On May 28, 2012, the U.S. Supreme Court granted certiorari in Mississippi ex rel. Hood v. AU Optronics Corp., Docket No. 12-1036, a price-fixing case between the State of Mississippi and a number of electronics companies. The Supreme Court agreed to determine whether a state’s parens patriae action is removable as a “mass action” pursuant to the Class Action Fairness Act (“CAFA”) when the state is the sole plaintiff, and the claims arise under state law. The case will be heard and decided during the term beginning in October 2013.

Federal appellate courts are currently split on whether CAFA should apply to lawsuits filed by state attorneys general on behalf of state citizens. This issue is of significance to employers in workplace class action litigation, since interpretations of the CAFA is important to defense strategy in removal situations.

Background Of Mississippi ex rel. Hood v. AU Optronics Corp.

In March 2011, Mississippi’s Attorney General filed a complaint in Mississippi state court, on behalf of Mississippi consumers, alleging that defendants were price-fixing LCD panels. The lawsuit brought claims under the Mississippi Antitrust Act and the Mississippi Consumer Protection Act. Shortly after it was filed, defendants removed the case to federal court on the grounds that it was either a “class action” or a “mass action” under the CAFA. The district court granted Mississippi’s motion to remand, however, finding that although the case constituted a “mass action” under the CAFA, it fell into the “general public exception” to the CAFA’s mass action jurisdiction because the claims were asserted on behalf of the general public, and not on behalf of individual claimants. Defendants appealed. 

The Fifth Circuit’s Opinion

In November of last year, the Fifth Circuit reversed the district court’s remand order, agreeing with the electronics companies who argued that the lawsuit belonged in federal court and was removable under the CAFA. See Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012). In reaching its decision, the Fifth Circuit agreed that the case was a “mass action” within the meaning of the CAFA. According to the Fifth Circuit, the real parties-in-interest include not only the State of Mississippi, but also individual consumers residing in Mississippi. However, the Fifth Circuit determined that, because the claim was, at least in part, brought on behalf of individual consumers, the general public exception did not apply, and therefore that the CAFA mass action jurisdiction was proper. Its decision notwithstanding, the Fifth Circuit recognized that, by finding the general public exception inapplicable, it essentially read it out of the statue.

Circuit Split

Previously, three other courts of appeals addressed similar claims involving the same jurisdictional question, and held that they were not removable:

AU Optronics Corp. v. South Carolina, 699 F.3d 385 (4th Cir. 2012), petition for cert. filed, No. 12-911 (Jan. 23, 2013);

LG Display Co. v. Madigan, 665 F.3d 768 (7th Cir. 2011); and

Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2011).

So while the Fourth, Seventh, and Ninth Circuits have found no federal jurisdiction in these circumstances, the Fifth Circuit in AU Optronics Corp. found federal jurisdiction as a CAFA mass action. In other words, cases involving the same claims and arising out the same conduct by the same defendants have been inconsistently resolved. Notably, the same question presented in currently pending before the Supreme Court in the certiorari petition filed in AU Optronics Corp. v. South Carolina.

Implications

The Supreme Court granted certiorari to ensure that federal jurisdiction over state parens patriae actions does not vary based on the location of the federal court to which the lawsuit may be removed. Furthermore, because the Fifth Circuit’s decision essentially prevents a state attorney general from bringing a parens patriae action in state court – even when the state is the plaintiff and the claims arise under state law – it is likely that the Supreme Court feels compelled to strike a balance between principles of federalism and state sovereignty with CAFA. The Supreme Court’s decision will serve as a barometer of its hostility toward class actions. When the CAFA was enacted in 2005, its goal was to give federal courts jurisdiction over lawsuits involving large numbers of plaintiffs, and since it was implemented, the Supreme Court has issued a number rulings that have made it harder and harder for plaintiffs’ lawyers to bring class actions, especially in state court. The decision in AU Optronics Corp., however, given its implication of issues of state sovereignty, could test just how far the Supreme Court is willing to go to guard against potential class action abuses.