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Volume 8, Number 2
Decisions Affecting the Powers and Duties of Attorneys General
Emily Myers, NAAG Antitrust Counsel and Powers and Duties Counsel
Mississippi—Supreme Court Holds CAFA Does Not Apply to Suits Where State is Sole Named Plaintiff.In an important case recognizing state attorney general authority, the U.S. Supreme Court held that the Class Action Fairness Act (CAFA), which allows defendants in “mass actions” in state court to remove those cases to federal court, does not apply where the state is the sole named plaintiff.
The state of Mississippi brought a case in state court against manufacturers of liquid crystal display panels (LCDs), alleging violations of the state’s antitrust laws and seeking injunctive relief, civil penalties and restitution for itself and its citizens. Defendants (respondents in the Supreme Court) removed the case to federal court, alleging that it was a “mass action” as defined by CAFA. CAFA permits removal of “mass actions” which are defined as civil actions “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” The district court, following Fifth Circuit precedent, held that the words “persons” and “plaintiffs” in the mass action section are to be defined as real parties in interest, so that the case was removable under CAFA. However, the district court also held that the “general public exception” would apply. This exception excludes from the definition of mass action a civil action in which the claims are asserted “on behalf of the general public (and not on behalf of individual claimants or members) of a purported class.” The Fifth Circuit reversed, holding that the individual consumers were the real parties in interest, but that the general public exception did not apply. This decision created a circuit split, and the Supreme Court granted cert.
Respondents argued that CAFA’s mass action provision should cover a case where claims were brought by fewer than 100 named plaintiffs, but more than 100 unnamed persons are real parties in interest as beneficiaries to those claims. The Supreme Court disagreed, noting that Congress could have used the phrase “named or unnamed real parties in interest” rather than “persons” if it intended to cover real parties in interest. Congress had used the phrase “named or unnamed” in its definition of class actions in CAFA. The Court also held that the 100 or more persons in the mass action provision are the “plaintiffs” referred to later in the same sentence, rather than unspecified real parties in interest. The Court reached this conclusion because Congress used the same formulation in the mass action provision as is used in Federal Rule of Civil Procedure 20, governing joinder. The mass action provision requires that the 100 or more persons seek a joint trial “on the ground that the plaintiffs’ claims involve common questions of law or fact.” The court noted, “It is difficult to imagine how the claims of one set of unnamed individuals could be proposed for joint trial on the ground that the claims of some completely different group of named plaintiffs share common questions.”
Respondents also suggested that the term “plaintiffs” should include both named and unnamed real parties in interest. The court noted that the term plaintiff does not mean “anyone named or unnamed, whom a suit may benefit.” In addition, Congress used the term “plaintiffs” twice in the mass action provision. The second time, Congress provided that “jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirement” of $75,000. Assuming that Congress meant the same thing each time it used the term in a single provision, the jurisdictional provision would require the district court to “identify the unnamed parties whose claims in a given case are for less than $75,000.” Even if the administrative difficulty of identifying such plaintiffs could be overcome, such an interpretation would require that plaintiffs with claims less than $75,000 be severed from those whose claims were greater than $75,000, with the former remanded to state court. The court stated that, in contrast, the typical interpretation of the term plaintiff “leads to a straightforward, easy to administer rule.”
The court next turned to the statutory context of the mass action provision. The CAFA provision governing transfer motions provides that an action once removed to federal court shall not be transferred to another court “unless a majority of the plaintiffs in the action request transfer.” If the respondents’ interpretation of “plaintiffs” as real parties in interest were to apply to this provision, the court would have to poll potentially hundreds of thousands of real parties in interest to ask them about their preferred forum. Turning to another contextual argument, the court noted that respondents are arguing that this action is similar to a class action, and should therefore be removed. The court held, “But if Congress had wanted representative actions brought by States as sole plaintiffs to be removable under CAFA on the theory that they are in substance no different from class actions, it would have done so through the class action provision, not the one governing mass actions.”
