Can you remove class actions filed in state court to federal court?

on January 15, 2014 by James Hunt

Jim hunt picIn November of 2013, the U.S. Supreme Court heard arguments in Mississippi v. AU Optronics Corp. to determine whether the Class Action Fairness Act of 2001 (“CAFA”) applies to a lawsuit brought by the state of Mississippi. While the state is not a class, it was argued that the defendants’ products caused injuries to a large number of Mississippi residents, which could be considered a class.

Pursuant to CAFA, defendants are permitted to remove large class action lawsuits originally filed in state court to federal court. Mississippi filed the lawsuit in state court alleging that the defendants participated in price-fixing in the liquid-crystal display (“LCD”) industry resulting in damages to the state as well as its residents. The defendants, relying upon CAFA, removed the case to federal court. The Fifth Circuit confirmed that the removal was proper.

During oral arguments, Mississippi’s counsel stressed that the statute refers to lawsuits by “plaintiffs” and this case clearly only has one plaintiff. The Chief Justice responded to this argument by focusing on the problems that result from removing these actions out of CAFA’s application. Specifically, his concern was how defendants could settle with individual defendants without being concerned with a duplicative “parens patriae” action. In other words, could attorney generals across the nation file the same complaint as soon as the plaintiffs’ class is successful?

The defendants encountered resistance from the Court as well, primarily from Justices Scalia, Kagan and Sotomayor. Justice Kagan focused on the fact that Mississippi should not have to make the showing of “common questions of law or fact” as required under Federal Rule of Civil Procedure 23 when Mississippi would not have to meet that requirement in state court. Justice Scalia emphasized that nothing in the state statute required Mississippi to prove commonality. Justice Sotomayor was concerned that defendant’s argument would require a finding that the class is certifiable before the case could be removed to federal court.

During oral arguments, it appeared the majority of the Justices were more sympathetic to the state, but it will be interesting to see how this one is decided.

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