CAFA ConnectionJanuary 12, 2012 – Articles
Welcome to Dinsmore & Shohl’s CAFA Connection, a firm e-publication reporting on cases decided under the Class Action Fairness Act ("CAFA"). Although CAFA was enacted in 2005, many of its important provisions are the subject of ongoing judicial interpretation. This newsletter contains a summary of recent case law developments under CAFA.
1. The Sixth Circuit holds that denial of class certification does not eliminate CAFA jurisdiction.
In Metz v. Unizan Bank, 649 F.3d 492 (6th Cir. 2011) the plaintiffs sued several banks to recover money lost in a Ponzi scheme. Most of the plaintiffs’ claims were dismissed either for failure to state a claim or on statute of limitations grounds, but the district court allowed certain claims for conspiracy to commit fraud and aiding and abetting fraud to proceed against one of the defendants. Subsequently, the district court denied class certification on the surviving claims and granted summary judgment on the conspiracy claim. The aiding and abetting claim proceeded to trial and the defendant obtained a defense verdict. The plaintiffs appealed raising several assignments of error, including a challenge to the court’s jurisdiction under CAFA. One of the plaintiffs contended that after the court denied class certification it no longer had jurisdiction over the case under CAFA. The Sixth Circuit, relying on cases decided by the Seventh and Eleventh Circuits, held that denial of class certification does not divest a federal court of jurisdiction under CAFA.
The Court focused on three provisions in CAFA to support this holding. First, the Court looked at the definition of class action under CAFA. The definition provides that a class action is “any civil action filed under Rule 23. . . .” The Court concluded that the “filed under” language demonstrates that it is the time of filing — not the time of certification — that matters when making a jurisdictional determination under CAFA.
Second, the Court focused on the language in 28 U.S.C. § 1332(d)(8) which provides: “[t]his subsection shall apply to any class action before or after the entry of a class certification order by the court with respect to that action.” Relying on the reasoning of the Seventh Circuit in Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805,806 (7th Cir. 2010), the Sixth Circuit noted that the likely explanation for this language in the statute is that “ ‘the defendant can wait until a class is certified before deciding whether to remove the case to federal court,’ not that certification is a requirement for continued jurisdiction.”
Third, the Court looked at 28 U.S.C. § 1332(d)(1)(C) which defines a “class certification order” as “an order issued by a court approving the treatment of some or all aspects of a civil action as a class action.” Again, relying on the reasoning in Cunningham, the Sixth Circuit explained that this language means that a lawsuit filed as a class action cannot be maintained as a class action without a class certification order, but it does not mean that unless a class is certified the court loses its jurisdiction. If Congress wanted denial of class certification to divest the district court of jurisdiction, it could have included such a provision in the statute.
The Court observed that its ruling was consistent with both the general jurisdictional principle that if jurisdiction exists at the time an action is commenced, subsequent events cannot divest the court of jurisdiction, and Rule 23 (c)(1)(C) which specifically permits a district court to revisit its decision on class certification anytime before final judgment.
2. The Seventh Circuit holds that dismissal of claims against the removing defendant does not deprive the court of CAFA jurisdiction.
In Cleary v. Philip Morris Inc., 656 F.3d 511 (7th Cir. 2011), the Seventh Circuit affirmed the lower court’s denial of a motion to remand in a CAFA removal case. The plaintiffs initially filed their class action in state court in 1998 against various defendants in the cigarette industry. Over time, the plaintiffs amended their complaint to eliminate and add various claims against the defendants. In 2009, the plaintiffs filed a third amended complaint seeking to reinstate a previous claim, and to add new defendants. One of the new defendants removed the case to federal court pursuant to CAFA. The plaintiffs moved to remand, arguing that the case could not be removed because the claim asserted against the removing defendant related back to the first amended complaint filed in 2000, and, consequently, the time for removal had passed. The district court denied the motion to remand rejecting the plaintiffs’ relation back argument against the removing defendant who was new to the case. Eventually the claim against the removing defendant was dismissed as time barred.
