U.S. Supreme Court: Are Parens Patriae Actions Removable to Federal Court Under the Class Action Fairness Act?

On May 28, 2013, the United States Supreme Court granted certiorari in State of Mississippi v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012), to resolve a circuit split on whether parens patriae cases, where the state is the sole plaintiff acting on behalf of its residents, may be removed to federal court under the Class Action Fairness Act (“CAFA”). CAFA permits defendants to remove from state court to federal court certain “mass actions.” In this case, the district court held that the Mississippi attorney general’s suit is a mass action under CAFA, but should not have been removed from state court because of an exception in the CAFA statute for law suits filed by attorneys general on behalf of the general public. Mississippi ex rel. Hood v. AU Optronics Corp., 876 F. Supp. 2d 758, 775 (S.D. Miss. 2012). The Fifth Circuit disagreed and held that removal is proper, concluding that the suit constitutes a mass action under CAFA because the consumers are “[t]he real parties in interest.” AU Optronics, 701 F.3d at 800, 803.

To date, the Fifth Circuit is the only federal circuit to conclude that parens patriae cases are mass actions subject to federal court removal under CAFA. By contrast, the Fourth, Seventh and Ninth Circuits, in the following cases, have held that parens patriae cases must be litigated in state court:

• AU Optronics Corp. v. South Carolina, 699 F.3d 385 (4th Cir. 2012), petition for cert. filed, No. 12-911 (Jan. 23, 2013) (affirming the district court’s decisions to remand two actions filed by the South Carolina Attorney General against two different companies for violations of South Carolina’s Antitrust Act and its Unfair Trade Practices Act);
• LG Display Co. v. Madigan, 665 F.3d 768 (7th Cir. 2011) (affirming the district court’s decision to remand the action filed by the Illinois Attorney General for violation of the Illinois Antitrust Act); and
• Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2011) (reversing the district court’s denial of the Nevada Attorney General’s motion to remand an action for violation of the Nevada Deceptive Trade Practices Act).

Practical Effect

For class action defendants, the AU Optronics decision is a significant victory because federal courts provide more restrictive class action rules than many state courts do. If the Supreme Court affirms the AU Optronics decision, the ruling will serve as an affirmation of the broad scope of federal jurisdiction under CAFA, and state attorneys general will no longer be able to avoid federal court by filing parens patriae actions.

The AU Optronics case represents the ability of state attorneys general to bring law suits on behalf of consumers against companies. In recent years, state attorneys general have been increasing their enforcement efforts through litigation against companies representing a variety of industries. The Supreme Court’s decision to hear this case is significant because it could be reflective of a view that cases brought by state attorneys general bear no more weight than suits brought by private parties.