may remain to prevent such cases from being litigated in hostile state courts. Dentons lawyers have substantial experience with such complex removal issues and the defense of these parens patriae actions and stand ready to help guide your company around the potential traps and pitfalls that can significantly impact the outcome of such cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
6 Dec 2017, Webinar, New York, United States

Join Dentons for a complimentary webinar focused on the ongoing challenge of integrating new technologies into existing information governance policies and risk management frameworks.

7 Dec 2017, Seminar, Cape Town, South Africa

Dentons South Africa would be delighted if you could join us for our upcoming event.

8 Dec 2017, Seminar, Johannesburg, South Africa

Dentons South Africa would be delighted if you could join us for our upcoming event.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.