The plaintiffs renewed their request for remand following dismissal of the claim against the removing defendant. Their request was denied. On appeal, the plaintiffs argued that even though the district court had jurisdiction, it should have exercised its discretion and remanded the case. The Seventh Circuit disagreed, noting that jurisdiction under CAFA is determined at the time of removal, and nothing filed after removal affects jurisdiction. Relying on the Fifth Circuit case of Braud v. Transp. Serv. Co., 445 F.3d 801, 808 (5th Cir. 2006), the Seventh Circuit observed that it is the action that is removable, not the claims against a particular defendant. Consequently, dismissal of a removing defendant does not necessitate remand of the action.
3. The Seventh Circuit reiterates that subsequent procedural events do not alter the removability of the case which instead is based on circumstances as of the date the suit is filed.
In Morrison v. YTB International Inc., 649 F.3d 533 (7th Cir. 2011), the plaintiffs filed a nationwide class action in federal court on behalf of all those who had participated in the defendant’s home-travel-agency program. The plaintiffs alleged that the defendants operated a pyramid scheme in violation of the Illinois Consumer Fraud Act. In response to the complaint, the defendants sought to eliminate all non-Illinois residents from the putative class, arguing that out-of-state plaintiffs had no standing to seek relief under the Illinois Consumer Fraud Act. The district court agreed. The defendants then argued that the court should decline to exercise jurisdiction over the remainder of the case under 28 U.S.C. § 1332(d)(4), CAFA’s local controversy exception, because it was just an intra-state controversy. The district court dismissed the action with prejudice, and the plaintiffs appealed.
The Seventh Circuit rejected the district court’s two-step approach to determining jurisdiction. First, the Court observed that 28 U.S.C. §1332(d)(4) applies only when at least two thirds of the class are residents of the same state as the principle defendant. Jurisdiction is determined “on the state of things when suit is filed.” When this case was filed the proposed class was a nationwide class.
The Seventh Circuit also rejected the defendants’ argument that the non-resident proposed class members lacked “standing” to sue so the case as filed was subject to the local controversy exception. The Court noted that the defendants had argued in the district court that the non-resident’s claims should be dismissed on the merits under Rule 12(b)(6), not dismissed due to lack of standing under Rule 12(b)(1). Furthermore, the non-resident plaintiffs did not lack “standing” to sue if they had been injured by the defendants and the injury could be redressed by a judicial decision. If the non-resident plaintiffs’ claims arose under another state’s law, then choice of law principles were implicated, not “standing” issues.
The Seventh Circuit then looked at the district court’s choice of law analysis under the Illinois Consumer Fraud Act and concluded that on a motion to dismiss, where the court neither took evidence nor made findings of fact, and where the complaint only had to state a plausible claim for relief, the non-resident defendants had pleaded such a claim.
4. The Fifth Circuit dismisses a case originally filed in federal court because CAFA’s home state and local controversy exceptions apply.
In Hollinger v. Home State Mutual Insurance Co., 654 F.3d 564 (5th Cir. 2011), the plaintiffs brought a class action in federal court based on CAFA diversity jurisdiction against several county mutual insurance companies alleging violation of the Texas Insurance Code. Specifically, the plaintiffs alleged that the defendant insurers discriminated in the non-standard insurance market by charging higher premiums to certain consumers, even though those consumers were of the same class and hazard as other consumers who were charged lower premiums. The plaintiffs also sued certain reinsurers, alleging that the reinsurers participated in and permitted violations of the Texas Insurance Code. The defendants moved to dismiss the action based on the mandatory jurisdiction abstention provisions contained in the local controversy and home state exceptions in CAFA. Dismissal was granted and the plaintiffs appealed.
