Arizona v. Countrywide: Parens Patriae Action Not Removable Under CAFA

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According to a recent Ninth Circuit decision, parens patriae actions are not removable under the federal Class Action Fairness Act (CAFA).  See Arizona v. Countrywide Financial Corp., No. 11-80086 (9th Cir. Jan. 3, 2012).  Parens patriae actions are those brought by a state based on its interest in the well being of its citizens.  The appellate decision, which endorses a more extensive district court opinion, may prove critical to ensuring that state enforcement actions, such as PAGA (Private Attorneys General Act) actions, are not removable under CAFA. 

The lawsuit, which was filed by the Attorney General of Arizona in December of 2010, alleged that Countrywide violated state laws by deceiving customers about the terms of its loan modification program.  See Arizona v. Countrywide Financial Corp., No. CV-11-131, 2011 U.S. Dist. LEXIS 35203 (D. Ariz. Mar. 18, 2011) (available here).  Countrywide sought to remove the case to federal court under CAFA, on grounds that the borrowers who would receive restitution from the lawsuit were the real parties in interest.  Id. at *4-5.  The Arizona district court disagreed, holding that the state was the real party in interest and therefore CAFA did not apply.  The district court then remanded the case to state court. Id. at *7-11, 17.  Countrywide’s successor in interest, Bank of America, brought a motion for reconsideration before the Ninth Circuit, which the appellate court denied in its January 3 order.

The state Attorney General is now expected to proceed with claims against Countrywide in Arizona state court.