Sunday, January 19, 2014

FYI: US Sup Ct Holds State AG Action on Behalf of State and Its Citizens Not Removable Under CAFA's "Mass Action" Provision

The Supreme Court of the United States recently held that unnamed parties who are real parties in interest do not count towards the "100 or more persons" requirement found in the definition of "mass action" in the federal Class Action Fairness Act of 2005 ("CAFA"), and therefore that removal of a state attorney general action brought on behalf of a state and its citizens under this provision was improper.


A copy of the opinion is available at


As you may recall, CAFA changed the requirements for diversity jurisdiction in two types of cases – class actions and mass actions. CAFA defines "class action" to mean "any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar statute" and "mass action" as "any civil action in which monetary relief claims of 100 or more persons are proposed to tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact." 


For class and mass actions, CAFA expanded diversity jurisdiction in two ways.  First, it replaced complete diversity of citizenship among all plaintiffs and defendants with minimal diversity.  Minimal diversity allows federal jurisdiction over class and mass actions when any member of a class of plaintiffs is a citizen of a state different from any defendant. 


Second, CAFA grants federal jurisdiction over class and mass actions in which the aggregate amount in controversy exceeds $5 million, provided at least one plaintiff has claim greater than or equal to $75,000.00.


In March of 2011, the State of Mississippi ("the State") sued several makers of liquid crystal displays ("LCD displays") in state court, alleging that they had formed an international cartel to restrict competition and raise prices in the LCD market.


The State claimed that these actions violated two Mississippi statutes: the Mississippi Antitrust Act and the Mississippi Consumer Protection Act. The State sought injunctive relief and civil penalties under both statutes, along with punitive damages, costs, and attorney's fees. It also sought restitution for its own purchases "of LCD products and the purchases of its citizens."


Respondents filed a notice to remove the case from state to federal court, arguing that the case was removable under CAFA as either a "class action" or a "mass action." 


The District Court ruled that the suit did not qualify as a "class action" because it was not brought pursuant to Federal Rule of Civil Procedure 23 or any similar State statute or rule of procedure.  The District Court, however held that the suit did qualify as a "mass action," because it is a 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 District Court nonetheless remanded the case back to state court on the basis of CAFA's "general public exception," which excludes from the mass action definition "any civil action in which . . . all of the claims in the action 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." 28 U. S. C. §1332(d)(11)(B)(ii)(III).


The United States Court of Appeals for the Fifth Circuit reversed the District Court's holding.  Although it agreed with the District Court's determination that the State's suit is not a class action under CAFA. It also agreed that, under existing Fifth Circuit jurisprudence, the suit qualified as a "mass action" because the real parties in interest in Mississippi's suit were the more than 100 individual citizens who purchased the LCD products.


The Court of Appeals, however disagreed with the District Court's ruling that the suit fell within CAFA's general public exception, thus giving the United States District Court jurisdiction over these claims. 


The Supreme Court of the United States unanimously reversed the Court of Appeals.  The Supreme Court concluded that unnamed parties who are real parties in interest do not count towards the "100 or more persons" requirements found in CAFA's mass action definition.  


Significantly, plain text of CAFA's mass action definition which requires mass actions to have 100 or more persons rather than "100 or more named or unnamed real parties in interest."  The Supreme Court noted that although other sections of CAFA allowed the use of named or unnamed plaintiffs, and where Congress includes particular language in one section of a statute but omits it in another section of the same act, it is presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.  Congress chose not to use the phrase "named or unnamed" in CAFA's mass action provision, a decision the Court understood to be intentional.


The Supreme Court observed that CAFA's mass action jurisdictional requirement of $75,000.00 would become a jurisdictional nightmare if named and unnamed plaintiffs could be used to satisfy the plaintiff quantity requirement in mass actions.  A District Court would be unable to identify or value an unnamed plaintiff's claims.  


In addition, the Supreme Court noted the statutory context of CAFA's mass action requirements also supported their view.   Section 1332(d)(11)(C)(i) of CAFA provides that once a mass action has been removed to federal court, it "shall not thereafter be transferred to any other court . . .unless a majority of the plaintiffs in the action request transfer." If the term "plaintiffs" means "unnamed parties in interest," it would be practical impossible for a court to decide whether an action may be transferred. A District Court would have to identify and communicate with hundreds of thousands if not millions of real parties in interest to poll about their preferred forum.


The Supreme Court next addressed the Fifth Circuit's reasoning which stressed an analysis of the real parties in interest to a suit.  The Court held that rather than engaging in this type of analysis, the applicable test is whether Congress intended for unnamed parties to help satisfy the mass actions requirements under CAFA. 


Accordingly, the United States Supreme Court unanimously reversed and remanded the Court of Appeals decision, because of the language of CAFA. 






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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