Under CAFA’s local controversy exception, a district court must decline jurisdiction if several factors are present. First, greater than two thirds of the members of the proposed class, in the aggregate, are citizens of the state in which the suit is filed. Second, at least one defendant is a defendant from whom significant relief is sought, that defendant’s alleged conduct forms a significant basis for the claims asserted, and that defendant is a citizen of the state in which the action is filed. Third, the principal injuries resulting from the alleged conduct or any related conduct of each defendant are incurred in the state where the action is filed. Finally, during the three-year period preceding the filing of the action, no other class action has been filed asserting same or similar factual allegations against any of the defendants on behalf of the same or other persons. 28 U.S.C. § 1332(d)(4)(A). Under the home state exception the district court must decline jurisdiction if two thirds or more of the potential class members in the aggregate, and the primary defendants, are citizens of the state where the action is filed. 28 U.S.C. § 1332(d)(4)(B).
The Fifth Circuit affirmed the district court’s dismissal by reviewing the evidence regarding whether at the time the lawsuit was filed two thirds or more of the members of the proposed class were citizens of Texas. The Court started with the premise that the state where a person establishes domicile serves a dual function as the person’s state of citizenship. Next, the Court observed that evidence of a person’s place of residence is prima facie proof of his domicile. The Fifth Circuit noted that U.S. census data is an appropriate and frequent subject of judicial notice. In this case, the census data showed that for the relevant time period, the relocation rate of American citizens of all ages and races out of Texas was only approximately 5.2%. Additional data showed that a smaller percentage of people move out of Texas than from any other state. The defendants offered statistical data showing that more than 99% of the cars that the county mutual insurer defendants insured were located in Texas, the county mutual insurers were citizens of Texas, and the county mutual insurers only issued policies within the State of Texas. The Fifth Circuit recognized that with respect to a discreet proposed class, such as the one at issue in this case, use of a common sense presumption regarding citizenship was appropriate, i.e., registering a vehicle and insuring it in Texas was some evidence of intent to remain in Texas.
Looking at all the evidence, the Fifth Circuit concluded that the underlying case presented questions of state law regarding insurance policies issued by state citizens for cars located within the state. Consequently, the claims did not appear to be of a level of national litigation which CAFA was designed to address.
5. The Fifth Circuit reinstates a remanded case where the plaintiff fails to prove that CAFA’s local controversy exception applies.
The Fifth Circuit, in Opelousas General Hospital Authority v. FairPay Solutions, Inc., 655 F.3d 358 (5th Cir. 2011) reinstated a case that had been remanded under CAFA’s local controversy exception. The plaintiff hospital filed an action on behalf of a putative class of Louisiana hospitals against two out-of-state defendants and one local defendant for alleged violations of the Louisiana Racketeering Act. The plaintiff contended that one of the out-of-state defendants, a bill review company, had under-calculated payment amounts due to the hospital under the Louisiana workers’ compensation law, and that the remaining defendants had engaged in an enterprise with the bill review defendant to reimburse the hospital using the under-calculated payment amount. The case was removed to federal court pursuant to CAFA and fraudulent misjoinder and the plaintiff sought remand. The plaintiff was permitted to take discovery with respect to the remand issues. The plaintiff successfully argued that remand was appropriate under CAFA’s local controversy exception. The defendants appealed.
On appeal, due to stipulations by the parties, the Fifth Circuit limited it CAFA analysis to: (1) whether the local defendant was a defendant from whom significant relief was sought by the class members; and (2) whether the local defendant’s alleged conduct formed a significant basis for the claims asserted. The plaintiff sought to limit the Fifth Circuit’s review to just the allegations in the complaint relying on the words “sought” and “alleged” in 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) and (bb) — a defendant from who significant relief is sought, and whose alleged conduct forms a significant basis for the claims asserted. The Fifth Circuit, however, noted that this position violated the doctrine of judicial estoppel because the plaintiff had relied on evidence outside the complaint in order to argue its motion for remand. The Fifth Circuit concluded that regardless of whether its review was limited to just the complaint, or also included extrinsic evidence, the result was the same. The plaintiff failed to carry its burden of establishing that CAFA’s local controversy exception applied.
First, the Court examined the complaint and observed that it contained no information about the conduct of the local defendant relative to the conduct of the diverse defendants vis-a-vis the class members. For instance, the complaint did not contain the alleged illegal underpayments made by the local defendant versus those made by the co-defendants. In the absence of such allegations, the plaintiff failed to establish that the local defendant’s conduct formed a significant basis of the plaintiff’s claims.
