United States: Five Takeaways From The Supreme Court’s "AU Optronics" Decision

Last Updated: January 30 2014
Article by Brian W. Shaffer, Thomas J. Sullivan and Zachary M. Johns

Court's decision provides key takeaways for class action defendants, including how the decision limits the use of CAFA's mass action provision to suits that actually name 100 or more persons as plaintiffs.

On January 14, the U.S. Supreme Court issued its decision in Mississippi ex rel. Hood v. AU Optronics Corp.,1 holding that a parens patriae action filed by the state of Mississippi on behalf of its citizens was not a "mass action" as defined by the Class Action Fairness Act (CAFA) and thus could not be removed to federal court on that basis. The Court interpreted the definition of "mass action" as requiring 100 or more parties to be actually named as plaintiffs. The Court also rejected arguments that the state's citizens should have been counted as the real unnamed parties in interest for purposes of the 100-person threshold. Instead, Mississippi's parens patriae lawsuit included only one plaintiff, the state.

There are five significant takeaways from AU Optronics that any potential defendant should understand. First, the decision limits the use of CAFA's mass action provision to suits that actually name 100 or more persons as plaintiffs. Second, the ruling likely enhances the incentive for private contingency-fee counsel to pair with state attorneys general and bring parens patriae actions in state court. Third, the opinion underscores the possibility that a defendant may face both class actions and parens patriae actions for the same alleged conduct—often in different courts. Fourth, private contingency-fee counsel may be further encouraged to urge state attorneys general to use parens patriae actions as an alternative to private class actions that would otherwise be barred, such as when potential class members have signed class action waivers. Finally, despite these possibilities, the AU Optronics decision is limited to jurisdiction under CAFA and does not eliminate or restrict the ability of litigants to remove attorney general cases on other grounds.

CAFA's Mass Action Provision

Congress enacted CAFA to expand federal jurisdiction and to provide for jurisdiction over class actions with national importance.2 Among its various provisions, CAFA contemplates two types of cases: class actions and mass actions.3 For both types of actions, CAFA loosened federal statutory jurisdictional requirements by only requiring minimal diversity among the parties4 as well as an aggregate amount in controversy that exceeds $5 million.5 Mass actions are defined under CAFA as the following:

[A]ny civil action (except a [class action] within the scope of section 1711(2)) in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a).6

Of particular note is the limitation in the final clause, providing that, unlike a typical class action under Federal Rule of Civil Procedure 23, federal jurisdiction in a mass action "'shall exist only over those plaintiffs' whose claims individually satisfy the $75,000 amount in controversy requirement."7 CAFA also provides certain exceptions for mass actions, including actions that involve principally local issues or raise matters of state concern.8

Supreme Court Opinion

In AU Optronics, the state of Mississippi, represented by private contingency-fee counsel, sued AU Optronics and other manufacturers of liquid crystal displays (LCDs), alleging that they formed an international cartel to restrict competition and raise prices of LCDs.9 Mississippi brought a parens patriae action in state court on behalf of itself and Mississippi citizens who purchased LCD products at allegedly inflated prices. Defendants removed to the U.S. District Court for the Southern District of Mississippi. The district court found that the state's action qualified as a mass action because the state sought to represent the interests of many unnamed citizens, exceeding the "100 or more persons" requirement for a mass action.10 The district court interpreted the words "persons" and "plaintiffs" in the mass action section of CAFA as including the real parties in interest. The district court remanded, however, finding that the "general public" exception applied.11 The U.S. Court of Appeals for the Fifth Circuit agreed that the AU Optronics action qualified as a mass action but reversed the district court's finding that the suit fell within the general public exception.12

Justice Sonia Sotomayor, writing for a unanimous Court, disagreed with both the district court and the Fifth Circuit, instead interpreting the phrase "persons" as including only plaintiffs named in the action. Turning first to the statutory text, Justice Sotomayor observed that the "mass action" definition does not include "100 or more named or unnamed real parties in interest," instead referring to "100 or more persons."13 According to the Court, had Congress intended to include the "unnamed real parties in interest," it could have drafted language to that effect as it did elsewhere within CAFA.14 The Court also foresaw administrative complications for district courts if they were required to consider unnamed parties to a mass action, such as determining whether unnamed parties' claims satisfied the $75,000 requirement and how to handle claims valued at less than $75,000.15

Significantly, the Court observed that the mass action component of CAFA "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."16 In doing so, the Court rejected arguments that federal courts are required under CAFA to look at the substance of actions for jurisdictional purposes in order to determine the real parties in interest. While the Court agreed that analyzing the real parties in interest is a "background principle" for determining diversity, the justices disagreed with the conclusion that Congress intended that principle to apply to CAFA's mass action provision.17

Five Takeaways

AU Optronics creates a significant limitation for parties seeking to remove certain actions under CAFA's mass action provision generally and for attorney general actions specifically. There are five key takeaways for any potential class action party:

