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    August 12, 2014 Articles

    Federal Removal More Difficult in Actions Brought by State Attorneys General

    The Supreme Court's decision in Mississippi ex rel. Hood v. AU Optronics Corp. has both immediate and potentially far-reaching, indirect effects.

    Loriann E. Fuhrer

    The Class Action Fairness Act of 2005 (CAFA) relaxes the diversity-jurisdiction requirements for class actions and mass actions (as defined in the act). Most notably, CAFA discards the requirement of complete diversity (which is met only where each and every plaintiff is a citizen of a state different from each and every defendant) for the more easily met “minimal diversity” standard (permitting jurisdiction where “any member of a class of plaintiffs is a citizen of a State different from any defendant”). 28 U.S.C. § 1332(d)(2)(A).

    In Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736, 187 L. Ed. 2d 654 (2014), the U.S. Supreme Court addressed the question of whether an action brought by a state attorney general seeking restitution on its own behalf and on behalf of “its citizens” constituted a “mass action” removable to federal court under CAFA. In AU Optronics, the attorney general of Mississippi brought suit in state court against manufacturers of liquid crystal displays (LCDs), alleging they violated Mississippi antitrust and consumer protection statutes. In addition to injunctive relief and civil penalties, the State sought “restitution for its own purchases ‘of LCD products and the purchases of its citizens.’” Id. (internal citation omitted). The defendants removed to federal court, arguing the action was either a “class action” or a “mass action” under CAFA.

    The district court held that the action was not a class action because it was not brought under a class action statute or rule of procedure; however, the court ruled that it did qualify as a mass action. Under CAFA, a mass action is one “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.” 28 U.S.C. § 1332(d)(11)(B). In reaching this result, the district court necessarily concluded that the “100 or more persons” described in CAFA could be unidentified consumers who were “real parties in interest” but not plaintiffs in the action. AU Optronics, 134 S. Ct. at 741. Despite the district court’s conclusion that the “100 or more persons” test was met, it nevertheless remanded the case, ruling that the suit fell within CAFA’s “general public exception,” found in 28 U.S.C. § 1332(d)(11)(B)(ii)(III). The Fifth Circuit Court of Appeals disagreed with the district court’s ruling on the “general public exception” and concluded that removal was proper. The Supreme Court granted certiorari to resolve a split in the circuits.

    The key holding in AU Optronics is that “[b]ecause Mississippi is the only named plaintiff, [the] suit does not constitute a mass action under CAFA.” In other words, the phrase “100 or more persons,” as set forth in CAFA’s definition of “mass action [ . . . ] does not encompass unnamed persons who are real parties in interest to claims brought by named plaintiffs” but who are not, themselves, joined as plaintiffs. Because the suit did not meet the definition of mass action under CAFA, removal was improper.

    The AU Optronics decision has both immediate and potentially far-reaching, indirect effects. The immediate practical effect is that removing parens patriae actions (actions brought by a state on behalf of its citizens, such as the much-publicized tobacco suits), like the action brought by the Mississippi Attorney General in AU Optronics, to federal court is now much more difficult. The increased obstacle to removal, alone, is generally bad news for corporate defendants who would typically prefer to defend in federal court. However, the bigger potential impact may come at the intersection between parens patriae and the class-action plaintiffs’ bar. In a growing trend, state attorneys general have, in effect, “deputized” class-action attorneys to bring parens patriae suits on behalf of the state. More recently, commentators have been predicting the increased use of parens patriae suits by class-action attorneys—for example, as a means of getting around class-action waivers and more recent pro–Federal Arbitration Act decisions, such as AT&T Mobility v. Concepcion. (See, e.g., Myriam Gillis & Gary Friedman, “After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion,” 79 U. Chi. L. Rev. 623 (2012).) The decision in AU Optronics may provide still further incentive to the class-action plaintiffs’ bar to pursue arrangements with state attorneys general, and to bring parens patriae suits in state court, further increasing the risk that corporate defendants will be forced to defend class-like claims in state court.

    Keywords: litigation, corporate counsel, parens patriae, class action, mass action, AU Optronics, state attorney general

    Loriann E. Fuhrer is a director with Kegler Brown Hill + Ritter Co., LPA, in Columbus, Ohio.