Parens patriae, the Class Action Fairness Act, and the path forward: the implications of Mississippi ex rel. Hood v. AU Optronics Corp.

• Author: Hayden, Patrick

Few issues in the law of federal courts generate more excitement than the relative strengths of state and federal courts and the power of the states to sue on behalf of their injured citizens. Since Congress passed the Class Action Fairness Act of 2005 (CAFA), (1) a tension has developed between these two issues in federal courts. This Comment addresses that tension, the circuit split it engendered, and the Supreme Court's attempt to resolve the split in its January 2014 opinion, Mississippi ex rel. Hood v. AU Optronics Corp. (2)

The legal issue was as follows: CAFA permits a defendant in a class or mass action to remove the action from state to federal court; (3) the states, meanwhile, frequently bring lawsuits on behalf of their injured citizens in their respective state courts. States possess this power through the doctrine of parens patriae: literally "parent of the country," parens patriae permits a state to bring an action as a single party on behalf of a number of its injured citizens. (4) As CAFA has channeled more class actions and other aggregated claims into the federal courts, the state attorneys general have more frequently brought parens patriae actions in state court--and, in some cases, those actions have looked increasingly like the class actions that CAFA seemed to target. The question in Hood, then, was whether parens patriae actions, given their similarities to class actions, fell within the ambit of CAFA and could thus be removed from state to federal court.

In Hood, the Supreme Court answered this question, which had divided the circuits, with a decisive "no." Without acknowledging the sensitive issues of federalism and state sovereignty that this question could have involved, the Court's opinion was straightforward: as a matter of statutory interpretation, a parens patriae action is not a mass action and is not removable to federal court under CAFA.

This Comment discusses what Hood said, what it didn't, and where we should go from here. Specifically, I argue that Hood signals at least two important developments with respect to CAFA: (1) a new emphasis on CAFA's text, not its general purposes or legislative history, and (2) an apparent tolerance of litigation strategies designed to maneuver around CAFA and resist removal to federal court.

Left unresolved, however, is the question of what should be done to address the real risk of abuse of parens patriae. Hood seems to invite a legislative fix. Prior to the decision, the Seventh Circuit argued that "protection against excesses in the parens patriae context lies in the electoral process," (5) and at least one commentator proposed amending CAFA to "specifically exempt parens patriae suits from removal." (6) In Hood, the Court focused on what CAFA "says," noted that Congress "easily could have" drafted different language if it intended otherwise, and implicitly directed disappointed litigants to their representatives for relief. (7)

I argue, by contrast, that a better solution might be found through the law of parens patriae standing. Standing doctrine provides the appropriate analytical frame for determining whether a state fairly represents the interests of its citizens or whether it is merely acting as a class action representative in disguise. In particular, this Comment recommends that parens patriae standing analysis consider whether class actions are procedurally and practically available to the injured parties. Where such an alternative remedy exists, courts should generally find that the state lacks standing to proceed as parens patriae. At least one state has embraced this approach of considering the availability of class actions in parens patriae standing analysis, and such an approach could close the parens patriae loophole if accepted more widely.

1. CAFA, PARENS PATRIAE, AND THE CIRCUIT SPLIT

   CAFA responded to concerns about abuses of class actions at the state court level by channeling certain class actions from state to federal courts. (8) Born out of suspicion regarding jurisdictional gamesmanship, CAFA and its legislative history seemed to evince a spirit of substance over form: the statute invited courts to look beyond the labels parties might affix to their actions and determine whether the action is, in effect, a class action that should be subject to CAFA's removal provisions. (9)

   In the effort to bring "real" class actions to federal court, courts quickly encountered an interesting issue of potential gamesmanship: parens patriae actions brought by state attorneys general but often representing the interests of a small group of their citizens. In 2008, the Fifth Circuit addressed the issue first and, relying on CAFA's overarching purpose of extending federal court jurisdiction and removing class action look-alikes, held that parens patriae actions were indeed mass actions subject to CAFA removal. (10) The other circuits, however, disagreed. Specifically, the Second, (11) Fourth, (12) Seventh, (13) and Ninth (14) Circuits all rejected the Fifth Circuit's approach and, relying on the plain meaning of CAFA's text, held that a parens patriae action has only one plaintiff--the state--and therefore "falls 99 persons short of a 'mass action,"' (15) which requires at least too persons.

2. THE HOOD DECISION, IMPLICATIONS FOR CAFA, AND UNANSWERED QUESTIONS

   1. The Supreme Court's Opinion

      In January 2014, the Supreme Court rejected the Fifth Circuit's approach and endorsed that of its sister circuits. Hood's facts are typical of cases considering the tension between parens patriae and CAFA. AU Optronics is one of several manufacturers of liquid crystal display panels, or LCDs, to be sued for price-fixing; from 2006 to 2011, more than 150 actions were brought against LCD manufacturers for antitrust violations--over one hundred of which were styled as class actions. (16) In March 2011, the Mississippi Attorney General filed a complaint against AU Optronics in the Mississippi Chancery Court asserting causes of action under both the Mississippi Consumer Protect Act and Mississippi's antitrust laws. (17) The Mississippi Attorney General's action was virtually identical to the class actions brought against AU Optronics, (18) and private contingency fee attorneys represented the Mississippi Attorney General. (19) AU Optronics, seeking a federal forum, successfully removed the action to federal court under the theory, then accepted in the Fifth Circuit, that Mississippi's action was in substance a "mass action" under CAFA. (20) Although the district court initially remanded the case to state court on other grounds, (21) the Fifth Circuit ultimately affirmed the removal. (22)

      At the Supreme Court, the major issues involved in this dispute were on full display. Mississippi accused the Fifth Circuit of "violating] the 'etiquette of federalism.'" (23) Supporting Mississippi's position, forty-six state attorneys general argued as amici that "forcing an unwilling State to proceed in federal court" is an "affront to the sovereign dignity of the State" and "an affront to established principles of federal-state comity." (24) With equal passion, AU Optronics and its amici argued that "[i]f state attorneys general and their outside counsel are permitted to rely on their parens patriae authority to circumvent CAFA ... the very purpose of CAFA will be eviscerated." (25)

      Yet against this backdrop, the Supreme Court's unanimous opinion, authored by Justice Sotomayor, was moderate in tone and straightforward in its analysis. The Court--never once mentioning federalism, dignity, sovereignty, or bias-focused on the text of the statute and reasoned that a single state is not "too or more persons" as required by CAFA's definition of "mass action." "[T]he statute says '100 or more persons,'" Justice Sotomayor explained, "not '100 or more named or unnamed real parties in interest.'" (26) The Court rejected the notion that federal courts are free to "look behind the pleadings to ensure that parties are not improperly creating or destroying diversity jurisdiction" in all instances. That power, the Court explained, can come only from Congress, and here, the straightforward text and structure of CAFA's "mass action" provision provided no such license. (27)

   2. Implications for CAFA

      The Hood opinion is, generally speaking, a model of textualist interpretation and judicial restraint. Although it resisted the sensitive issues looming in the background of this dispute, the Court signaled at least two important...