Those pesky state AGs, usually aided by the plaintiffs’ bar, are an increasingly important player in coordinated drug and device litigation. And there always seems to be something vaguely unfair about a state filing a parens patriae action in its backyard state court, and then waving the (state) flag about how the AG is simply protecting its poor, helpless citizens from evil companies.
Recently, the Eastern District of Pennsylvania saw through this ruse, and refused to remand a case brought by the West Virginia AG on behalf of premium cable subscribers in West Virginia. See State ex rel. McGraw v. Comcast Corp., __, F. Supp. 2d __, 2010 WL 1257639 (E.D. Pa. Mar. 31, 2010). West Virginia brought a parens patriae action in West Virginia state court under the West Virginia Antitrust Act and West Virginia Consumer Credit and Protection Act. Id. at *1. Comcast removed and got the case transferred to the ED Pa., where an MDL involving similar claims was already pending (just in case you’re wondering how an ED Pa. court got involved). Id. The basis of the removal? Comcast argued federal jurisdiction was appropriate under the Class Action Fairness Act (CAFA). Id. at *2. CAFA, of course, changed the diversity rules so that federal courts have jurisdiction over most class actions. Bravo for that.
The court agreed that West Virginia’s parens patriae claim was really just a class action in all but name, so the federal court had jurisdiction. The big question for the court: was the state of West Virginia the only real party in interest – in which case there is no federal jurisdiction – or were those premium subscribers also parties in interest? The AG argued that West Virginia was the real party in interest because it has a quasi-sovereign interest in the “health and well-being – both physical and economic – of its residents in general.” Id. at *3. Yeah, but West Virginia was bringing the lawsuit on behalf of premium subscribers – a “discrete group of citizens,” id. – kind of like when AGs bring parens patriae actions on behalf of those consumers who took a particular drug or used a particular device.
To answer the question of who was the real party in interest, the court went claim-by-claim and concluded:
1) The state is the real party in interest where it seeks injunctive relief or civil penalties, which simply go into state coffers, id. at *4;
2) The state is not the real party in interest when it seeks damages (or treble damages) on behalf of its resident-consumers, id. at *6.
And here, the complaint was “damning” because it spelled out loud and clear what the state was really trying to do – get money for the “aggrieved consumers” who had “incurred damages” and thus were entitled to “restitution and/or excess charge damages.” Id. at *7. As an aside, the court also noted that the state’s purported interest in protecting those poor, helpless consumers was belied by the fact that there were already a number of private class actions consolidated in an MDL, including one case filed on behalf of – you guessed it – premium cable subscribers in West Virginia. Id. Guess those consumers weren’t so helpless after all.
The West Virginia AG did not go down without a fight, arguing that:
(a) The state antitrust and consumer protection act statutes grant the state parens patriae standing to pursue such actions. Id. at *8. Great, but that does not mean the state is the only real party in interest. Id.
(b) The state statutes at issue aren’t procedural devices like Rule 23, so a parens patriae action brought pursuant to these statutes is not akin to a class action. Id. at *9. Great, but when it looks like a class action duck, and quacks like a class action duck, it’s close enough to satisfy CAFA’s liberal jurisdictional requirements, which are intended to cover not only class actions but “lawsuits that resemble a purported class action.” Id. (quoting some legislative history). Here, particularly where one of the statutes in effect required notice and an opportunity to “opt out,” and had res judicata implications as to any consumers who fell under the parens patriae umbrella, the state statutes were good enough for CAFA jurisdiction.
(c) Federal jurisdiction would violate West Virginia’s right to sovereign immunity under the Eleventh Amendment. Id. at *11. Great, but when the state is the plaintiff, the Eleventh Amendment is not implicated. Id. at *12.
(d) Federal jurisdiction would violate the state’s Tenth Amendment right to “prescribe regulations within its borders.” Id. Gold star to the AG for coming up with a creative theory. Take the gold star away for failing to find any case law to support the theory. Id.
All in all, a good result after a hard fight against removal. The court did invite further briefing on whether it should sever the injunctive relief and civil penalty claims and send them back to state court (since the state is a real party in interest with respect to those claims). Id. at *13. It will be interesting to see what the AG does next – voluntary dismissal, at least of those pendent claims? Voluntary dismissal of the whole shooting match, since the allegedly aggrieved consumers are already covered by the MDL class actions? Or push forward on multiple fronts, wasting taxpayer dollars in the process?