U.S. Supreme Court Holds That Parens Patriae Suits Are Not Removable to Federal Court as “Mass Actions” Under the Class Action Fairness Act

On Jan. 14, 2014, the U.S. Supreme Court, in an opinion by Justice Sonia Sotomayor for a unanimous Court, held that a parens patriae antitrust suit filed in state court by Mississippi’s Attorney General seeking damages on behalf of the citizens of Mississippi was not removable to federal court under the Class Action Fairness Act of 2005 (CAFA). Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp., et al., No. 12-1036, (U.S. Jan. 14, 2014) .

The Attorney General of Mississippi sued AU Optronics and other manufacturers of liquid crystal display (LCD) panels in state court, alleging claims under the Mississippi Antitrust Act, Miss. Code Ann. § 75-21-1 et seq. and the Mississippi Consumer Protection Act, § 75-24-1 et seq. The AG alleged that the defendants operated an international cartel to restrict competition and raise prices for LCD products, and sought, among other things, restitution for purchases of LCD products by Mississippi and its citizens. AUO and the other defendants removed the case to federal court under CAFA’s provision that a “mass action” includes “any 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.” 28 U.S.C. § 1332(d)(11)(B)(i). The Court held that a suit filed by a state as the sole plaintiff does not qualify as a “mass action” under CAFA where it includes a claim for restitution based on injuries suffered by the state’s citizens.

The Court explained that CAFA “loosened” diversity jurisdiction for two types of cases, class actions and mass actions. The lower courts ruled that the lawsuit was not brought as a class action, and that ruling was not at issue in the Supreme Court. The Supreme Court held that the lawsuit also was not a mass action. Defendants argued that the clause “100 or more persons” should be construed to include both named and unnamed real parties in interest, even if they are not named as “plaintiffs.” The Court rejected defendants’ proposed construction of the statute, explaining that the term “‘plaintiffs’ [needed to be given] its usual meaning—to refer to actual named parties who bring an action.”

The decision, which resolves a split of authority among the Circuits, enables states to bring their own actions—including price-fixing actions—in state court and to avoid consolidation with class actions in federal court through the multi-district litigation process or otherwise. In issuing its unanimous decision, the Supreme Court applied the language of the statute as it is written, deferring to Congress to amend the statute if it so desires. Unless and until that happens, defendants will face the prospect of parallel proceedings in which citizens of a state are represented in both a class action and a parens patriae action—and the potential for duplicative liability. The Court’s decision does not address the potential for duplicative liability, and there undoubtedly will be more litigation in the future regarding that important issue.

A copy of the decision is available here.