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A few months ago, we told you that the Supreme Court granted certiorari in a case to decide whether a state’s parens patriae action is removable as a “mass action” under the Class Action Fairness Act (“CAFA”) when the state is the sole plaintiff and the claims arise under state law.  The decision on appeal is the Fifth Circuit’s Mississippi v. AU Optronics Corp., 701 F.3d 796, 800 (5th Cir. 2012).   The Fifth Circuit answered the question in the affirmative and as that remains the controlling law for the circuit, the Northern District of Mississippi recently followed suit in Hood v. Bristol-Myers Squibb Co., 2013 U.S. Dist. LEXIS 90540 (N.D. Miss. Jun. 27, 2013).  Since  Hood is a pharmaceutical case, we thought we’d use it as an opportunity to explore the issue a little more, and there is a also a good diversity ruling.

This AG action was brought in state court solely under the Mississippi Consumer Protection Act (“MCPA”) seeking civil penalties, disgorgement and injunctive relief.  Id. at *3.  Defendants removed the case to federal court.  In opposing plaintiff’s motion to remand, defendants asserted diversity jurisdiction, federal question jurisdiction and jurisdiction under CAFA.  The court agreed with defendants on both diversity and CAFA.

As a quick but important side note, plaintiffs filed an amended complaint on the same day they filed their motion to remand – presumably attempting to address the jurisdictional issues.  The court, however, found that the question of removal should be determined based on the original complaint that was in effect at the time of the removal.  Id. at *6-7.  Good practical reminder if you are faced with amended pleadings in the midst of a motion to remand.

On to diversity.  Here the question is who are the real parties in interest?  If the State of Mississippi is the sole party in interest, there cannot be complete diversity because a State is not considered a “citizen” for purposes of diversity.  Id. at *9-10.  That is precisely what the Mississippi AG argued – that he was bringing a parens patriae suit on behalf of the State of Mississippi under the MCPA, not a suit on behalf of the individual users of [defendant’s product].”  Id. at *9.  In opposition, defendants argued that the real parties in interest were the citizens of Mississippi who are completely diverse from the defendants.  Id.

In analyzing whether this case was solely a parens patriae suit, the court noted that when the state is pursuing proprietary or private interests, the state is only acting as a nominal party.  When the state is pursuing the interests of a private party, the private party is the real party in interest and simply because the state is the one pursuing the claims does not turn the private interests into sovereign interests.  Id. at *10-11 (relying on Alfred L.Snapp & Son v. Puerto Rico, ex reI. Barez, 458 U.S. 592, 601-02 (1982)).  So, the court had to look at the specific claims brought by the Mississippi AG in the original complaint.  It determined that plaintiff’s claims for injunctive relief and civil penalties were properly brought in a parens patriae suit.  However, “Plaintiffs request for disgorgement in equity, coupled with the series of different statements about the nature of the injury involved in the original complaint” demonstrated to the court that the AG was also bringing claims on behalf of individual Mississippi consumers.  Id. at *16.  The court pointed to numerous allegations in the complaint that individual consumers suffered injury (e.g., information was “communicated to consumers,” “Defendants purported to warn  . . . users,” “Defendants disseminated false and misleading information to the public”).  Id. at *16-18.   Because the suit was brought on behalf of individual consumers, all of whom are Mississippi residents, the case was removable based on diversity.  Id. at *20.

While the court could have stopped there, it went on to examine CAFA jurisdiction.  CAFA affords federal jurisdiction to “class actions” and “mass actions.”  To be a class action, the suit has to have been brought either under Federal Rule of Civil Procedure 23 – which this was not – or a similar State statute.  This suit was brought under the MCPA which expressly forbids class actions, so it is not similar to Rule 23 – and this isn’t a class action.  Id. at *28-29.

But what about a “mass action”?  CAFA defines a “mass action” as

any civil action . . . in which [1] monetary relief claims of [2] 100 or more persons [3] are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact” and [4] include an amount in controversy exceeding $75,000. 28 U.S.C. § 1332(d)(1l)(B)(i)

Id. at *29.  Based on its findings that the citizens of Mississippi are the real parties in interest, the case meets the requirements for a “mass action” under CAFA.  But, there is an exception, which is where AU Optronics comes in.

[T]he term “mass action” shall not include any civil action in which … all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a State statute specifically authorizing such action.  See 28 U.S.C. § 1332(d)(11)(B)(ii)(III).

Id. at *30.  This is known as the “general public” exception.  And, if you follow the logic from the diversity discussion, it would seem that the general public exception shouldn’t apply.  The suit was brought to enforce private, individual interests as well as public interests.  That’s what AU Optronics says:

[t ]he requirement that “all of the claims” be asserted on behalf of the public is not met [where] individual consumers, in addition to the State, are real parties in interest, so there is no way that “all of the claims’ are ‘asserted on behalf of the general public.”

Id. (quoting AU Optronics, 701 F.3d at 802).  While that seems like a straight-forward and non-controversial interpretation of the general public exception, the real issue seems to be does the rule swallow the exception.  To be considered a “mass action,” the case must involve the claims of at least 100 people.  To satisfy that requirement, a court must conclude that private interests are being pursued.  That finding both qualifies the case as a “mass action” and disqualifies it from the “general public” exception.  As the concurring opinion in AU Optronics points out

it is difficult to imagine a case that could be a mass action that also falls within the general public exception. .. In essence, our precedent has created a situation in which a case cannot satisfy the criteria of both the mass action provision and the general public exception.

Id. (quoting AU Optronics, 701 F.3d. at 807, 808).

Hence our interest in AU Optronics.  We’d like it to be affirmed which would likely lead to the great bulk of state AG actions against pharmaceutical and medical device manufacturers becoming potentially removable to federal courts.  But, we’re not blind to the fact that CAFA as written and currently applied has its issues.  For now, we’ll celebrate the victory in Mississippi and keep our fingers crossed for more good news.