On January 14, 2014, the United States Supreme Court, in Mississippi ex rel. Hood v. AU Optronics Corp., unanimously held that a suit filed by a state as the sole plaintiff does not constitute a “mass action” under the Class Action Fairness Act (CAFA). This decision resolves a circuit split over whether parens patriae actions – brought by a state on behalf of its citizens – are removable as mass actions under CAFA.
A mass action is a civil action in which monetary relief claims of “100 or more persons” are proposed to be tried jointly and the amount in controversy for each claim exceeds $75,000. Whether a parens patriae action qualifies as a mass action depends on whether the citizens on whose behalf the state is suing are considered “persons” under CAFA. Prior to AU Optronics, the Fourth, Seventh and Ninth Circuits concluded that parens patriae actions are not mass actions because the state, not its citizens, is the real plaintiff or “party in interest.” The Fifth Circuit, however, employed a “claim-by-claim” analysis to determine whether the state or the individual citizens were the real parties in interest, thereby allowing each citizen to count toward the 100-plaintiff mass action CAFA jurisdictional threshold.
In AU Optronics, the Supreme Court rejected the Fifth Circuit’s “claim-by-claim” methodology and endorsed the other circuits’ approach. The Court began its analysis with the statutory text of CAFA noting that for the “claim-by-claim” analysis to work, the phrase “100 or more persons” would have to be construed as “100 or more named or unnamed real parties in interest.” The Court also reasoned that in order for the “claim-by-claim” approach to work, each unnamed party in interest would have to meet the $75,000 amount in controversy requirement. This requirement would create an unwieldy “administrative nightmare” where courts would not only have to identify each unnamed party, but ascertain the amount in controversy for each unnamed party. The Court therefore held that the proper approach is for courts to determine who the “proposed plaintiffs” are, but not to include unnamed parties. This was the same approach employed by the Fourth, Seventh and Ninth Circuits.
The Supreme Court’s decision in AU Optronics further clarifies CAFA’s jurisdictional reach and confirms that parens patriae actions are not removable as mass actions under CAFA .The decision may result in increased parens patriae litigation and allow the state attorneys general to easily avoid litigating these cases in federal court.