Finally, the Court addressed respondents’ arguments that the CAFA provisions should be read in light of past Supreme Court decisions that “require courts in certain contexts to look behind the pleadings to ensure that parties are not improperly creating or destroying diversity jurisdiction.” The Court concluded that Congress did not intend this type of inquiry to apply to CAFA’s mass action provision for two reasons. First, the real party in interest inquiry has not been applied in the past to attempt to count up additional unnamed parties in order to satisfy the mass action provision’s numerosity requirement.” More important, CAFA itself states that a mass action shall not include “any civil action in which . . . the claims are joined upon motion of a defendant.” The Court interpreted this provision to demonstrate Congress’ focus “on the persons who are actually proposing to join together as named plaintiffs in the suit.” Congress’ repeated use of the word “plaintiffs” refers to “actual named parties—a concept inherently at odds with the background inquiry into unnamed real parties in interest, who by definition are never plaintiffs.” Mississippi ex rel. Hood v. AU Optronics, 571 U.S. ___ (2014).
Indiana—Attorney General Controls Litigation for State Agencies.The Indiana superintendent of Public Instruction serves as both the chair of the state Board of Education and the director of the Department of Education. The other members of the Board of Education, without notifying the superintendent, sought information from the legislature in connection with “grading” Indiana schools. The superintendent, represented by in-house counsel for the Department of Education, sued the individual members of the Board of Education, seeking a declaratory judgment that the actions of the Board members violated Indiana’s Open Door law and seeking an injunction to prevent them from taking further action. The attorney general filed a motion to strike the appearance of plaintiff’s counsel and the complaint, on the grounds that the attorney general is solely responsible for legal representation of the state.
Indiana statutes provide that the attorney general “shall prosecute and defend all suits instituted by or against the state of Indiana, the prosecution and defense of which is not otherwise provided for by law. . .” Ind. Code 4-6-2-1. The superintendent argued that another provision, Ind. Code 4-6-2-1.5(a), limited the attorney general’s responsibilities to defense of state employees when they are made party to a suit that has arisen from an act that the employee believed was part of his or her duties. The court did not agree, noting that the legislature, had it wished to limit the attorney general’s duties, would have done so more directly. The court also described the attorney general as “giv[ing] the State independent legal representation and [establishing] a general legal policy for state agencies.” The court pointed out, “If it makes sense for the State of Indiana to speak with one voice, the Attorney General’s, in cases in which a state official is a defendant, why shouldn’t the State speak with one voice, when it is necessary for the State to initiate suit?”
The superintendent also argued that there would be a conflict of interest if both she and the members of the Board were represented by the attorney general. The court first noted that the attorney general has not yet entered an appearance for either party in this case. The attorney general may advise settlement, may determine that, with appropriate safeguards, his office can represent both sides, or may give his written consent to the use of other counsel. Even if the attorney general did represent both, his conduct would not violate the Rules of Professional Conduct, which state, “[L]awyers under the supervision of these officers may be authorized to represent several government agencies in intragovernmental legal controversies in circumstances where a private lawyer could not represent multiple private clients.” The court dismissed the superintendent’s claims. Ritz v. Elsener, No. 49C02-1310-PL-038953 (Marion Cir. Ct., Nov. 8, 2013).
Mississippi—CAFA Removal Not Appropriate If Amount in Controversy Too Low.The U.S. Court of Appeals for the Fifth Circuit once again took up the question of removal of an attorney general’s parens patriae claims under the Class Action Fairness Act (CAFA). In this case, decided before the U.S. Supreme Court issued its opinion opposing CAFA removal in AU Optronics v. Hood, the Fifth Circuit held that CAFA removal was not appropriate.
The Mississippi attorney general filed six complaints in state court alleging violations of the state’s consumer protection laws in connection with deceptive marketing and sales of Payment Protection Plans to Mississippi credit card holders. The state alleged that defendants signed up customers for these Plans without their knowledge or consent. Payment Protection Plans are fee-based services that protect customers against unauthorized charges and identity theft. The state sought injunctive relief, civil penalties and disgorgement and restitution in these complaints. The state specifically disclaimed any intention to bring a claim under federal law. The defendants removed the cases, arguing that they were mass actions or class actions under CAFA and that the amount paid for the Payment Protection Plans exceeds $5 million in the aggregate, although they did not assert that any individual damages exceed $75,000. Defendants also argued that the state law claims were preempted by federal usury laws because the Payment Protection Plans affect loan interest rates and balances. The state moved for remand and the district court denied the motion on both CAFA and preemption grounds. The state appealed.
