U.S. Supreme Court to Rule on Class Action Fairness Act’s “Mass Action” Provision

Cruz-Alvarez_FFeatured Regular Expert Column

Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. (co-authored with Jared SherrShook, Hardy & Bacon, L.L.P.)

The Supreme Court granted certiorari on May 28 in Mississippi ex rel. Hood v. AU Optronics Corp., No.  12-1036, to determine whether the State of Mississippi’s parens patriae action against manufacturers, marketers, sellers, and distributors of LCD panels for an alleged price-fixing scheme is removable as a “mass action” under the Class Action Fairness Act (“CAFA”).  The U.S. Court of Appeals for the Fifth Circuit held that the district court erred in remanding the case to state court on the grounds that, while the suit was not a “class action” within CAFA, it satisfied CAFA’s “mass action” provision of § 1332(d)(11)(B).

The crux of the case turns on the question of whether the suit involves the claims of “100 or more persons” to satisfy CAFA’s “mass action” provision.  Id.  The Fifth Circuit reasoned, as it did in Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418, 424-25 (5th Cir. 2008), that “persons” in the “mass action” context are the “real parties in interest,” and not simply the named party in the pleadings.  Mississippi ex rel. Hood v. AU Optronics Corp., 701 F. 3d 796, 800 (5th Cir. 2012).  The court ruled that Mississippi’s complaint, the statutes under which Mississippi brought suit, and common law parens patriae authority led to the conclusion that the real parties in interest in the case far exceeded 100 people. Indeed, the Fifth Circuit found that, in actuality, Mississippi brought the case as a representative of its many citizen consumers who purchased the products at the center of the case.  Accordingly, it ruled that the suit was properly removed to federal court because it met the CAFA definition of a “mass action.”

The Supreme Court has never addressed federal “mass action” jurisdiction under CAFA and its ruling here is likely to have a significant impact.  In our opinion, the Court should affirm the Fifth Circuit’s interpretation of the “mass action” provision in CAFA because such an interpretation is consistent with Congress’s intent, which was to broaden federal court diversity jurisdiction to encompass “interstate cases of national importance,” as a means of protecting out-of-state defendants from potential state-court bias.  CAFA § 2(b)(2).  This lawsuit, brought by the Mississippi Attorney General for significant damages against leading domestic and foreign manufacturers of LCD panels, is precisely the type of case contemplated by CAFA.

Because the State of Mississippi is suing for significant damages in a representative capacity on behalf of numerous Mississippi citizens and consumers of LCD displays, CAFA’s “mass action” provision is satisfied. States like Mississippi should not be permitted to circumvent CAFA and evade removal jurisdiction simply by pleading a parens patriae action.  A different result would allow plaintiffs’ lawyers to game the system to avoid removal.

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