John Doroghazi

Supreme Court Limits Removal of State Attorney General Actions to Federal Court

January 28, 2014 Advisory

In virtually every state, the Attorney General can bring lawsuits for violations of state consumer protection or antitrust law. Often the Attorney General can seek both penalties and injunctive relief for itself and restitution for its citizens harmed by the defendant's alleged wrongful actions. For defendants, these lawsuits often mean litigating a high stakes lawsuit in a far-away state court against one of the highest ranking (and potentially most popular) elected officials in that state. To try and level the playing field, defendants have attempted to remove these actions to federal court under the mass action provisions in the Class Action Fairness Act of 2005 (CAFA). The Supreme Court put an end to that option, however, in its recent decision in Mississippi v. AU Optronics Corp. (12-1036), where the Court held that an AG parens patriae action does not constitute a "mass action" under CAFA.

In AU Optronics Corp., the State of Mississippi sued LCD manufacturers for violating state antitrust and consumer protection statutes by forming a cartel to restrict competition and raise prices. In addition to its requests for injunctive relief, civil penalties, and various other remedies, Mississippi sought monetary restitution for purchases made by its citizens. Defendants removed the case to federal court, arguing that it was either a class action or a mass action and thus subject to removal under CAFA. The district court found that it was not a class action because it was "not brought pursuant to Federal Rule of Civil Procedure 23 or a ‘similar State statute or judicial procedure.'" But the district court found that Mississippi's action did constitute a mass action under CAFA because it was a civil action "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." The district court reached this conclusion based on Fifth Circuit precedent, holding that "persons" and "plaintiffs" should be defined as the "real parties in interest." Here, the citizens of Mississippi were real parties in interest, according to the district court, because Mississippi was seeking restitution on their behalf. The district court nevertheless remanded the action to state court because it concluded that it fell within an exception to CAFA which excludes from the definition of mass actions civil actions brought on behalf of the "general public." The Fifth Circuit agreed that the suit was a mass action, but held that it did not fall within the general public exception because it sought relief for specific individuals. Thus, the Fifth Circuit found the case removable under CAFA.

The Supreme Court unanimously reversed the Fifth Circuit. The Court reasoned that the words "person" and "plaintiffs" in the definition of a "mass action" must mean the same thing and it simply did not make sense, in the Court's view, to conclude that "plaintiffs" included unnamed persons. Elsewhere, CAFA explicitly refers to named and unnamed plaintiffs, underscoring that Congress knew how to include such individuals when it intended to do so. Further, the structure of the mass action provisions of CAFA would be unworkable if this interpretation were adopted. While CAFA provides for removal of a mass action where the claims of 100 or more persons are to be tried jointly, jurisdiction in the federal courts exists only over those plaintiffs whose claims are in excess of $75,000. If "plaintiffs" included unnamed persons who were the "real parties in interest," this analysis would be nearly impossible. Similarly, transfers of mass actions are permissible only with the consent of a majority of the plaintiffs. Again, such a provision would be unworkable if the plaintiffs were unidentified "real parties in interest."

AU Optronics's practical effect is that most, if not all, Attorney General suits, including those seeking restitution for private citizens, will proceed in state court. While defendants have not been foreclosed from arguing that an AG action qualifies as a class action because this issue was not before the Court, that argument has thus far met with limited success.