On Tuesday, the Supreme Court once again weighed in with a decision regarding class actions, but this time with a twist. In what is a rare event in the class action context, the Court handed down a unanimous decision in Mississippi ex rel. Hood v. AU Optronics Corporation. All of the justices agreed that the text of the Class Action Fairness Act (“CAFA”) is clear: in order to constitute a “mass action,” a lawsuit must involve monetary claims by one hundred or more named plaintiffs, not just one hundred or more real parties in interest. As such, the justices concluded, an action may not be removed to federal court under CAFA simply because a state is pursuing a claim on behalf of more than one hundred of its citizens. In doing so, the Court resolved a circuit split regarding whether CAFA applied to actions brought by state attorneys general to recover damages on behalf of consumers.
Hood involved a lawsuit filed in state court by the attorney general for the State of Mississippi, alleging that the manufacturers of liquid crystal displays (“LCDs”) had formed an unlawful cartel. The attorney general sought restitution for purchases made by its citizens. The manufacturers sought to remove the case to federal court, arguing that the case was removable under CAFA. CAFA allows defendants to remove both class actions and “mass actions,” the latter of which are defined as civil actions “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.” 28 U.S.C. § 1332(d)(11)(B)(i). The manufacturers argued that the action qualified as a “mass action,” even though the state attorney general was the only named plaintiff, because there were over one hundred unnamed persons who were real parties in interest.
The Supreme Court disagreed. The Court found that the statutory text clearly contradicted the manufacturers’ argument that the term “persons” included all real parties in interest regardless of whether those persons were named or unnamed. The Court held that the meaning of the term “persons” was clarified by Congress’ use of the term “plaintiffs” in the very same sentence. Looking at the statutory text, the Court concluded that “Congress meant for the ‘100 or more persons’ and the proposed ‘plaintiffs’ to be one and the same.” The Court also noted that Congress did not use the phrase “named or unnamed” in CAFA’s mass action provision, even though it had done so in another subsection of Section 1332. As such, the Court reasoned, if Congress had wanted the term “persons” to include all real parties in interest, “it easily could have drafted language to that effect.” Having concluded that the plain text of the statute compelled it to interpret “persons” as meaning “named plaintiffs,” the Court then went on to observe that its interpretation was consistent with CAFA’s statutory context and was further supported by the administrative difficulties that would be raised by a contrary interpretation.
Hood clearly establishes that actions brought by state attorneys general based on claimed injuries to private citizens, commonly referred to as parens patriae cases, are not “mass actions” that can be removed under CAFA. This ruling could have a potentially significant effect. In many parens patriae cases, private plaintiffs’ lawyers are retained to represent the states in return for contingency fees. These private attorneys may now propose parens patriae suits more frequently, seeking to avoid removal to federal court. It will bear watching to see if such a trend develops.