The Fifth Circuit first noted that CAFA applies to a “mass action” where the monetary claims of 100 or more persons involve common questions of law or fact. The statute provides “[J]urisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under section (a).” Section (a) provides that the matter in controversy must exceed the sum or value of $75,000 exclusive of interest and costs. Noting that the Supreme Court was currently considering the issue, the court assumed, without deciding, that the individual customers are the real parties in interest for the state’s restitution claims. The court held that at least one plaintiff in a mass action under CAFA must satisfy the $75,000 amount in controversy, and the burden of proof of this element is on the defendant. In this case, defendants have made no such showing. Requiring the state to provide proof of individual customers’ claims would “require the State to prove a negative, based on evidence outside of the State’s control, about unknown parties that it expressly denies representing.” The court also held that even if one of the plaintiffs did satisfy the $75,000 amount in controversy, “the exercise of supplemental jurisdiction here would be an end-run around CAFA, which contains the explicit statutory requirement that 'jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy” the $75,000 requirement.'
Defendants alleged that the state itself was a real party in interest with regard to its claims for restitution and civil penalties, and that those claims exceed $75,000. The court held that under its prior precedent in Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), the state was not the real party in interest with respect to restitution claims. The court also held that even if the restitution claims belong to the state itself, “Any claims for which the State is the sole party in interest could not possibly be mass action claims, as they are brought by a single plaintiff on its own behalf, rather than a mass of plaintiffs.”
Turning to the preemption argument, the Fifth Circuit described the National Banking Act (NBA) as preempting state law usury claims. Defendants argued that the fees associated with the Payment Protection Plans were interest, and their regulation by the state was therefore preempted. The court disagreed, holding that the fees were charges “specifically assigned to cover an ancillary service, rather than general charges for the extension of credit.” In addition, even if these fees could be described as interest, the state did not allege any violation of state usury laws, or make any claims about the amount of the fees. Rather, “the gravamen of the State’s complaints is that the customers do not actually understand that they have agreed to purchase these services and are charged without their consent, not that they are being charged too much.” The NBA thus does not preempt the state’s claims. Hood v. JP Morgan Chase & Co., No. 13-60686 (5th Cir. Dec. 2, 2013).
New Hampshire—Attorney General’s Authority Over County Attorney.The county attorney for Rockingham County, N.H., was the subject of a criminal investigation. The attorney general suspended the county attorney and the county attorney challenged the suspension on the grounds that he was a constitutional officer and elected official who was entitled to notice and hearing prior to any suspension. He further argued that because he had not been charged with a crime, he can only be suspended if there is a “clear and convincing showing of his failure to fulfill his official responsibilities.”
The state Superior Court, sitting en banc, first noted that precedents from other states were not helpful because of the “different views taken of the authority of the Attorney General and the role of the Attorney General in the law enforcement systems of other states.” In New Hampshire, “the Attorney General, a constitutional officer, has statutory and common law discretionary authority over the county attorneys.” The attorney general is “the chief law enforcement officer of the state and retains all of his common law powers,” including the authority to intervene and supersede the county attorney. New Hampshire statutes provide that the county attorney shall be “under the direction of the attorney general.” The statutes also provide that county attorneys are “subject to the control of the attorney general whenever in the discretion of the latter he shall see fit to exercise the same.”
In a prior New Hampshire case, the attorney general’s suspension of a county attorney was upheld when that attorney was indicted by a grand jury. In this case, the grand jury investigation is ongoing. The attorney general offered to submit to the court for in camera review the status of the investigation, but the court declined to review the investigation for several reasons. First, the court assumes good faith on the part of the attorney general in his enforcement of the laws. Second, the issue before the court is whether the attorney general appropriately exercised his discretion, not whether the county attorney is guilty of a crime. The court noted that the attorney general may consider “whether the investigation can be conducted if the County Attorney has access to his office, and whether, if the County Attorney is not suspended during the pendency of an investigation, ‘the average citizen would wonder if he was receiving the type of impartial justice the constitution requires.’” The court also noted that the fact that charges have not yet been brought does not mean the attorney general has abused his discretion in suspending the county attorney. “It is simply a matter of fact that criminal investigations, properly conducted, may require substantial time, to ensure that the guilty are charged and the innocent are not. A prosecutor has the obligation to seek justice, not merely to convict. . . Part of a prosecutor’s obligation is determining not only when, but whether to bring charges, which can only be determined after careful and adequate investigation.” After reviewing the evidence provided by the attorney general and the county attorney about the investigation, the court concluded that the attorney general’s suspension of the county attorney was justified. Reams v. Foster, 2013 N.H. Super. LEXIS 23 (N.H. Super. Ct. Dec. 23, 2013).
