Source: https://www.skadden.com/insights/publications/2014/01/supreme-court-decides-emparens-patriaeem-suits-mus
Timestamp: 2019-04-24 14:41:16+00:00

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On January 14, 2014, the U.S. Supreme Court held in an unanimous decision that parens patriae lawsuits filed by state attorneys general alleging only violations of state law may not be removed to federal court under the Class Action Fairness Act of 2005 (CAFA). The Court concluded these suits are not “mass actions” within the meaning of the statute and must remain in state courts.
The LCD manufacturers removed the case to federal district court, arguing it was a mass action under CAFA. CAFA defines mass action to mean “any civil action . . . in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.”4 The U.S. District Court for the Southern District of Mississippi concluded that “persons” should be defined to mean the “real parties of interest” to the restitution claim, which were the unidentified Mississippi consumers who purchased the LCD screens.5 The district court nonetheless remanded the case to state court due to a “general public exemption” provision in CAFA.6 On appeal, the Fifth Circuit agreed with the district court that the lawsuit satisfied the removal requirements of CAFA, as the “real parties of interest in Mississippi’s suit are those more than 100 … individual citizens who purchased the [LCD] products within Mississippi.”7 The court reasoned that when a state brings actions to enforce the rights of consumers, the state is “not asserting its sovereign interest[s]” but should be viewed as acting “as a class representative” and “pursu[ing] the interests of … private part[ies].”8 Because the Fourth, Seventh and Ninth Circuits previously reached the opposite conclusion in similar actions, the Supreme Court granted certiorari to determine whether a suit filed by a state as the sole plaintiff constitutes a “mass action” under CAFA where it includes a claim for restitution based on injuries suffered by the state’s citizens.
By deciding the case strictly based on statutory language, the Court was able to side step the policy implications of prohibiting removal under CAFA even though at least some of the justices expressed unease during oral argument that having these suits in state court may create the potential for duplicative recovery and reduce incentives for defendants to settle these large actions.
For example, the decision leaves open a significant question as to whether a consumer settlement in a private class action bars or precludes the state attorney general’s subsequent litigation where it presents identical claims under a different statutory authority. Here, the Mississippi attorney general argued that because the state’s lawsuit seeks restitution, a public remedy, the private class action settlement should not preclude this action under Mississippi law. Defendants have reason for concern that any argument that the consumer settlement does bar the attorney general’s action may now only be adjudicated in the attorney general’s home state court.15 At oral argument, Chief Justice Roberts remarked that there would be nothing to prevent “attorneys general from around the country sitting back and waiting [as] private class actions proceed, and as soon as one settles or the plaintiffs’ class prevails, taking the same complaint, maybe even hiring the same lawyers [to bring an action],” with the advantage of knowing the parameters of the trial and settlement.16 As state attorneys general often outsource these parens patriae lawsuits to members of the private plaintiffs’ bar, there now appears to be little incentive to forgo bringing the additional lawsuit.
Because the Supreme Court did not resolve or even address any of these policy concerns in its decision, it remains to be seen what impact the AU Optronics decision will have on the potential for double recovery from antitrust defendants and ultimately the types of settlements they will be willing to enter. But it certainly appears likely that the opinion will incentivize state attorneys general to bring more of these types of lawsuits in the future.
1 Don Jeffrey & Phil Milford, “Samsung, LCD Makers Agree to Pay $538.6 Million to Settle Antitrust Claims,” Bloomberg Law (Dec. 27, 2011), http://www.bloomberg.com/news/2011-12-27/sharp-samsung-propose-539-million-settlement-in-panel-antitrust-cases.html.
2 Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp et al., No.12-1036, slip op. at 3 (U.S.S.C. Jan. 14, 2014).
4 28 U.S.C. § 1332(d)(11)(B)(i).
5 Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp et al., 876 F. Supp. 2d 758, 771 (S.D. Miss. 2012).
7 Mississippi ex rel. Hood v. AU Optronics Corp., 701 F. 3d 796, 779 (5th Cir. 2012).
9 Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp et al., No.12-1036, slip op. at 6 (U.S.S.C. Jan. 14, 2014).
15 Transcript of Oral Argument at 11, Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp. et al., No.12-1036, slip op. (U.S.S.C. Jan. 14, 2014).
16 Id. at 17, 19.

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