Next, the Court examined the extrinsic evidence and found it equally lacking. The plaintiff offered no evidence supporting any direct contact between the defendants as a group. There was no evidence connecting the local defendant to one of the co-defendants, and no basis to compare the significance of the local defendant’s conduct to that of the other defendants. Furthermore, the plaintiff offered nothing to demonstrate that the local defendant’s conduct affected a significant portion of the class, while the bill reviewer defendant was able to demonstrate that the local defendant was just one of over 100 insurers for whom it reviewed charges submitted by Louisiana hospitals.
Finally, the Court considered the plaintiff hospital’s argument that the local defendant’s conduct was necessarily significant because under the racketeering statute the local defendant could be held equally liable with the other defendants. The Fifth Circuit rejected this argument, instead following the reasoning in a case from the Eleventh Circuit, Evans v. Walter Indus. Inc., 449 F.3d 1159, 1167, n. 7 (11th Cir. 2006) that “the mere fact that relief might be sought against [the local defendant] for the conduct of others (via joint liability) does not convert the conduct of others into the conduct of [the local defendant] so as to satisfy the ‘significant basis’ requirement.” The Fifth Circuit concluded that the plaintiff could not rely on the racketeering claim to “fill the gaps of proof” required to establish the local controversy exception to CAFA. Consequently, the Court vacated the remand order and directed that the case be reinstated.
6. The Fifth Circuit holds that a “class arbitration” is not a prior “class action” for purposes of CAFA’s local controversy exception.
In the case of Williams v. Homeland Insurance Co. of New York, 657 F.3d 287 (5th Cir. 2011), the plaintiff filed suit on behalf of a class of Louisiana medical providers against three Louisiana defendants alleging that all of the defendants had failed to comply with the preferred provider organization notice provisions under Louisiana law. Over one year later, the plaintiff amended the complaint to add three non-Louisiana defendants consisting of a claims administrator and its insurers. The claims administrator settled with the plaintiff, but before the settlement could be approved in state court the case was removed to federal court pursuant to CAFA. The settling parties moved for remand pursuant to CAFA’s local controversy exception, and the motion was granted. The remand order was appealed.
On appeal, the Fifth Circuit found that the plaintiff had established that greater than two-thirds of the proposed class members were citizens of Louisiana, that at least one of the local defendants was a defendant from whom significant relief was sought, that the local defendant’s conduct formed a significant basis for the claims asserted by the class, and that the principal injuries occurred in Louisiana. The Court then addressed whether a “class arbitration” initiated by a class member against one of the defendants within three years of the filing of the removed action constituted a “class action” for purposes of the local controversy exception to CAFA. The local controversy exception will not apply if a class action has been filed against a defendant from whom significant relief is sought during the three year period preceding the filing of the removed action. 28 U.S.C. § 1332(d)(4)(A)(ii).
The Fifth Circuit held that a “class arbitration” is not a “class action” for purposes of CAFA’s local controversy exception. The Court examined CAFA’s definition of “class action” — any civil action filed under Fed. R. Civ. P. 23 or similar state statute or rule of judicial procedure — and concluded that “any civil action” does not include a class arbitration. Although one of the defendants argued that class arbitrations often are commenced under rules that mimic Rule 23, the Court reasoned that if arbitrations were included within “any civil action” “then CAFA would require district courts to exercise original jurisdiction over any arbitration that satisfies CAFA’s threshold requirements.” The district court’s remand order was affirmed.
7. The Ninth Circuit holds that a defendant need not admit liability in order to remove a case pursuant to CAFA.
In Grant v. Capital Management Services, L.P., 2011 U.S. App. LEXIS 18366 (9th Cir. Sept. 2, 2011), the Ninth Circuit held that a defendant does not need to admit liability in order to remove a case to federal court. The plaintiff filed a class action for alleged violations of the Telephone Consumer Protection Action (“TCPA”) which prohibits the use automatic telephone dialing systems or an artificial or prerecorded voice to a telephone number assigned to a cellular telephone service. Neither the size of the proposed class nor the amount in controversy was apparent from the face of the complaint. The defendant removed the case to federal court pursuant to CAFA. The district court remanded, finding that the defendant had failed to submit sufficient evidence to support the removal.
