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From Antitrust Law Daily, January 14, 2014

Class Action Fairness Act did not require removal of state’s LCD price fixing suit

By Jeffrey May, J.D.

A price fixing action filed by the State of Mississippi as the sole named plaintiff was not a “mass action” under the Class Action Fairness Act (CAFA), even though the state sought restitution for injuries suffered by its citizens, the U.S. Supreme Court decided today in a unanimous decision, written by Justice Sonia Sotomayor. The Court concluded that the case had to be remanded to state court. The decision provides reassurance to state attorneys general that they can pursue state court actions against national and international cartels impacting their residents (State of Mississippi v. AU Optronics Corp., January 14, 2014, Sotomayor, S.).

The Court refused to accept the broad reading of CAFA “mass action” adopted by the U.S. Court of Appeals in New Orleans, which decided in November 2012 that the state’s suit was such an action (2012-2 Trade Cases ¶78,150). The Fifth Circuit ruled that removal to federal court of the state’s suit against manufacturers of liquid crystal displays (LCDs) for violations of the Mississippi Antitrust and Consumer Protection Acts was proper. It concluded that, because the state and individual citizens who purchased products within Mississippi were the real parties in interest in the case, the suit amounted to a mass action. That decision conflicted with decisions of the Fourth, Seventh, and Ninth Circuits that deemed similar lawsuits not to be mass actions removable under CAFA.

Congress enacted CAFA at least in part out of concerns that certain requirements of federal diversity jurisdiction had functioned to keep “cases of national importance” in state courts rather than federal courts, the Court explained. CAFA loosened the requirements for diversity jurisdiction for “class actions” and “mass actions.”

The Act defines “class action” to mean “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure” and “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.”

The Court looked to CAFA’s “plain text” to conclude that the suit was not a mass action. Under CAFA, a mass action must involve monetary claims brought by 100 or more persons who propose to try those claims jointly as named plaintiffs. Suits brought by fewer than 100 named plaintiffs did not amount to mass actions simply because there might be 100 or more unnamed persons who were real parties in interest or beneficiaries to the plaintiff’s claims. Rejected was the defending LCD maker’s argument that CAFA language referring to “claims of 100 or more persons” meant “the persons to whom the claim belongs, i.e., the real parties in interest to the claims,” regardless of whether those persons were named or unnamed.

The Court noted that the statute specifically said “100 or more persons,” not “100 or more named or unnamed real parties in interest.” If Congress had intended otherwise, it could have drafted language to that effect. Moreover, Congress repeatedly used the word “plaintiffs” to describe the “100 or more persons” in the statute. The Court refused to stretch the meaning of “plaintiff” beyond recognition as the defending manufacturer urged and rejected the appellate court’s determination that a “real party in interest inquiry” was necessary because federal courts were required “to look to the substance of the action and not only at the labels that the parties may attach.”

The Court’s analysis focused solely on the language of the statute. It did not consider some of the issues raised at oral argument regarding the impact of allowing states to pursue such actions in state court. Chief Justice John Roberts had expressed concern at the November 2013 argument that, under the state’s approach, defendants in a class action brought by consumers might not settle the case because they would fear that a state might later sue the defendants seeking restitution.

“What prevents attorneys general from around the country sitting back and waiting until 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 go and say, well, now we are going to bring our parens patriaeaction?” Roberts questioned. Roberts had suggested that states might do so with even greater frequency if Mississippi prevailed in the case.

The case is 12-1036.

Attorneys: Jonathan S. Massey (Massey & Gail LLP) argued for State of Mississippi. Christopher M. Curran (White & Case LLP) argued for AU Optronics Corp.

Companies: AU Optronics Corp.

MainStory: TopStory Antitrust

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