State AGs Win Right to Sue Corporations in State Court

, The Litigation Daily

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U.S. Supreme Court Justice Sonia Sotomayor
U.S. Supreme Court Justice Sonia Sotomayor

This article first appeared in The National Law Journal's Supreme Court Brief.

State attorneys general who have been aggressively pursuing companies for alleged violations of their antitrust and consumer protection laws scored a major victory on Tuesday when the U.S. Supreme Court ruled that their lawsuits belong in state, not federal, courts.

The justices unanimously reversed a lower federal appellate court's decision that so-called state parens patriae suits constitute mass actions removable to federal court under the federal Class Action Fairness Act. The doctrine of parens patriae allows a state to sue to protect its residents’ interests.

Writing for the high court, Justice Sonia Sotomayor said the plain text of the Class Action Fairness Act states that a "mass action" must involve monetary claims brought by 100 or more persons who propose to try those claims together as named plaintiffs.

"Because the State of Mississippi is the only named plaintiff in the instant action, the case must be remanded to state court," she said. The "instant action" was the state's suit alleging price-fixing of liquid crystal display (LCD) panels.

Forty-six state attorneys general and consumer organizations supported Mississippi in the high court case, Mississippi v. AU Optronics, which pitted them against the defense bar, the National Association of Manufacturers, the Pharmaceutical Research and Manufacturers of America and others.

Mississippi Attorney General Jim Hood said in a formal statement, "The United States Supreme Court was crystal clear that federal courts have no jurisdiction under the so-called Class Action Fairness Act over actions brought by state Attorneys General for consumer and anti-trust violations. For far too long, large corporations have abused the federal judiciary by trying to drag every action filed by an Attorney General in state court into federal courts. The working people of Mississippi and other states won one this time."

However, "when state attorneys general file lawsuits to seek monetary recoveries based on claimed injuries to private citizens, those lawsuits look like, walk like, and quack like class actions," countered Archis Parasharami, co-chairman of Mayer Brown's consumer litigation and class action practice. He was one of many outside observers following the case closely. "In fact, in most of these so-called 'parens patriae' cases, the same private plaintiffs’ lawyers that bring private class actions are retained to represent states in exchange for the potential to garner substantial attorneys' fees."

He and John Beisner, head of the mass torts, insurance and consumer litigation group at Skadden, Arps, Slate, Meagher & Flom, predicted the justices' decision would encourage plaintiffs' lawyers and state attorneys general to bring more of these cases. "Their goal will be to avoid federal court and possibly to argue that class certification safeguards can be ignored in such cases," Beisner said.

The justices' ruling reverses a decision by the U.S. Court of Appeals for the Fifth Circuit, which had held that the lawsuit amounted to a mass action because "the real parties in interest in Mississippi's suit are those more than 100 individual citizens who purchased the [LCD] products within Mississippi."

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