Ladies and gentleman, the next great circuit split is upon us.
On Wednesday, a three-judge panel of the 5th Circuit Court of
Appeals ruled that the Mississippi attorney general's antitrust
case against a gaggle of liquid crystal display makers is a mass
action that, under the Class Action Fairness Act, must be
litigated in federal court. As Judge Jennifer Elrod noted in a
concurrence, that decision puts the 5th Circuit at odds with the
4th, 7th and 9th Circuits, which have all held in the last two
years that AG parens patriae suits are not mass actions and
belong in state court. The circuit split is all the more
remarkable because the recent 7th and 9th Circuit decisions also
stemmed from the LCD price-fixing conspiracy.
The 5th Circuit panel, which included Judges Edith Clement
and Grady Jolly as well as Elrod, said that its analysis was
guided by circuit precedent in a 2008 case called Louisiana v. Allstate. In that case, a split panel held that the interested
parties in an antitrust case against the insurance and risk
management industries were individual policyholders, not the
attorney general of Louisiana. And since there were more than
100 individual policyholders seeking more than $5 million in
damages, the majority held in Allstate, the case fit CAFA's
definition of a mass action.
That decision, according to the panel in last week's ruling,
dictates a "claim-by-claim" approach that requires the 5th
Circuit to determine who will benefit from claims asserted by
the AG. In this case, the panel said, the AG can't claim money
damages under the state laws he's prosecuting, but individual
LCD consumers in Mississippi can, so they have an interest in
the litigation. "We have been directed to no statutory or common
law that permits the state to extinguish the right and remedy
the consumer has for his injury," the panel wrote. "There is
(also) the all too troubling suggestion by the plaintiff that
Mississippi could obtain restoration for harm to individual
citizens, yet keep that money for itself. We think that
consideration, coupled with the reasons provided above, is
enough to find against the state having carte blanche to recover
for others' injuries under common law parens patriae authority."
By contrast, other federal circuits have held that parens
patriae cases simply don't fit the definition of a class or mass
action under CAFA. AGs, for instance, don't have to show
standing or seek certification in parens patriae suits, and
damages can often be payments to state treasuries rather than to
individual consumers. In fact, a district court judge in Tampa,
Florida, recently ruled that state AGs can bring parens patriae
suits against Capital One, even though the credit card company's
cardholders already reached a class action settlement over
certain allegedly overcharged fees.
This question of whether AG suits can be removed to state
court or should stay in the friendly confines of state court is
more than a mere technicality. As I've written time and again,
state AGs' litigation can present defendants with an alternative
means of resolving claims they'd otherwise have to settle with
private class action lawyers. AGs generally aren't driven by the
powerful incentive of contingency fees, so private lawyers have
been known to grouse that they settle on the cheap. Regardless
of the truth of that assertion, having cases removed to federal
court is generally regarded as a boon to defendants.
Elrod said it's time for her colleagues to overturn the
Allstate precedent and align themselves with other federal
circuits that have held to a strict reading of the language of
CAFA. Otherwise, we may see the U.S. Supreme Court take another crack at it.
(Reporting by Alison Frankel)
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