High Stakes in High Court’s Review Today of State Attorney General’s CAFA Circumvention

mississippiThe justices of the U.S. Supreme Court welcomed Mississippi today, in the person of Attorney-General Jim Hood, who was the “named plaintiff” in Mississippi ex rel Hood v. AU Optronics.  Hood claims that he, standing in the shoes of the state, is the only actual plaintiff in a class action prosecuted by private contingent-fee lawyers, and thus the suit cannot be removed from state to federal court under the Class Action Fairness Act (CAFA).

WLF filed an amicus brief in support of the Respondent in AU Optronics, and The Legal Pulse’s class action expert, Frank Cruz-Alvarez, blogged on the case when the Court granted review in June.

The stakes for free enterprise in AU Optronics are substantial. A Mississippi victory would blow a gaping hole in CAFA. As the Wall Street Journal argued in an editorial today:

Mr. Hood and his trial-bar friends are trying to evade federal law by running their class-action through the AG’s office. Mr. Hood’s retention agreement with Zimmerman Reid and another firm, Abraham & Rideout, reads: ‘Assume Recovery by the State of Mississippi of a monetary, [sic] sum, benefit, or value equal to $600,000,000.00.’ Yes, $600 million.

The conflicts of interest in such arrangements are quite breathtaking. According to a recent report, for example, General Hood’s “plaintiffs’ firm contributors were all out-of-state, and they made no contributions to other candidates for statewide office in Mississippi.” In only two instances where contingent-fee law firms represented Mississippi in securities fraud class actions did the firms not make a previous contribution to General Hood’s campaign. They did so subsequently, however, according to this report.

State attorneys-general were well aware of how CAFA would curb the trial lawyer/state AG alliance. As The Journal notes, 46 attorneys-general sought a specific exemption in CAFA for suits filed on behalf of the state, but Congress defeated that amendment. AU Optronics presents state officials with a second opportunity to achieve through judicial fiat what they could not obtain eight years ago via legislation.

It’s no surprise then that 46 other states’ attorneys-general signed onto an amicus brief supporting Mississippi.

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