New Mexico—State’s Parens Claims Dismissed.New Mexico brought an action against Capital One Bank alleging violations of state law in the defendant’s action in administering Payment Protection Plans, as described in the Fifth Circuit decision in Hood v. JP Morgan Chase (above). Defendants claimed that a previously settled class action lawsuit (the Spinelli case) barred under res judicata the state’s claims for restitution (but not for civil penalties or injunctive relief) on behalf of consumers. The settlement made payments to consumers to settle alleged violations of state law, including New Mexico law. The class members, who included “all Capital One cardholders—including those living in New Mexico--who enrolled in and were charged for Payment Protection on or after January 1, 2005 through July 31, 2010” released “all those who claim through them or who assert claims on their behalf (including the government in its capacity as parens patriae).”
The court agreed that the attorney general has special powers and duties and represents the interests of the state as a whole, rather than any particular consumer. However, the court “recognized a distinction for res judicata purposes between an instance where a state agency is seeking to vindicate public interests and when the state agency is seeking restitution on behalf of consumers.” The attorney general argued that the Spinelli court had declined the defendants’ request for an injunction against similar actions by the attorneys general of Hawaii and Mississippi. The court found that the Spinelli court had been asked to bar all enforcement actions by the states, which it declined to do. In this case, defendants are only asking the court to bar recovery of damages for consumer who had already recovered in Spinelli.
Turning to the specific factors indicating claims barred by res judicata, the court held that the parties were in privity for purposes of the claim. The court cited New Mexico Supreme Court precedent in holding that “With respect to the consumer relief claims only, [the State] is representing an exclusively private interest. It is not seeking to punish or deter Defendants from similar conduct in the future. . . The fact that [the regulation at issue] also implicates public interests does not mean that with respect to the consumer relief claims [the State] is advancing public interests.” The court also held that the claims arose from the same “nucleus of operative facts” as those in the Spinelli case, although the state alleged a new legal theory. Because the court found that the state was in privity with the plaintiffs in the Spinelli case, the court held that the state had had a full and fair opportunity to litigate its claims. Although the state argued that it had exclusive authority to enforce the regulation at issue, the court found that private claims for violations of the regulation have been recognized in other courts. The court held that the state’s consumer relief claims were barred by res judicata. State ex rel. King v. Capital One Bank (USA), No. 13cv00513 (D.N.M. Nov. 4, 2013).
South Carolina—Attorney General May Prosecute Cases in Municipal and Magistrate’s Courts.The South Carolina attorney general sought to prosecute two criminal domestic violence cases in two separate municipal courts. The defendants argued that the attorney general could not prosecute the case because the South Carolina Constitution (Art. V, Sec. 24) provides, “The Attorney General shall be the chief prosecuting officer of the State with authority to supervise the prosecution of all criminal cases in courts of record” and summary (municipal and magistrate’s) courts are not courts of record under South Carolina law. The municipal courts reached opposite conclusions as to the attorney general’s authority and the state Supreme Court granted certiorari at the request of the attorney general.
The Supreme Court examined the plain language of the constitution and concluded that the section only applies to the attorney general’s authority to “supervise” prosecutions in courts that are not courts of record. In this case, the attorney general is acting as the prosecutor, not supervising. Construing the language as the defendants suggest would be “absurd” because their reading “places the Attorney General as the chief prosecuting officer for the State but prevents him from prosecuting a [criminal domestic violence case] merely because the case is in summary court. We find that the framers could not possibly have intended that that the chief prosecuting officer of the State cannot prosecute in summary court but a solicitor or a police officer can.” The court also noted that long before Art. V, sec. 24 was enacted, the courts of South Carolina had recognized the attorney general’s authority to prosecute cases in summary courts. In earlier cases, the court had recognized that enactment of this section “represented no practical change in the Attorney General’s authority.”
