U.S. Supreme Court Rejects CAFA "Mass Action" Removal (as the 4th Circuit and Judge Anderson did)


Per the United States Supreme Court's unanimous ruling in Mississippi v. AU Optronics Corp. (issued on January 14, 2014), a state's lawsuit seeking restitution for the benefit of its citizens does not meet the definition of a "mass action" under the Class Action Fairness Act of 2005 (CAFA) and cannot be removed to federal court.

Background

 

CAFA defines "mass action" as "any civil action . . . in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact."  28 U.S.C Section 1332(d)(11)(B)(i).

This case reached the Supreme Court following the 5th Circuit's determination that Mississippi's lawsuit against AU Optronics qualified as a "mass action" under CAFA.  According to the 5th Circuit, even though the State of Mississippi was the only "named plaintiff," the "real parties in interest" were those (100 or more) citizens of Mississippi who purchased AU Optronics' products.

As the 5th Circuit's ruling was at odds with decisions of the 4th, 7th, and 9th Circuits reaching the opposite conclusion, the Supreme Court granted certiorari.  As described here,  Judge Joseph F. Anderson, Jr. and the 4th Circuit ruled that South Carolina's lawsuit against AU Optronics was not a "mass action."

Decision

 

Justice Sotomayor used both the text of CAFA and its context in concluding that "persons"  means "plaintiffs" and not "unnamed real parties in interest."

The statute refers to "persons" as "plaintiffs" in the sentence defining a "mass action."  Moreover, Rule 20, FRCP, also refers to "persons" and "plaintiffs" interchangeably ("[p]ersons may join in one action as plaintiffs if they assert any right to relief jointly . . . ."). Additionally, because CAFA also provides that "jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional requiremen[t]" of $75,000, any definition of "mass action" including unnamed parties in interest would present an "administrative nightmare" to a district court attempting to identify those parties.

With respect to context, Section 1332(d)(11)(C)(i) forbids the transfer of a mass action to another court "unless a majority of the plaintiffs in the action request transfer."  Accordingly, deciding a transfer motion based upon "unnamed real parties in interest" would be "surpassingly difficult."

Finally, in response to the argument that one or more "background principles" required the Court to "look behind the pleadings" to analyze the existence of diversity jurisdiction, Justice Sotomayor found no such concept underpinning or informing the definition of "mass action."  Particularly, there is no indication Congress intended to incorporate any "background principle" that would support counting plaintiffs differently for purposes of CAFA.  Indeed, Congress expressed a contrary intent in excluding from the definition of a "mass action" those cases where  "the claims are joined upon motion of a defendant." Section 1332(d)(11)(B)(ii)(11).

Takeaway

         

As characterized by the Supreme Court, a "mass action" is principally a "backstop to ensure that CAFA's relaxed jurisdictional rules for class actions cannot be evaded by a suit that names a host of plaintiffs rather than using the class device."  Accordingly, CAFA's removal provisions are not available absent a lawsuit with the requisite number of named plaintiffs. 

Popular posts from this blog

Legalized, But Regulated: Commercial Hemp in South Carolina

Image
On December 20, 2018 the Agricultural Improvement Act of 2018  (the "2018 Farm Bill") became law.  Following closely on the heels of the 2018 Farm Bill, on March 28, 2019 the South Carolina Hemp Farming Act  ("S.C. Hemp Farming Act") was signed into law.  The following is a brief overview of the status of hemp (also called "commercial hemp" or "industrial hemp") farming and regulation in South Carolina in the wake of the 2018 Farm Bill and the S.C. Hemp Farming Act. Background The terms "hemp" (which has non-drug connotations and uses) and "marijuana" (no further explanation necessary) describe the same plant genus: cannabis. The difference between the two is generally based on the relative amount of tetrahydrocannabinol (THC) contained in the plant. Hemp plants are cultivated to produce fiber and seeds and very little if any THC. Marijuana plants, on the other hand, are cultivated to produce more THC. THC...
Read more

What Authority the Principal Chose: Arredondo, POAs, and Arbitrability

Image
It was only a matter of time before arbitrability (the enforceability of an agreement to arbitrate) put a South Carolina courts in the position to construe the language in a power of attorney ("POA"). And this opinion did.  I try to view these decisions through the lens of how an attorney practicing in South Carolina might learn from them. And this decision, like some others involving the FAA and arbitrability, (for example, Grant v. Kuhn Chevrolet  or Herron v. Century BMW  , had the litigator and the drafter in me scratching my head.  Or at least I was confused until I learned about what had happened legislatively in the time since the POAs at issue in Arredondo were scrutinized by three (3) South Carolina courts. This decision, involving a POA executed before January 1, 2017, is likely an anomaly or a one-off, as going forward the S.C. Uniform Power of Attorney Act (SCUPOA) provides a guide for the creation of POAs that may avoid the necessity for so much j...
Read more

The SC Insurance Data Security Act: Ask Some Questions to Evaluate Your Security Program

Image
The  South Carolina Insurance Data Security Act  (“Act”), fashioned after the  NAIC Insurance Data Security Model Law  (Model Law), went into effect on January 1, 2019. South Carolina was the first state in the nation to pass this legislation, and others (Ohio, Mississippi), have followed suit. The Act requires that each South Carolina person licensed or authorized by the South Carolina Department of Insurance (DOI) a “Licensee” must implement, no later than July 1, 2019, a “comprehensive written information security program” (“Program”) designed to protect nonpublic information (NPI) and the security of the Licensee’s information system. In addition, the Act requires a Licensee to report to the Director of the DOI within 72 hours following an actual or potential “cybersecurity event.” S.C. Code Section 38-99-40(A) (Section 6(A) of the Model Act). While South Carolina Licensees (hopefully) are well down the path to meeting the Act’s requirements, the...
Read more