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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Maryland Attorney General may soon not be the "parent of the country" he used to be.

Photo by Alex Wong/Getty Images

State attorneys general are a diverse bunch, and their posture on policy and legal issues often reflects that of the states they represent. Think about the response to the Affordable Care Act. Twenty-eight state attorneys general joined lawsuits challenging it, while many of the others were among its staunchest defenders.  But when the Supreme Court convenes Wednesday to hear argument in Mississippi v. AU Optronics, the state attorneys general will present a united front. That's not surprising given that the case presents a challenge to their authority and jurisdiction.

The issue before the court is whether a defendant sued by a state AG for restitution or damages incurred by injured consumers can move (or “remove”) the lawsuit from state to federal court. More broadly, the case offers the Roberts court an opportunity to limit the reach of state attorneys general.

When Congress enacted the Class Action Fairness Act of 2005, it expanded federal jurisdiction to class actions and similar mass actions that involved the claims of 100 or more people. At the time, Congress noted that state courts often show bias against out-of-state defendants and keep cases of national importance out of federal courts.

In Mississippi v. AU Optronics, the court will decide whether a case that otherwise satisfies all of CAFA's requirements can still remain in state court merely because it was filed by a state attorney general instead of private plaintiffs. The AGs often file such cases, as the Mississippi attorney general did in this case, under the doctrine of parens patriae. That term literally means "parent of the country," but over time it has come to embody an undefined notion of jurisdiction by the state over issues of interest and importance to its citizens.

The Supreme Court has nibbled around the edges of defining when states can assert parens patriae jurisdiction, but has failed to offer precise boundaries for the scope of an AG's parens patriae authority. For example, it has said a state may bring an action to vindicate a “quasi-sovereign” interest, but has not clarified what constitutes such an interest.

In a 2010 case, the court described a state's interest in ensuring an equitable division of an interstate river as "precisely the type of interest that the State, as parens patriae, represents on behalf of its citizens.” The court has also noted that to assert its parens patriae authority, a state must "be more than a nominal party” and must "articulate an interest apart from the interests of particular private parties.” If the Supreme Court strictly applies those standards during the AU Optronics argument, the attorneys general might be in for a rough ride.

The claims against AU Optronics arise from allegations that a group of foreign companies conspired to fix the prices of LCD panels. As a result, the AG says, consumers paid inflated prices. The only connection to Mississippi is that some of the consumers of products with AUO’s panels hailed from the state. Mississippi wants restitution for those consumers' alleged overpayments.  

The Mississippi attorney general filed in state court, arguing that because its case is brought by the state as a parens patriae action, it is exempt from CAFA. AU Optronics responds that the statute expressly covers all cases “in which monetary relief claims of 100 or more persons are proposed to be tried jointly.”

There is no reason to believe CAFA meant to exempt lawsuits filed by state attorneys general. To the contrary, while the legislation was being considered, Congress rejected a proposed amendment that would have expressly excluded suits brought by state attorneys general. 

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. 

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.