The defendant’s evidence consisted of a declaration, the contents of which were based upon a review of the company’s records. The declaration established that the company had made calls to over 10,000 cell phone numbers, and that the calls were placed to more than 1,000 phone numbers identified with a unique debtor residing in the state. The defendant maintained that this evidence established both sufficient class size and the necessary amount in controversy under CAFA. The amount in controversy could be calculated based on the allegations in the complaint that each call made in violation of the TCPA would incur no less than $500 in damages. The district court, however, found the declaration lacking because it did not also include a statement that the calls had been made using an automated dialing system. On appeal, the Ninth Circuit disagreed stating that for the district court to require such evidence was the same as requiring the defendant to admit liability. An admission of liability is not necessary to meet removal requirements under CAFA. The Court held that the defendant’s declaration satisfied the preponderance of the evidence standard for CAFA removal, and the case should not have been remanded.
8. Following the legal certainty test, the Second Circuit vacates a district court’s dismissal of a class action complaint for failure to establish CAFA’s amount in controversy.
Bank v. Hydra Group LLC, 433 Fed. Appx. 50 (2nd Cir. 2011), involved an appeal from the sua sponte dismissal of a class action complaint. The district court dismissed the case for lack of subject matter jurisdiction due to insufficient amount in controversy under CAFA. 2010 U.S. Dist. LEXIS 100436 (E.D.N.Y. Sept. 24, 2010). The plaintiff filed suit in federal court alleging that he received three separate unsolicited advertisements via e-mail in violation of the California Business & Professional Code. Although the plaintiff contended that damages could reach in the billions, the district court noted that the statute’s liquidated damages provision limited damages to $1 million per incident. The court concluded that based on the three incidents mentioned in the complaint, the amount in controversy was only $3 million. The plaintiff disputed the district court’s interpretation of the liquidated damages provision.
On appeal the Second Circuit overturned the remand order. The Court noted that dismissal is warranted only if it appears to a legal certainty that a claim is for less than the jurisdictional amount. A review of the complaint coupled with the lack of case law interpreting the state statute at issue, led the Second Circuit to conclude that the legal certainty test had not been met. The dismissal was vacated and the case remanded for further proceedings.
9. The Seventh Circuit reinstates two remanded cases, explaining the “legally impossible” standard as it relates to calculating the amount in controversy under CAFA.
a. In ABM Security Services, Inc. v. Davis, 646 F.3d 475 (7th Cir. 2011), the defendant appealed the remand of a putative class action filed by employees for alleged violations of the Illinois Minimum Wage Law. The defendant removed the case pursuant to CAFA. Despite two amendments to the original notice of removal, the district court found the defendant had failed to establish that the amount in controversy exceeded $5 million. The case was remanded and the defendant appealed.
The damages sought by the class included compensatory damages, plus interest on all regular and overtime compensation allegedly due, costs, attorneys’ fees and punitive damages. In the initial notice of removal the defendant calculated the amount on controversy to be approximately $11 million exclusive of attorneys’ fees. The district court was not satisfied with the defendant’s calculations and asked for clarification of the amount asking the defendant to take into consideration the exclusion of class members who had opted into another related pending class action, and to provide a more precise number of days worked by the class members excluding sick days and vacation days. Under each new calculation, the defendant demonstrated an amount in controversy in excess of $5 million. The district court still was not satisfied and engaged in its own calculation. The court determined that the defendant was shy of the required amount in controversy by roughly $5,500. The district court’s calculation excluded attorneys’ fees not yet incurred as of the filing of the complaint, and followed a different mathematical analysis of the authorized statutory penalty. The district court did not include the details of its own calculation in the opinion remanding the case. The defendant appealed.
