What makes a class action a class action? It’s a harder question than you might think. In Manhattan, U.S. district court judge Victor Marrero is getting an earful from plaintiffs lawyers in a private antitrust class action claiming bid rigging in the muni bond derivatives market. The plaintiffs lawyers claim state attorneys general are trying to settle their case out from under them by reaching nationwide deals with muni bond bank defendants outside of the bounds of the class action. They want Judge Marrero to draw a bright line between their case and the regulatory settlements.
They’re not going to get any help from a new ruling by the U.S Court of Appeals for the Fourth Circuit. On Friday, a split Fourth Circuit panel concluded that West Virginia’s AG can proceed in state court with a case claiming that six pharmacy chains overcharged West Virginia residents for generic drugs. The ruling rejects defense arguments that the AG’s case is a class action in disguise that belongs in federal court under the Class Action Fairness Act.
“The Attorney General filed a statutorily authorized action on the state’s behalf, asserting claims arising exclusively under state consumer protection statutes,” wrote Judge Paul Niemeyer for himself and Judge Andre Davis. (Sixth Circuit senior judge Ronald Gilman, sitting by designation, dissented.) “These West Virginia statutes, on which the Attorney General relies for his claims, contain virtually none of the essential requirements for a Rule 23 [federal] class action.”
West Virginia attorney general Darryl McGraw Jr., represented by private counsel from Bailey & Glasser , originally filed the case in state court, alleging only state-law causes of action. The pharmacies removed it to federal court under CAFA. Charleston U.S. district court judge John Copenhaver Jr. rejected various defense pre-emption and CAFA arguments and sent the case back to state court. On appeal, the pharmacies and lead counsel from Foley & Lardner raised only the CAFA issue.
Friday’s ruling marks the first time a federal appellate court has decided whether an AG consumer case meets the definition of a class action under CAFA, according to West Virginia chief deputy AG Frances Hughes. “We feel vindicated that we properly filed our case in state court,” she said. “We’re delighted the Fourth Circuit agreed, and we hope this puts an end to the idea that when an attorney general brings a parens patriae case it falls under the Class Action Fairness Act.” Hughes said defendants in state consumer fraud cases typically remove them to federal court, citing CAFA. The Fourth Circuit’s opinion, she said, should put an end to that.
David Goroff of Foley, who argued at the Fourth Circuit for the pharmacies, didn’t return phone calls for comment.
(Reporting by Alison Frankel)