  1. The Court limited use of CAFA's mass action provision to those actions that actually name "100 or more persons" as plaintiffs. In addition, although not expressly held by the Court, each plaintiff must have a claim in excess of $75,000 for the claim to remain in federal court. As the Court reasoned, the mass action provision serves as a "backstop" to CAFA's relaxed jurisdictional rules and ensures that plaintiffs cannot evade federal jurisdiction by naming "a host of plaintiffs rather than using the class device."18
  2. As a practical matter, the Court's ruling enhances the incentive for private contingency-fee counsel to pair with state attorneys general and bring parens patriae actions in state court on behalf of state citizens in tandem with or immediately following private class actions. Thus, there is an increased possibility of follow-up actions after the settlement of a class action, possibly brought by the same private counsel under the authority of a state attorney general.
  3. Such multiple cases for essentially the same conduct are likely to proceed in different courts. Chief Justice John Roberts homed in on this problem during oral argument in AU Optronics, questioning whether an attorney general could file a parens patriae action immediately following a class action settlement for the same alleged conduct.19 Counsel for Mississippi responded by pointing out (among other things) that the state's interest in parens patriae actions is broader than those of a class seeking damages to individual consumers as it includes, for example, indirect harms. The concern about multiple actions, also reflected in questions by Justices Antonin Scalia and Anthony Kennedy, is an area of significant debate. Although the underlying issues are more substantive than jurisdictional, the Court may have the opportunity to address such concerns in the future.
  4. The AU Optronics decision leaves open the possibility that private contingency-fee counsel may bring parens patriae actions on behalf of a state's citizens in state court where a class action would otherwise be impossible. For example, a parens patriae action may be a viable alternative to claims involving consumer products or services where a class action waiver has been signed.20 In this way, AU Optronics presents a potential end run around other Supreme Court class action jurisprudence.
  5. The holding in AU Optronics, although significant for attorney general actions, is limited to addressing jurisdiction over attorney general parens patriae actions under CAFA. The decision does not eliminate or restrict the ability of litigants to remove attorney general cases on other grounds, such as where state-law claims implicate significant federal issues, nor does it speak to situations where a single, diverse, private plaintiff invokes state law to attempt to recover more than $75,000 based on conduct harmful to other citizens.21

Removing a path to federal court under CAFA's mass action provision paves the way for attorney general actions to remain in state court and underscores the incentive for states and private contingency-fee counsel to pursue these actions. In fact, 46 states filed as amici curiae in support of Mississippi, suggesting that federal jurisdiction over parens patriae actions improperly places state actions in federal courts.22

The full impact of AU Optronics will be revealed as new claims are pursued by or in the name of state attorneys general. The universe of potential defendants is broad and could include all producers or sellers of goods or services within a state. Potential defendants should be aware of this important development, as it is increases the potential for class-like litigation in state courts and underscores the risk of multiple lawsuits involving the same conduct.

Footnotes

1. No. 12-1036, (U.S. Jan. 14, 2014), available here.

2. Id., slip op. at 2.

3. Id.

4. Minimal diversity requires only that one member of a class be a citizen of a state different from any defendant. 28 U.S.C. § 1332(d)(2)(A); see also 28 U.S.C. § 1332(d)(11)(A) (providing that "a mass action shall be deemed removable under [§§ 1332(d)(2) through (d)(10)]").

5. 28 U.S.C. §§ 1332(d)(2), (d)(6), (d)(11)(a).

6. 28 U.S.C. § 1332(d)(11)(B)(i).

7. AU Optronics, No. 12-1036, slip op. at 3 (quoting 28 U.S.C. § 1332(d)(11)(B)(i)). Although framed in terms of jurisdiction over "plaintiffs," the limitation refers to subject matter jurisdiction over claims that do not meet the amount in controversy requirement of 28 U.S.C. § 1332(a).

8. Id. at 3 n.1; see also 28 U.S.C. § 1332(d)(3)-(5).

9. AU Optronics, No. 12-1036, slip op. at 3.

10. Mississippi ex rel. Hood v. AU Optronics Corp., 876 F. Supp. 2d 758 (S.D. Miss. 2012).

11. The general public exception excludes from the "mass action" definition "any civil action in which . . . 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).

12. Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012). Although remand orders are not generally appealable, CAFA creates an exception to that principle.

13. AU Optronics, No. 12-1036, slip op. at 6.

14. Id.

15. Id. at 8–9.

16. Id. at 11.

17. Id. at 12.

18. Id. at 11.

19. Oral Argument Transcript at 17–22, AU Optronics, No. 12-1036 (Nov. 6, 2013), available here.

20. See American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) (upholding use of class action waiver).

21. E.g., Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314–16 (2005) (finding federal jurisdiction appropriate in quiet title action where the only contested legal and factual issues involved interpretations of federal law).

22. Brief of Amici Curiae State of Illinois and 45 Other States in Support of Petitioner at 19-20, AU Optronics, No. 12-1036 (July 29, 2013), available here.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions