Mississippi ex rel. Hood v. AU Optronics Corp.
In Mississippi ex rel. Hood v. AU Optronics Corp., decided on January 14, 2013, the Supreme Court, in a unanimous decision, reversed the Fifth Circuit Court of Appeals, and held that a lawsuit brought by the Attorney General of Mississippi on behalf of the state’s citizens was not a “mass action” under the Class Action Fairness Act (“CAFA”). The decision likely clears the path for parens patriae actions brought by state attorneys general to proceed in state courts.
In a parens patriae lawsuit, the state brings a suit on behalf of the state’s citizens for injuries suffered by the state’s citizens. In AU Optronics, Mississippi’s attorney general invoked the state’s parens patriae authority to sue the manufacturers and distributors of liquid crystal display panels (“LCD”) (“Defendants”) for allegedly engaging in anticompetitive activities in violation of Mississippi antitrust and consumer protection statutes. Defendants removed the case to federal court alleging that the suit was either a “class action” or “mass action” under CAFA. Both the district court and the Fifth Circuit held that although the claim was not a “class action,” it was a “mass action.” The district court remanded, however, based on CAFA’s “general public” exception. The Fifth Circuit found this exception inapplicable.
Under CAFA, a “mass action” is defined as “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.” Both the district court and the Fifth Circuit interpreted the term “persons” to mean real parties in interest, that is, all those who possessed the right to sue. Under this construction, the suit was not brought by one “person” (i.e., the state of Mississippi), but rather by thousands, if not hundreds of thousands, of unnamed consumers that had purchased LCDs in Mississippi.
The Supreme Court disagreed, holding that representative actions brought by states’ attorneys general did not constitute “mass actions” under CAFA. Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036, slip op. at 4 (U.S. Jan. 14, 2014). In so holding, the Court rejected the lower courts’ construction of CAFA’s “mass action” definition.
First, the Court held that the term “persons” as used in the definition of “mass action” referred to named plaintiffs joined in a single action, not all real parties in interest. Id. at 6. In support of its position, the Court pointed to the use of the term “persons” in the Federal Rules of Civil Procedure governing joinder, which refers to “persons” as those who may join in a single action as plaintiffs. Id. at 7. It also noted the logical inconsistency of distinguishing between “persons” and “plaintiffs.” Id. The Court asked if “person” and “plaintiff” mean different things, then what ground could possibly exist for joining all “persons” based on the similarities in “plaintiffs’” claims? Id.
Nor could the Court agree that the term “plaintiffs” contemplated all unnamed real parties in interest. To do so, the court found, would be to completely disregard the term’s universally understood meaning: “a party who brings a civil suit in a court of law.” Id. Moreover, because CAFA requires that all plaintiffs in a “mass action” have claims of at least $75,000 (the diversity jurisdictional amount requirement), such a construction would force courts to conduct individual analyses of the claims of hundreds of thousands of consumers, “an administrative nightmare” which congress could not possibly have intended. Id. at 8-9. Similar administrative issues would also be encountered given CAFA’s directive that all plaintiffs must consent to the transfer of a “mass action” after it has been removed to federal court. Id. at 9.
Finally, the Court noted that “Congress’ overriding concern in enacting CAFA was with class actions.” Id. at 10. To serve that end, Congress included “mass actions” as a “backstop” to prevent plaintiffs from circumventing CAFA’s relaxed jurisdictional requirements by naming plaintiffs individually. Id. at 11. The “mass action” provision was never intended to encompass representative actions brought by states. Had Congress believed such actions warranted coverage, the Court concluded, it would have included them within the provision on “class actions” and “not the one governing mass actions” Id.
The decision may lead to more state attorneys general using their parens patriae authority to bring lawsuits since they will have a better chance of retaining their choice of a state forum. We also anticipate that class action plaintiff’s attorneys (likely still trying to recover from the Supreme Court’s repeated decisions enforcing class actions waivers in arbitration agreements) will seek to be deputized by states’ attorneys general to assist in the prosecution of complex, multi-million dollar representative actions, and this will likely be a new battleground ripe for further litigation.