The Seventh Circuit considered the appeal in the context of the following test: “once the proponent of federal court jurisdiction has explained plausibly how the stakes exceed $5,000,000, the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much.” Under this standard, the district court erred in remanding the case because the district court’s order did not establish that the defendant’s calculations regarding the plaintiffs’ potential recovery were legally impossible. The remand order was reversed.
b. In Keeling v. Esurance Insurance Company, 660 F.3d 273 (7th Cir. 2011), the plaintiff filed a class action in state court against the defendant insurance company alleging fraud for charging policyholders for worthless policies due to policy restrictions. The plaintiff sought the return of premiums and injunctive relief. The defendant removed the case to federal court under CAFA. The plaintiff argued that the amount in controversy was less than $5 million so the case should be remanded. The motion to remand was granted and the defendant appealed.
The Seventh Circuit examined the amount in controversy analysis of the district court. The defendant submitted evidence that it had issued over 50,000 policies containing the language complained of by the plaintiff. The net premiums received on those policies were $613,894, and no claims had been paid on the policies. The district court concluded that the principal amount in controversy was the $613,894, and it would be legally impossible for the class to recover the nearly $4.4 million in punitive damages needed to meet CAFA’s $5 million amount in controversy. Although the class demanded injunctive relief also, the district court deemed the cost to the defendant on that claim to be miniscule since the company could easily reprint the policies without the offending provisions.
The Seventh Circuit disagreed with the district court’s analysis of the value of the injunctive relief claim. The Court concluded that rewriting the policies could lead to the company either not charging a premium, or changing the terms of the policy so that the policyholders would receive indemnity more frequently. Either outcome could result in financial loss to the defendant. Under the appellate court’s analysis, the expense of restitution, combined with the cost of prospective relief would total approximately $2 million, leaving $3 million still needed to meet CAFA’s jurisdiction requirements. The Seventh Circuit then looked at punitive damages. The issue before the Court was whether it was legally impossible for the class to recover $3 million in punitive damages. If the plaintiff recovered $600,000 in compensatory damages, a multiplier of 5 would result in $3 million in punitive damages. Looking at punitive damage awards in other cases based on multipliers, the Court determined that while recovery of $3 million in punitive damages might be improbable, it was not legally impossible. Consequently, the remand order was overruled.
10. Federal circuit courts disagree on whether parens patriae actions are removable pursuant to CAFA. The United States Supreme Court’s recent denial of a petition for writ of certiorari in a Fourth Circuit case means, at least for now, the issue will continue to be addressed on a circuit-by-circuit basis.
A split has developed among the federal circuit courts regarding whether parens patriae actions are removable under CAFA. The courts have focused on CAFA’s definition of “class action” as “any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.” 28 U.S.C. § 1332(d)(1)(B).
In 2008, in State of Louisiana v. Caldwell, 536 F.3d 418 (5th Cir. 2008), the Fifth Circuit upheld the removal of a parens patriae action under CAFA’s mass action provision. Since then, however, other federal circuit courts have determined that parens patriae actions are not removable pursuant to CAFA. In early 2011, the Fourth Circuit affirmed remand of a parens patriae case in West Virginia ex rel. McGraw v. CVS Pharmacy, 646 F.3d 169 (4th Cir. 2011) holding that because the case was not brought under Fed. Civ. Rule 23 or West Virginia's equivalent Civil Rule 23, it was not a class action subject to removal under CAFA.
a. In Washington State v. Chimei Innolux Corp., 2011 U.S. App. LEXIS 20083 (9th Cir. Oct. 3, 2011), the Ninth Circuit affirmed the remand of two actions brought by state attorneys general against the manufacturers of thin-film transistor liquid crystal display panels alleging an international price-fixing conspiracy. The prayer for damages in each suit included declaratory and injunctive relief, civil penalties, and restitution. The defendants removed the cases pursuant to CAFA, maintaining that the cases were “disguised class actions” because the consumers, and not the states, were the real parties in interest as to the monetary relief claims. The lower courts remanded the cases and the defendants appealed.
