In 2016, the Supreme Court decided in Hood v. AU Optronics1 that the Class Action Fairness Act (CAFA), which allows defendants in “mass actions” in state court to remove those cases to federal court, does not apply in parens patriae actions brought by the attorney general where the state is the sole named plaintiff. Lower courts have gradually been providing greater clarity on CAFA’s applicability to other attorney general actions. Two cases decided in the past year further refined the application of CAFA.
Chapman v. Tristar Products2 was a private product liability action settled by the parties for about $1.2 million in relief to a nationwide class of purchasers with about $1.9 million in attorneys’ fees. The Arizona attorney general filed an amicus brief with the district court arguing that the division of funds was unfair to class members. After the court indicated it was going to approve the settlement, the state sought to intervene or to have the court recognize it as an objector. The court held that the state lacked standing to intervene or object. The state appealed both the motion to intervene and the court’s acceptance of the settlement.
In the Sixth Circuit, the state described several theories of injury to support its standing, including standing under the doctrine of parens patriae and standing under CAFA. To show parens patriae standing, the state must show an injury to a “quasi-sovereign” interest. The court characterized quasi-sovereign interests as more than the interests of individuals. For example, a state has a quasi-sovereign interest “in the health and well-being—both physical and economic—of its residents in general.” To make this determination, courts look to “whether the State would, if it could, address the issue ‘through its sovereign law-making powers.’” The state cited Arizona’s consumer protection statute, which prohibits deceptive or unfair acts or practices in the provision of services.
The court found that the existence of the consumer protection statute did not show that Arizona had exercised its sovereign law-making processes to address this situation because at the fairness hearing, “Arizona specifically disclaimed any objection to the proposed settlement on the grounds of fraud or collusion.” Arizona was therefore limited to the same objections that could be made by individual class members, which do not implicate the “quasi-sovereign” interest required for parens patriae standing.
The court also rejected the state’s argument that it had standing under CAFA. CAFA requires notice of the terms of the settlement be given to the attorney general of a state of which at least one class member resides. The state noted legislative history indicating that the notice provision of CAFA “is designed to ensure that a responsible state and/or federal official []is in a position to react if the settlement appears unfair to some or all class members.” In addition to this legislative history, attorneys general in some other states have intervened in class action settlements in the past. The court declined to use the legislative history, since it considered the language of the statute clear: “Nothing in this section shall be construed to expand the authority of, or impose any obligations, duties or responsibilities upon, Federal or State officials.” The court held that this foreclosed the state’s argument.
The state fared better in Nessel ex rel. Mich. v. Amerigas Partners, L.P.,3 another Sixth Circuit decision involving an action brought by the Michigan attorney general. The state filed suit in state court against Amerigas, a large provider of residential propane, alleging that it engaged in unfair trade practices in violation of Michigan’s Consumer Protection Act (MCPA). Section 10 of the MCPA authorizes the attorney general to bring a class action on behalf of persons residing in or injured in this state for the actual damages caused by any of the following: (a) A method, act or practice in trade or commerce defined as unlawful under section 3 [unfair, unconscionable, or deceptive methods, acts, or practices].4
Amerigas removed the case to federal court, arguing that the attorney general’s lawsuit was a “class action” under CAFA. CAFA defines a “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 one or more representative persons as a class action.”5 Rule 23 specifies four prerequisites for a class action: the class must be so numerous that joinder of all members would be impractical; there must be questions of law or fact common to the class; the claims of the class representative must be typical of the claims of the class members; and the class representatives must “fairly and adequately protect” the interests of all class members.
The district court remanded the case on the grounds that it was not a class action because Section 10, used by the attorney general, did not require the numerosity of class members, commonality of questions, typicality of claims and adequacy of representation required by Rule 23. Amerigas appealed and the Sixth Circuit affirmed the district court.
Even though Section 10 describes the attorney general’s action as a class action, the court first noted that the attorney general herself did not allege that she had been harmed by the claimed unfair business practices, so her claims are not “typical” of the proposed class. Second, although the attorney general is “authorized to seek damages on behalf of a group of consumers who were allegedly harmed,” she is not a member of the class and therefore cannot be an adequate “representative” of the class members. Third, the attorney general is not required to add a class member as a plaintiff in her suit, but rather, brings the case for the state alone, fulfilling neither the requirement of numerosity nor commonality. The Sixth Circuit also held that even though this suit was brought under statutory authority, rather than under the attorney general’s parens patriae authority, it still is not similar enough to a class action to be removable under CAFA.
Amerigas argued that because the words “class action” were used in Section 10, Michigan Rule 3.501 should be incorporated in the statute, and that rule is analogous to Rule 23. The court observed that Section 10 does not state that it incorporates the state’s class action rule. In addition, the plain language of Rule 3.501 indicates that it does not apply to actions brought by the attorney general. Finally, federal courts should be wary of “snatch[ing] cases which a State has brought from the courts of that State, unless some clear rule demands it.”6 Because there is no clear statement in CAFA that Congress intended removal of these types of actions, the court “decline[d] to effectively invalidate the Michigan Legislature’s determination that an Attorney General should be able to sue for injuries to consumer pursuant to Section 10.”