U.S. Supreme Court Rules Parens Patriae Actions by State AGs Not Removable Under CAFA

Last week, the Supreme Court unanimously ruled that a parens patriae suit brought solely by a state on behalf of its injured citizens is not considered a “mass action” and therefore cannot be removed to federal court under the Class Action Fairness Act of 2005 (“CAFA”). Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp., et al., 571 U.S. __ (2014) (slip opinion available here).

CAFA defines “mass action” as a civil action “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiff’s claims involve common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i). Such actions can be removed by defendants from state to federal court. In Hood, a suit brought under state antitrust statutes, the Mississippi Attorney General sued several liquid crystal display makers, including AU Optronics Corp. and LG Display Co., in state court. Defendants removed the case under CAFA, arguing that the lawsuit qualified as a “mass action” because it represented the interests of more than 100 state citizens. The district court held that the suit was a “mass action” under CAFA, but remanded based on CAFA’s “general public” exception. The Fifth Circuit agreed that the suit was a “mass action” because, even though there was but a single named plaintiff, the nonparty consumers on whose behalf the suit was brought were the “real parties in interest” thus satisfying the mass action provision’s numerosity requirement. However, the Fifth Circuit disagreed with the district court that the “general public” exception applied and reversed, concluding that federal jurisdiction under CAFA existed.

The Supreme Court granted certiorari to resolve the circuit split (the Fifth Circuit’s decision had departed from the other circuits’ which have considered the issue). The Court reversed, holding that the mass action provision’s numerosity requirement—which refers to “100 or more persons”—refers only to named plaintiffs. Thus, the Court held that, regardless of how many unnamed individuals potentially stand to benefit from the suit, only named plaintiffs may be counted to establish jurisdiction under CAFA’s mass action provision. Following this ruling, some analysts predict an increase in parens patriae cases being filed by attorneys general in partnership with private plaintiffs firms, with such suits being litigated in state court. Also, the Hood ruling may allow plaintiffs a way to dodge recent SCOTUS decisions allowing companies to enforce contractual class action waivers and arbitration agreements (such as American Express v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)), because those rulings to not apply to state attorneys general.