Parens patriae is a Latin term which literally means “parent of the fatherland.” In parens patriae actions, a state sues on behalf of its citizens. The rights of the states to do this was first established in 1900 in Louisiana v. Texas, 176 U.S. 1 (1900), when Louisiana sued Texas on behalf of its citizens to stop Texas from quarantining Louisiana goods shipped into Texas. Like a class action, parens patriae is a powerful mechanism for aggregating claims of individuals that are too modest themselves to justify confronting a corporate defendant with vast resources. But the benefits of the parens patriae mechanism come with strings attached.
The United States antitrust laws contain explicit provisions that allow states to seek antitrust relief in federal courts on behalf of the people of the state. These actions function similarly to class actions, with the state acting in a role similar to a putative class representative. One of the primary differences between parens patriae and private class actions is that parens patriae law imposes no certification requirement, such as is required by Federal Rule of Civil Procedure 23, for a parens patriae action to proceed.
A state can bring a parens patriae action, for example, under Section 4C of the Clayton Act, 15 U.S.C. § 15c, which allows state attorneys general to sue private companies in federal court for monetary damages under federal antitrust law, as parens patriae, on behalf of their citizens who are “natural persons.” (A state could bring antitrust claims on its own behalf just as any private person could, but 15 U.S.C. § 15c limits beneficiaries of claims made as parens patriae to natural persons.)
Could the existence of a parens patriae action effect your company’s rights? Possibly. Most state laws include statutes that are analogous to 15 U.S.C. § 15c, but many extend the state’s authority to sue on behalf of all “persons,” including corporations. Moreover, while federal law contains specific provision for opt-outs, further providing that any final judgment shall be res judicata as to any claim by a person that does not opt out (see 15 U.S.C. § 15c(b)), many state statutes do not provide an opt out or notice mechanism. See, e.g., Illinois Antitrust Act §7(2), 740 Ill. Comp. Stat. 10/7(2) (2010); Neb. Rev. Stat. §84-212 (2008) (Nebraska antitrust statute); N.H. Rev. Stat. Ann. §356:4-a (2009) (New Hampshire antitrust statute); Ohio Rev. Code Ann. §1345.07 (West Supp. 2012) (Ohio antitrust statute).
Thus, intervention may be the only means by which a corporation that has suffered substantial competitive injury can obtain its day in court and not be left to rely on the state to prosecute its claims. Notably, a state’s action could potentially preclude any follow-on action by other entities, under the res judicata doctrine. See, e.g., Alaska Sport Fishing Ass’n v. Exxon Corp., 34 F.3d 769, 773 (9th Cir. 1994) (“Exxon”) (“State governments may act in their parens patriae capacity as representatives for all their citizens in a suit to recover damages for injury to a sovereign interest…. There is a presumption that the state will adequately represent the position of its citizens….Thus, the sportfishers here, as members of the public, were ‘parties’ to the…suit within the meaning of res judicata.”).
Can a party intervene in a state’s parens patriae action? Maybe. The courts have evinced a bias against intervention in parens patriae suits. See Margaret H. Lemosa 126 Harv. L. Rev. 486, 508-09, Aggregate Litigation Goes Public: Representative Suits by State Attorneys General (December, 2012) (explaining courts’ disinclination to allow intervention: “Once again, the difference in treatment of public and private [i.e., class action] aggregate litigation seems to stem from a presumption that state attorneys general will protect the interests of the individuals they represent, making it unnecessary for those individuals to take a hand in (or exclude themselves from) the litigation.”); see also Prete v. Bradbury, 438 F.3d 949, 956-59 (9th Cir. 2006) (requiring a “very compelling showing” of inadequacy of representation for intervention).
This may be important because state laws may not permit the attorney general to pursue certain remedies that would otherwise be available to class action plaintiffs or plaintiffs otherwise suing on their own behalf. Some statutes allow the state to seek only parens patriae restitution and injunctive relief (and not compensatory damages). See, e.g., Ariz. Rev. Stat. Ann. §§44-1521 to -1534 (2003); Cal. Bus. & Prof. Code §17535 (West 2008); Conn. Gen. Stat §§42.110a-.110q (2011); 815 Ill. Comp. Stat. 505/7 (2010); Iowa Code §714.16 (2007); N.Y. Exec. Law §63(12) (McKinney 2012); Ohio Rev. Code Ann. §1345.07 (West 2012). Defendants could then seek dismissal of follow-on federal antitrust claims by corporate plaintiffs, claiming that federal as well as state antitrust law claims are barred, based on the doctrine of claim splitting, which is a subset of res judicata or claim preclusion: “The doctrine of claim splitting bars a party from subsequent litigation where the ‘same controversy’ exists.” Single Chip Systems Corp. v. Intermec IP Corp., 495 F. Supp. 2d 1052, 1058 (S.D. Cal. 2007).
In Exxon, for example, the United States and the State of Alaska brought suit in their capacities as “trustees for the public” (effectively parens patriae) under federal statutes, including Section 311(f) of the Clean Water Act (CWA), 33 U.S.C. § 1321(f)(5), and Section 107(f)(1) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended, 42 U.S.C. § 9607(f)(1). The governments sought damages for restoration of the environment and compensation for lost public uses of natural resources. 34 F.3d at 771.
The Ninth Circuit held claims asserted by private plaintiffs in a separate suit barred by res judicata, ruling they sought relief that the governments had claimed in their prior action. Thus, where a corporate plaintiff faces any risk of preclusion under res judicata based on a prior state action (because, for example, the governmental entity has a plausible basis for seeking the damages that otherwise would be available to the plaintiff), intervention may be the only course that avoids the risk of losing potentially significant damages claims.