On appeal, the Ninth Circuit affirmed both remand orders holding that the actions were not “class actions” for purposes of CAFA. The court based its holding on statutory construction. It looked at CAFA’s definition of class action and found that neither lawsuit had been brought under Civil Rule 23 or a similar state statute. The Court also concluded that the California and Washington attorneys general did not have to demonstrate standing through a representative in order to recover on behalf of individuals. The state statutes at issue did not have requirements of numerosity commonality, typicality or adequacy of representation as required by Rule 23. The Ninth Circuit noted that its holding was in accord with the Fourth Circuit’s holding in West Virginia ex rel. McGraw v. CVS Pharmacy.
The Ninth Circuit rejected the defendants’ contention that CAFA’s legislative history supported removal of the cases because the drafters intended the definition of “class action” to be interpreted liberally to include more actions than just Rule 23 class actions. The Ninth Circuit focused on the statutory language in 28 U.S.C. § 1332(d)(1)(B) which requires not only that the action be filed under Rule 23 or a similar state statute or rule, but also that the similar statute or rule authorize the action be brought by one or more representative persons “as a class action.” This “as a class action” language prohibits all representative actions from being class actions within the meaning of CAFA.
b. In LG Display Co. v. Madigan, 2011 U.S. App. LEXIS 23036 (7th Cir. Nov. 18, 2011), the Illinois attorney general brought suit against eight manufacturers of LCD panels alleging violations of the Illinois Antitrust Act. The suit was brought on behalf of the state, its agencies, and its residents seeking injunctive relief, civil penalties and treble statutory damages. The defendants removed the case as a disguised class action under CAFA. The attorney general moved for remand and remand was granted. The defendants sought to appeal the ruling to the Seventh Circuit. The Seventh Circuit determined that the case was neither a class action nor a mass action under CAFA, and, therefore, the Court lacked jurisdiction over an appeal from the district court’s remand order.
In reaching its conclusion, the Seventh Circuit relied upon the Ninth Circuit’s decision in Washington State v. Chimei Innolux Corp. and the Fourth Circuit’s decision in West Virginia ex rel. McGraw v. CVS Pharmacy. The Court examined the Illinois Antitrust Act and determined that it does not impose any of the requirements of Rule 23 — commonality, typicality, numerosity or adequacy of representation. Furthermore, the suit was not filed as a class action by a representative of a class, but rather as a parens patriae action by the attorney general.
The Seventh Circuit also concluded that the action was not a “mass action” within the meaning of CAFA. To be a “mass action” the suit must involve monetary relief claims of 100 or more persons proposed to be tried jointly on the ground that the claims involve common questions of law or fact. 28 U.S.C. § 1332(d)(11)(B)(i). The Court observed that the suit was brought by the attorney general, not by 100 or more persons. The court further concluded that this was not a “mass action” under 28 U.S.C. § 1332(d)(11)(B)(ii)(III) because CAFA excludes from mass actions any suit where all of the claims in the action are asserted on behalf of the general public pursuant to a state statute specifically authorizing such action.
The defendants contended that under a claim-by-claim analysis of the complaint it was clear that the real parties in interest were the Illinois purchasers not the state, and, therefore, CAFA’s jurisdiction requirements had been met. The Seventh Circuit rejected this argument, declining to follow the claim-by-claim approach advocated by the defendants and followed by the Fifth Circuit in Louisiana ex rel. Caldwell v. Allsate Insurance Co. Instead the Court approved the district court’s analysis of the complaint as a whole and the district court’s conclusion that the state was the real party in interest.
On November 28, 2011, the United States Supreme Court denied the defendants’ petition for writ of certiorari appealing the Fourth Circuit’s decision in West Virginia ex rel. McGraw v. CVS Pharmacy. See CVS Pharm., Inc. v. West Virginia ex rel. McGraw, 2011 U.S. LEXIS 8531 (U.S. Nov. 28, 2011). Consequently, the issue of whether parens patriae actions are removable pursuant to CAFA will continue to be addressed on a circuit-by-circuit basis.