One of the biggest cases underway in any federal court right now is the multidistrict litigation over price-fixing in the market for liquid crystal display screens. The San Francisco federal judge overseeing the litigation, Susan Illston, has certified huge classes, which means that just about everyone who purchased a computer or mobile device is a member of a class demanding damages for an antitrust scheme that's already netted more than a half-dozen guilty pleas from participants.
The attorneys general of Washington and California, however, decided to bring their own actions in their own home courts. Each AG filed a parens patriae suit, claiming that state agencies and state residents were victims of the price-fixing conspiracy. The defendants, including Sharp, Epson, Hitachi, Samsung, and Toshiba, removed the cases to Judge Illston's MDL, arguing that they're mass actions under the Class Action Fairness Act.
They're not, according to a ruling Monday by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit. The appellate panel, in a 16-page opinion that parallels a Fourth Circuit ruling last May on the exact same issue, concluded that the AG's suits are not disguised class actions because "parens patriae suits lack the defining attributes," wrote Judge Sidney Thomas. AGs don't have to show standing or seek certification in parens patriae suits, nor do the state laws under which the suits were filed require the same sorts of numerosity and typicality showings as class actions, the opinion said. Moreover, the appellate judges said, the relief in an AG suit isn't necessarily money damages to individual consumers, but can be a payment to the state treasury. "This fact highlights the great distinction between a parens patriae lawsuit and a true class action," the opinion said.
What's important about the ruling isn't just that the Washington and California LCD cases will remain in state court. The Ninth Circuit panel's decision endorses the power of state AGs to bring their own cases even when private class actions cover the exact same conduct. AGs, in other words, can pre-empt private cases-which is just what plaintiffs lawyers in the municipal bond derivatives class action before Manhattan federal judge Victor Marrero assert has happened in their case. Many of the muni bond derivative defendants have reached settlements with state AGs, rather than settling in the class action. The plaintiffs lawyers assert that it's an easy out for defendants, whose regulatory settlements aren't subject to a federal judge's oversight, as real class actions are.
John Grenfell of Pillsbury Winthrop, who represents Sharp in the LCD litigation and argued to keep the AG cases in federal court at the Ninth Circuit, told me that was one of the points his side tried to raise. (I pointed out the oddity of class action defendants in the LCD case arguing the same position as the muni bond class action plaintiffs; Grenfell said "it is ironic how interests can align.") He also said that duplicate suits in state and federal court are inefficient and can lead to confusion if they result in inconsistent rulings. I left messages with the California and Washington state lawyers who made the winning arguments at the Ninth Circuit (Adam Miller for California and Jonathan Mark for Washington) but didn't hear back.
Interestingly, this ruling could have implications for Bank of America's proposed $8.5 billion settlement with Countrywide mortgage-backed securities investors (and you thought I'd make it through one whole day without writing about that case!). Remember, Grais & Ellsworth removed that case to federal court under the theory that the state Article 77 proceeding to approve the deal is a de facto mass action as defined by the Class Action Fairness Act. Both the Fourth and Ninth Circuits refused to give an expansive reading of CAFA in ruling that the AG parens patriae suits don't fit the definition of a class or mass action. I don't think Grais & Ellsworth's reasoning in the BofA case would survive the strict CAFA readings of the Ninth and Fourth Circuits.
(Reporting by Alison Frankel)
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