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SCOTUS to Hear LCD Price-Fixing Case; Parens Patrie Sovereignty

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By William Peacock, Esq. on May 30, 2013 12:58 PM

How does one define a class-action lawsuit? A suit is brought on behalf of a group of aggrieved consumers. A high-priced lawyer is attached to the case. Typically, a big settlement is reached, and the members of the class are compensated in some way.

What about a suit by a state attorney general "on behalf of" the citizens? It's a suit, on behalf of a group of aggrieved customers. Often, high-price lawyers are attached for their expertise. And consumers often end up with compensation or restitution.

Are they one-and-the-same? If so, does the Class Action Fairness Act mandate removal of a state's lawsuit, brought in state court, to federal courts?

It's an interesting question that has confounded the circuit courts and led to a significant circuit split. The Fourth, Seventh, and Ninth Circuits sided with state sovereignty, and held that these types of suits, the parens patrie actions, fell within the 28 U.S.C.§ 1332(d)(11)(B)(ii)(III) "general public" exception. This exception bars removal to federal court for suits brought on behalf of the general public by the state's attorney general.

The Fifth Circuit, however, relying on binding precedent from its own circuit, took a "claim-by-claim" approach in Mississippi Hood v. AU Optronics Corp and held that the true parties in interest were the more than 100 individual consumers, with their individual claims, who purchased the LCD panels. Because the individual consumers were the parties of interest, and not the "general public", the suit is a mass (or class) action and CAFA removal was warranted.

Class Action. Mass Action. Parens Patrie Action. Different labels for nearly the same thing, and that seems to be the concept behind the Fifth Circuit's opinion.

In a concurrence, Judge Elrod urged the court to overturn Louisiana ex rel. Caldwell v. Allstate Insurance Co., which was the binding precedent that led to the court's decision. Note that because of the Fifth Circuit's rule of orderliness, a panel will not overrule another panel's decision. Then again, one has to wonder why an en banc rehearing was denied considering the significant issues involved.

Now, it will be up to the Supreme Court to resolve those issues, as they granted certiorari earlier this week, reports Reuters. Considering their recent hostility to class action lawsuits, one has to wonder how this will play out.

The case also presents interesting issues of sovereignty. Should a state's attorney general be forced to bring claims on behalf of state residents, who were injured in the state, in federal court because of a federal procedural reform law?

Judge Jolly, in the majority opinion, addressed by issue by stating, "Nothing we have said denies the State of Mississippi the right to proceed with this case. It will simply proceed in federal, not state, court."

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