Will the Supreme Court Hobble the Powers of State Attorneys General This Week?

The law, lawyers, and the court.
Nov. 5 2013 4:19 PM

State AGs in the Dock

Are state attorneys general about to be slapped down at the Supreme Court?

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The Mississippi Attorney General’s Office says its lawsuit doesn't really involve any claims of harmed consumers, only “the claims of the State, which is the sole plaintiff.” While this sounds like an overly legalistic approach, it has carried the day in three of the four federal appeals courts that have decided CAFA challenges to state AG actions. In fact, the case being appealed to the Supreme Court is the only one in which the appeals court decided against a state attorney general.  

Last year the 4th Circuit Court of Appeals rejected an attempt by AU Optronics to remove a similar suit brought by South Carolina’s attorney general to federal court. The 4th Circuit dismissed the suggestion that it must consider the actual party whose claim is being advanced and instead adopted a test that looks to "what interest the state possesses in the lawsuit as a whole." Since the individual consumers who may receive restitution as a result of the lawsuit are not named as plaintiffs, the court said the lawsuit is not covered by CAFA. The 7th and 9th Circuit Courts of Appeal have reached similar conclusions and results.  

By contrast, the 5th Circuit concluded that this case is a kind of class action in which the state of Mississippi is the class representative. Since the interest in the lawsuit belongs to the individuals harmed and not the state, the court found CAFA was applicable. That’s the case the Supreme Court hears tomorrow. 

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The state attorneys general are not taking this threat to their authority lightly. Their amicus brief explains that state courts are better-equipped than federal courts to resolve state-law disputes, and also argues that a decision for the defendants would "interfere with states' sovereign right to bring parens patriae actions to enforce their own laws in their own courts." 

Maryland Attorney General Doug Gansler, who joined the 46-state amicus brief and who is the immediate past president of the National Association of Attorneys General, told us that a defeat for the states would be troubling because "the parens patriae doctrine allows the state to protect citizens who can't protect themselves," and the state is "alone in having the ability and incentive to protect the broadest interests of its people, and the parens patriae doctrine allows it to do so."

The problem for the AGs in this case is that the Mississippi lawsuit looks awfully similar to a separate and previously filed class action filed by private plaintiffs addressing the same alleged price fixing by AU Optronics, and seeking to recover damages for the very same harm suffered by the very same consumers. Also Mississippi’s Attorney General’s Office is not even actually litigating its own case. Instead, it has outsourced the case to private attorneys, who often bring private class actions, and has offered them a cut of any recovery they obtain.

Some courts are expressing increasing skepticism about the assertion that a state attorney general seeking restitution for individuals who suffered harm has an interest in those claims separate and apart from the individuals themselves. The New York Court of Appeals has ruled that New York’s attorney general cannot maintain fraud claims seeking restitution once a class action brought by the injured consumers has been settled. More recently, federal courts across the country have demonstrated a desire to exercise jurisdiction over claims filed by state attorneys general in state court. Over the past year, more than 15 attorneys general, including Mississippi Attorney General Jim Hood, filed separate state court lawsuits against Standard & Poor’s alleging that the ratings agency deceived investors by providing analysis that was not objective and was influenced by a desire to please its clients. Those cases have been removed to federal court, and consolidated in a single federal court in New York. The attorneys general are seeking to remand the cases back to their respective state courts, but those efforts have not yet been successful.

All this maneuvering over state versus federal court must appear unseemly and technical. But don't expect it to stop anytime soon. State attorneys general will continue to press for the real and perceived advantages of state courts while defendants will push to move cases to what they deem the more neutral territory of the federal courts.

At his confirmation hearings, Chief Justice John Roberts famously declared that his job on the court will be to call balls and strikes. This week the justices will have to decide whether state attorneys general are entitled to the home field advantage, and perhaps even whether it is appropriate for them to suit up at all.

Avi Schick is a litigation partner at Dentons and was formerly a Deputy Attorney General in New York. Kiran Patel is an associate at the firm. One of their colleagues prepared an amicus brief submitted in this case.

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