Supreme Court Rules That State Attorneys General Are Not Bound by the Class Action Fairness Act

The Class Action Fairness Act (“CAFA”) permits a defendant to remove a “mass action” from state to federal court, eliminating some requirements relating to diversity of citizenship. A “mass action” is defined as a civil action in which the monetary claims of “100 or more persons” are “proposed to be tried jointly” as involving “common questions of law or fact.” Does CAFA apply if a state attorney general files suit in the name of the state seeking to recover by way of restitution its losses and those of its citizens?

In Mississippi v. AU Optronics, No. 12-1036 (January 14, 2014), the Supreme Court ruled that CAFA did not apply to such a suit. In a unanimous opinion written by Justice Sotomayor, the court found that since only the state was a named plaintiff, CAFA was inapplicable. The analysis in the opinion “begins with the statutory text” (Slip Op. at 5), and finds that CAFA fails to reference “unnamed real parties in interest” as statutory “persons.” (Slip Op. at 6) In addition, the text refers to “persons”  and “plaintiffs” in the plural, and “plaintiff” has the settled meaning of a “party who brings a civil suit in a court of law,” thus excluding “unnamed individuals with an interest in the suit.” (Slip Op. at 6-10).

The Supreme Court rejected the argument that CAFA should apply because the state’s action was similar to a class action. The opinion concluded that “if Congress had wanted representative actions brought by States as sole plaintiffs to be removable under CAFA on the theory that they are in substance no different from class actions, it would have done so through the class action provision, not the one governing mass actions.” (Slip Op. at 11)

There are two points worth highlighting here on the approach taken by the court. First, the almost exclusive focus on the statutory language, and the corresponding failure to recognize as relevant how a state attorney general action allows plaintiffs to evade the underlying purpose of CAFA, raises the question whether statutory policy will become less important for statutory construction in future business litigation. Second, given the federalism concerns often raised by the five conservatives on the court, one wonders why the point was not made that construing the statute in the way the court did also serves to respect the independent role of the states in our federal system.

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