State Parens Patriae Antitrust Suits Not Removable Class Actions

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Parens patriae actions filed by the Attorneys General of Washington and California on behalf of their state citizens, alleging an international conspiracy to fix the prices of thin-film transistor liquid crystal display (TFT-LCD) panels in violation of state antitrust laws, did not constitute class actions within the meaning of the Class Action Fairness Act of 2005 (CAFA), the U.S. Court of Appeals in San Francisco ruled yesterday.

Removal of the actions to federal court, based on federal jurisdiction under CAFA, was improper because the suits were not “class actions” within the plain meaning of CAFA. Remand to state court was upheld.

“Class Actions”

CAFA defined the term 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 1 or more representative persons as a class action.” Neither lawsuit was filed under Rule 23 of the Federal Rules of Civil Procedure or a similar state statute, it was decided.

The appellate court rejected the defendants’ contention that the states’ parens patriae suits were class actions within the meaning of CAFA because they were representative actions with sufficient “similarity” to a class action under Rule 23. CAFA applied to state actions that were filed under a statute that was both “similar” to Rule 23 and authorized an action “as a class action.”

Defining Attributes

Parens patriae suits were not labeled class actions and lacked the defining attributes of true class actions. They lacked the statutory requirements for numerosity, commonality, typicality, or adequacy of representation, and they did not contain certification procedures, the court explained.

The Ninth Circuit noted that the Fourth Circuit was the only other federal appellate court to have squarely considered the question of whether parens patriae lawsuits are class actions under CAFA.

In West Virginia ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d 169 (CA-4, 2011), the U.S. Court of Appeals in Richmond, Virginia, similarly held that an action brought by the West Virginia Attorney General against five pharmacies, alleging that they sold generic drugs to in-state consumers without passing along the cost savings, in violation of three state statutes, was not a class action under CAFA.

The October 3, 2011, decision in Washington State v. Chimei Innolux Corp. will appear in CCH Trade Regulation Reporter.