Four years ago, the Fifth Circuit became one of the first courts to consider the application of CAFA’s “mass action” provision to a suit filed by a state attorney general on behalf of a subset of injured citizens. The court’s approach has since been rejected in other circuits. Now, a recent case in which the Fifth Circuit awkwardly applied its own precedent has created a confusing set of circumstances and led at least one Fifth Circuit judge to opine that the other courts probably have it right after all.
CAFA provides that removal of a case to federal court is proper if the suit is either a “class action”—defined with reference to Rule 23 and parallel state law provisions—or a “mass action.” A case is a “mass action” under CAFA if it proposes the joint trial, based on common questions of law or fact, of monetary relief claims of at least 100 persons with an amount in controversy of at least $75,000.
In 2008, the Fifth Circuit held in Louisiana ex rel. Caldwell v. Allstate Insurance Company that where removal of a state attorney general’s lawsuit is sought on “mass action” grounds, a court should “pierce the pleadings” to determine whether the “real party in interest” is the state or the injured citizens. In Caldwell, the Louisiana attorney general brought a parens patriae action on behalf of injured policyholders alleging that insurance companies conspired in violation of the state antitrust laws. The court held that the policyholders, not the state, were the real parties in interest, and therefore the lawsuit was removable as a mass action.
Courts that addressed the same issue after Caldwell took the opposite approach. In 2011, the Seventh Circuit affirmed the remand of a lawsuit brought by Illinois on behalf of injured purchasers of allegedly price-fixed LCD products, holding that whether a state is the real party in interest “is a question to be determined from the essential nature and effect of the proceeding.” In March 2012, the Ninth Circuit sided with the Seventh Circuit, requiring the remand of an action filed by the Nevada attorney general alleging that Bank of America misled Nevada consumers about the terms and operation of its home mortgage modification and foreclosure processes. The Ninth Circuit noted “the devastating effect of the foreclosure crisis on Nevada” and “Nevada’s sovereign interest in protecting its citizens and economy from deceptive mortgage practices” in determining that Nevada was the real party in interest.
The issue returned to the Fifth Circuit in Mississippi v. AU Optronics Corporation, another antitrust and consumer protection case brought against LCD manufacturers on behalf of purchasers. The Fifth Circuit noted that its approach had been rejected by other courts, but nonetheless applied Caldwell and held that the Mississippi attorney general must litigate his “mass action” in federal court.
The awkwardness of the Fifth Circuit’s adherence to Caldwell, however, was illustrated in a concurring opinion by Judge Jennifer Walker Elrod. Judge Elrod supported the denial of remand on the ground that the panel had accurately applied Caldwell, but then proceeded to explain why the Fifth Circuit might be wise to free itself of Caldwell’s constraints:
1. CAFA provides no textual support for piercing the complaint “to determine whether [the] plaintiff is the sole beneficiary of each basis for relief.”
2. The Supreme Court has repeatedly warned that removal statutes should be strictly construed, with ambiguities resolved in favor of remand.
3. Principles of comity and federalism dictate that this rule should apply “with particular force” where the plaintiff is a state suing in its own courts.
4. The Caldwell approach negates the “general public” exception to CAFA, which provides that a “mass action” does not include a civil action in which all of the claims “are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action.” Because Caldwell, as well as the majority in AU Optronics, hold the injured citizens on behalf of whom the state has sued are the real parties in interest, these cases also hold that the claims are not “asserted on behalf of the general public” for purposes of the exception. The result is that “a case cannot satisfy the criteria of both the mass action provision and the general public exception,” thereby vitiating the general public exception.
Based on this own critique from a concurring judge, it would seem unlikely that future circuits to consider the matter on first impression would follow the Fifth Circuit’s approach. The question is whether the Fifth Circuit, at its next opportunity, will accept Judge Elrod’s suggestion and reconsider, or whether the Fifth Circuit will stand as the only circuit in which a state’s parens patriae lawsuit is removable under CAFA.