Less than a year after issuing its first ruling interpreting the Class Action Fairness Act (“CAFA”), the Supreme Court heard oral argument last week in another case under the statute, Mississippi v. AU Optronics Corp., No. 12-1036. The Court will now consider whether CAFA’s definition of “mass action” applies to “parens patriae” lawsuits, which states can file to assert the general interests of their citizens.
Congress enacted CAFA in part to alleviate the perceived problems of forcing defendants to litigate expensive class action lawsuits, which often have a nationwide impact, in local state courts, where the plaintiffs’ lawyers might engage in forum shopping for a favorable judge or jurisdiction. CAFA makes it easier for defendants to remove certain large class-action or mass-action lawsuits to federal court. Interestingly, Congress considered and rejected an amendment to CAFA that would have explicitly exempted state attorney general actions, such as parens patriae lawsuits, from removal under the statute.
In the case now before the Supreme Court, the state of Mississippi accused six LCD display manufacturers of price fixing, and hired a law firm to sue under Mississippi law on behalf of Mississippi citizens. The question for the Court is whether this lawsuit is a “mass action” under CAFA.
CAFA defines mass actions to include those involving claims by 100 or more persons. Here, Mississippi was the only plaintiff on the complaint. The Fifth Circuit Court of Appeals, however, held that courts must look beyond the face of a state’s complaint to determine the “real parties in interest,” and that CAFA applies when the parties in interest number more than 100. The Fifth Circuit then held that the real parties in interest included the various citizens of Mississippi and that the case had to be removed to federal court.
At oral argument, Justices Scalia, Kagan, and Sotomayor all raised questions about CAFA’s statutory language, indicating that the definition of “mass action” applies only to cases where the actual plaintiffs number more than 100 and is not expansive enough to include parens patriae actions. Justice Scalia suggested that the drafting of CAFA is one of those cases when “sometimes, they try to catch everything, but the language they use doesn’t do it.”
Chief Justice Roberts, however, brought up an important point: if CAFA does not apply to parens patriae actions, then defendants could be exposed to separate state-court lawsuits in all 50 states and the District of Columbia, on top of already having to fight private class action lawsuits. The Chief Justice suggested that states would wait to see whenever a private class action results in a generous settlement, and then file lawsuits in state court seeking a payout as well – which is essentially what happened in this case.
Whether the majority of the justices in this case agree with Justice Scalia or Chief Justice Roberts, this case will have an important impact on the burden on companies of managing their class action lawsuits. In addition, expect further developments in class action litigation under CAFA, as courts continue to interpret the statute and fill in its gaps.