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)

Follow us on Twitter @AlisonFrankel, @ReutersLegal  | Like us on Facebook