The U.S. Supreme Court recently decided The Standard Fire Insurance Co. v. Knowles , a case that dealt with the extent to which plaintiffs can avoid federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”) by pleading around it. (See my blog posts from January 7, 2013 and March 20, 2013.) On May 28, 2013, the Court granted review of State of Mississippi v. AU Optronics Corp., another CAFA case, this time dealing with the issue of federal jurisdiction over a suit brought by the State that involves claims for restitution for a discrete group of citizens. While Knowles and AU Optronics have little in common, they are both cases that involve the boundary between federal and state court jurisdiction under CAFA. AU Optronics’s importance also lies in the hard look the Supreme Court will have to give to the real party in interest analysis when a State brings causes of action for monetary relief.
The question presented is: “Whether a state’s parens patriae action is removable as a ‘mass action’ under the Class Action Fairness Act when the state is the sole plaintiff, the claims arise under state law, and the state attorney general possesses statutory and common-law authority to assert all claims in the complaint.”
In AU Optronics, the State of Mississippi brought a state court antitrust action, asserting claims under the Mississippi Antitrust Act (“MAA”) and the Mississippi Consumer Protection Act (“MCPA”), for price fixing of liquid crystal display (“LCD”) panels. The Attorney General sought penalties and injunctive relief, as well as restitution to the State on behalf of Mississippi citizens and punitive damages. After defendants removed the action to federal court under CAFA, the district court remanded and the Fifth Circuit reversed.
The Fifth Circuit reasoned that although the case does not qualify as a “class action” under CAFA, it does come under the “mass action” portion of that statute, because it is a civil action claiming monetary relief for 100 or more persons, and the amount in controversy exceeds $75,000. After conducting a real party in interest analysis, the court held that Mississippi is not the sole real party in interest, but the more than 100 individuals for whom relief is sought are also real parties in interest. Critical to the court’s reasoning was the restitution piece of the suit, because neither the MAA nor the MCPA authorizes anything but injunctive relief and penalties, not the “public collection for private damages.” Thus, the Court held that “[e]ven assuming arguendo that the State has parens patriae standing to bring the claims here (an issue that we do not decide), that standing does not change the fact that Mississippi is acting, not in its parens patriae capacity, but essentially as a class representative.” Because Mississippi law prohibits double recoveries, the State’s action would effectively extinguish the right of an injured consumer to bring her own suit. The Fifth Circuit found this troubling: “We think that consideration, coupled with the reasons provided above, is enough to find against the State having carte blanche to recover for others’ injuries under common law parens patriae authority.”
The Fifth Circuit next considered the “general public” exception to CAFA, which provides that a suit is not a mass action if “all of the claims in the action are asserted on behalf of the general public . . . pursuant to a State statute specifically authorizing such action.” Because, as discussed above, not “all” of the claims fell under this exception, i.e., the claims for monetary relief, the action did not fall under this exception.
In its Petition for Writ of Certiorari, the State argued that there is a Circuit divide on whether federal jurisdiction exists under the circumstances presented. The State further asserted that Fifth Circuit CAFA jurisprudence, which demands, under the test in Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), that a complaint be dissected claim by claim, is at odds with the case law of other Circuits, and that a claim-by-claim analysis of a complaint may swallow the general public exception. The Fifth Circuit, too, cautioned that under its jurisprudence, finding a case to be mass action — precisely because the real parties in interest for restitution claims are a discrete group of citizens, as here — may “render such a statutory exception a dead letter.”
After years and years of class action jurisprudence, we find the Supreme Court grappling with very basic questions, from defining the commonality requirement in Wal-Mart, to articulating predominance in Comcast, and now, perhaps, answering the question of what makes a case a mass action under CAFA such that federal jurisdiction is warranted.