5th Circuit Splits with Other Federal Courts on CAFA and Attorney General Suits

5thCir

Directly conflicting with three other circuit courts, the U.S. Court of Appeals for the Fifth Circuit has ruled that the Mississippi Attorney General’s parens patriae antitrust suit against various LCD display makers qualifies as a “mass action” under the Class Action Fairness Act and must be litigated in federal court (Mississippi v. AU Optronics Corp.).

Under CAFA, an action may be removed to federal court if it involves claims of 100 or more persons, includes common questions of law or fact, and seeks at least $5 million in damages. In deciding jurisdiction for the Mississippi Attorney General’s suit, the Fifth Circuit stated that the “decisive question” was “whether the suit involves the claims of ‘100 or more persons.’ If so, the suit is a mass action and removal is proper.”

The three-judge Fifth Circuit panel said that it was guided by a precedential 2008 case, Louisiana v. Allstate. In that case, a panel adopted what is now known as the “Caldwell claim-by-claim approach” and ruled that the interested persons in the case against the insurance industry were the individual policy holders and not the Louisiana Attorney General. The Fifth Circuit explained that the Caldwell approach instructs the court to “pierce the pleadings and look at the real nature of the state’s claims” to determine if the state is the plaintiff or if the state is suing on behalf of individuals.

Specifically, the Fifth Circuit said, “we have been directed to no statutory or common law that permits the state to extinguish the right and remedy the consumer has for his injury. There is (also) the all too troubling suggestion by the plaintiff that Mississippi could obtain restoration for harm to individual citizens, yet keep that money for itself. We think that consideration, coupled with the reasons provided above, is enough to find against the state having carte blanche to recover for others’ injuries under common law parens patriae authority.”

The Fourth, Seventh, and Ninth Circuits, however, have held that such parens patriae cases do not fit the definition of a class for a mass action under CAFA standards. For example, Attorneys General do not have to show standing or seek certifications in parens patriae suits. Further, as these Circuits have noted, CAFA stipulates that a 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 pursuant to a State statute specifically authorizing such action.”  The Fifth Circuit found this “general public exception” inapplicable because it believed the Mississippi Attorney General was asserting claims on behalf of the individual consumers as opposed to on behalf of the general public.

AU Optronics creates a circuit split that will likely be left to the Supreme Court to sort out.  And the Fifth Circuit is not the only one currently facing the question.  In the longstanding Kentucky v. Purdue Pharma case, the Second Circuit has been asked to decide whether or not the federal courts, specifically the U.S. District Courts for the Southern District of New York or the Eastern District of Kentucky, from where it was transferred, have jurisdiction under CAFA.  If the Second Circuit decides that the case does in fact belong in federal court, it will join the Fifth Circuit and expand the existing circuit split.

One thought on “5th Circuit Splits with Other Federal Courts on CAFA and Attorney General Suits

  1. Pingback: Finger on the Pulse: From Our Blogroll and Beyond | The Legal Pulse

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