In a decision that squarely conflicts with three other circuit courts, the Fifth Circuit Court of Appeals has ruled that a price-fixing case initiated by the State of Mississippi against various LCD display makers must be litigated in federal court as a “mass action” under the Class Action Fairness Act (CAFA). After the Mississippi Attorney General had filed the parens patriae case in state court, the defendant manufacturers removed it to federal court. The Fifth Circuit held that the case qualified as a “mass action” under CAFA, and therefore the removal was proper. The panel's decision is contrary to decisions from the Fourth, Seventh, and Ninth Circuit Courts of Appeal, all of which held that attorney general parens patriae suits cannot be removed from state to federal court under CAFA.
Under CAFA, a mass action may be removed to federal court if it seeks to try jointly the monetary relief claims of 100 or more persons, involves common questions of law or fact, and seeks at least $5 million in damages. The Fifth Circuit identified the "decisive question" as “whether the suit involves the claims of ‘100 or more persons.’ If so, the suit is a mass action, and removal is proper.”
To determine whether the Mississippi AG's suit involved the claims of 100 or more persons under CAFA, the court relied on Louisiana ex rel. Caldwell v. Allstate Ins. Co, a Fifth Circuit decision from 2008 that adopted what has become known as the “Caldwell claim-by-claim” approach. The Fifth Circuit explained that Caldwell instructs a court to “pierce the pleadings and look at the real nature of a state's claims” to determine if the State itself should be considered the plaintiff, or whether the State is bringing claims on behalf of individuals.
The Caldwell approach, according to the court, “contrasts with other circuits that look to a state's complaint ‘as a whole’ and then subjectively determine if the state alone is the real party in interest.” Applying Caldwell, the panel held that in Mississippi’s suit, the “real parties in interest ... are those more than 100 persons” whose rights the State was seeking to enforce, not the State itself. Put simply, the panel held: “At its core, this case practically can be characterized as a kind of class action in which the State of Mississippi is the class representative.”
The Fifth Circuit's reasoning deviated from that used by the Fourth, Seventh, and Ninth Circuits when applying CAFA to suits brought by state attorneys general in two critical ways. First, in applying Caldwell, the panel scrutinized Mississippi's claims individually and in depth. Other circuits, by contrast, evaluate the complaint as a whole to determine the parties in interest. Those courts have found that even when individual consumers may be parties in interest regarding certain claims, that does not preclude the State from being the primary party in interest for purposes of determining whether the suit is a mass action under CAFA.
Secondly, CAFA provides that the term “mass action” shall not include any civil action in which “all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action.” The Fifth Circuit reasoned that this “general public exception” did not apply because it had found Mississippi had asserted certain clams on behalf of “individual consumers” and not on behalf of “the public.” The court specifically “acknowledge[d] the concern that finding the general public exception inapplicable here may render such statutory exception a dead letter, and we welcome congressional clarification of this issue.”
Allowing the removal of attorney general parens patriae suits from state to federal court is very beneficial to defendants. It remains to be seen whether this newly-created circuit split will result in a request for rehearing en banc in the Fifth Circuit or a petition for certiorari to the Supreme Court by the Mississippi Attorney General.