Mississippi’s LCD Price Fixing Claims Remanded to State Court

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

An action brought by the State of Mississippi against companies that manufacture liquid crystal display (LCD) panels for conspiring to fix prices in violation of the Mississippi state law was remanded to state court by the federal district court in Jackson.

The companies removed the case to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA); however, remand was appropriate because the action was neither a class action nor a mass action subject to removal.

Class Action Fairness Act

To establish jurisdiction under CAFA, the companies needed to show that the parties were minimally diverse and that the action was a class action or a mass action not subject to CAFA exceptions. CAFA’s diversity requirement was met, the court ruled, because Mississippi’s consumers and local governments—the real parties in interest—but no defendant was a citizen of Mississippi. The court rejected the state’s argument that it was the real party in interest, and, therefore, there was no minimal diversity because the state was not a “citizen” for purposes of diversity jurisdiction.

Because the claims were not brought pursuant to the Federal Rule of Civil Procedure 23 or a similar state statute, the suit was not a CAFA class action, the court ruled. Mississippi had no comparable class action statute. Nor did the Mississippi Consumer Protection Act and Mississippi Antitrust Act impose class action-like requirements.

Rejected was the defending companies’ contention that legislative history supported its position that a lawsuit that resembled a purported class action should be considered a class action for the purpose of applying CAFA. Because CAFA unambiguously defined class action, it was unnecessary to consider the legislative history offered by the defendants, which was questionable in any event.

Mass Action

Although the suit was a mass action, a statutory exception for actions brought on behalf of the general public required remand. A suit brought by the Mississippi Attorney General (AG) could be defined as a mass action under CAFA, as the real parties in interest numbered at least 100 persons seeking monetary relief and the AG proposed to try the claims jointly on the grounds that they involved common questions of law or fact. However, a general public exception applied that excluded actions asserted on behalf of the general public, and not on behalf of individuals or a purported class, pursuant to state statutes.

Based on the sheer number of LCD panel products bought by consumers, the case was clearly brought on behalf of the general public and fell within the state’s quasi-sovereign interest. Also, the claims were brought under state statutes that specifically authorized these kinds of suits. Therefore, the claims fell under the general public exception, in the court’s view.

Preemption

The manufacturers could not show that the Sherman Act completely preempted the Mississippi antitrust claims. Where plaintiffs have artfully avoided any suggestion of federal issues, removal is allowed where the state law is subject to complete preemption. However, the court rejected the manufacturers’ contention that the artful pleading doctrine applied because the Sherman Act applied to the claims, which were interstate and international in nature.

The decision is State of Mississippi v. AU Optronics Corp., 2012-1 Trade Cases ¶77,883.

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.

$4.8 Million Gift Card Controversy Sent Back to State Court

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Because the amount in controversy in a lawsuit on behalf of New Jersey purchasers of Landry's Restaurants gift cards was at most $4.8 million, the federal district court in Trenton sent the case back to New Jersey state court, where it had been filed.

Landry's had removed the case to the federal court, asserting that the amount in controversy met the $5 million threshold for federal jurisdiction under the Class Action Fairness Act (CAFA).

Dormancy Fees for Nonuse

The purchaser of a $25 card alleged that Landry’s gift cards purchased by New Jersey residents between April 2006 and March 2009 imposed a “dormancy fee” after 12 months of nonuse. The purchaser sought to represent other New Jersey residents who purchased the cards.

The gift cards allegedly violated the New Jersey Gift Certificate Law (Sec. 56:8-110 of the Consumer Fraud Act), which prohibited imposition of dormancy fees on gift certificates and cards within 24 months after the date of sale.

The purchaser also alleged that the gift cards violated the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act, a law prohibiting a consumer contract or notice stating that any of its provisions are void or unenforceable without specifying the provisions that are void or unenforceable in New Jersey.

Based on the documents produced in discovery, the maximum number of unlawful gift cards sold was 9,269. Given undisputed maximum damages of $520 per potential class member, the amount in controversy was at most $4,819,880. Therefore, it appeared to a legal certainty that CAFA’s requisite jurisdictional amount in controversy of $5 million was not met.

The opinion in Delaney v. Landry’s Restaurants, Inc. will be reported at CCH Advertising Law Guide ¶63,655.