In a footnote, the Supreme Court declined to address statutory arguments put forward by the defendants because “the General Assembly may not limit the authority granted to the Attorney General through art. V, sec. 24, because this power “arises from our constitution and cannot be impaired by legislation.” State v. Long, No. 27347 (S.C. Jan. 8, 2014).
West Virginia—Attorney General’s Use of Investigatory Subpoenas.Several entities in the consumer debt collection business were the subject of an investigation by the West Virginia attorney general. The attorney general issued investigative subpoenas, to which the defendants did not respond completely. The attorney general subsequently filed suit to compel defendants to respond and also sought an injunction against their alleged misconduct. The courts below granted the attorney general’s motion for an injunction and directed defendants to comply with the investigative subpoenas. Defendants appealed, arguing that the attorney general had improperly issued the subpoenas without an administrative hearing, that his investigatory authority did not include interrogatories, that there was no probable cause to issue the subpoena and that the court should not have enforced the subpoena after the attorney general had filed suit against the defendants.
The state Supreme Court held that the language of the statute authorizing the attorney general’s investigation clearly and unambiguously allows the attorney general to issue investigative subpoenas without an administrative hearing. Similarly, the court held that interrogatories were permitted pursuant to the investigative subpoena. The court held that although West Virginia statutes do require that the attorney general have probable cause to issue an investigative subpoena, “probable cause for the issuance of an investigative subpoena . . . does not anticipate information of sufficient detail as would permit the successful prosecution of an enforcement proceeding . . .[T]he investigatory subpoena . . . serves to facilitate the Attorney General’s investigation of such alleged wrongdoing by producing information that would support the filing of an enforcement action against the alleged violator.”
The court next turned to the question of whether the investigative subpoena was enforceable after the attorney general had filed a civil action against the defendants alleging violations that he sought to investigate through the subpoena. Although the court held that a subpoena is not a discovery device and may not be used as a substitute for pretrial discovery, “the Attorney General’s investigative subpoena unquestionably remains valid and enforceable as to those matters about which his investigation remains pending.” In order to clarify the rules that apply to administrative subpoenas in this situation, the court held,
[W]hen the Attorney General files a cause of action against a person or entity that is subject to an investigative subpoena, the Attorney General’s subpoena authority ends as to those matters that form the basis of the complaint’s allegations, and the rules of discovery applicable to civil proceedings generally provide the method by which the Attorney General may continue to investigate the alleged wrongdoing. However, an investigative subpoena survives the Attorney General’s filing of a lawsuit when the subpoena, in whole or in part, pertains to matters that do not form the basis of the subject complaint.”
Cavalry SPV I, LLC v. Morrissey, No. 11-1564 (W.Va. Nov. 13, 2013).
Opinions and Amicus Briefs
Arizona—Attorney General’s Opinion: Public May Not Be Charged for Public Records.The Arizona attorney general issued an opinion on what it means to “copy” a public record in a way that makes it appropriate for the public body to charge a fee. The attorney general concluded that members of the public who wish to simply inspect public records, rather than have a copy sent to them, may not be charged a fee even if the public body must print a paper copy of the record to enable the inspection. “[A]lthough the law explicitly authorizes a public body to pass along the cost of making copies of public records, it does not explicitly authorize charging a fee for taking the necessary measures to make public records available for inspection.” The attorney general also concluded that if a member of the public makes copies of the public records using his own personal device, the public body may not charge a fee. The attorney general opined that the legislative intent was to not authorize a fee for a member of the public to make his or her own copies of public records. “When . . . the requesting party would rather make copies using a personal device (to avoid a fee), this legislative intent must govern to avoid an absurd result, i.e., charging a fee for a service (copying) that the public body does not provide.” The attorney general noted that the copying of public records with a personal device may only occur if it is not disruptive to the public’s business, nor may it destroy, damage, or alter the public documents. Attorney General Opinion No. I13-012, Re: charging Copying Fees Under Arizona’s Public Records Law (Dec. 2, 2013).
Kentucky—16 States File Amicus in Support of Attorney General’s Common Law Power in Criminal Cases.In a case addressing the common law powers of the Kentucky attorney general in the context of a criminal drug prosecution, the Kentucky court of appeals held that the attorney general’s common law powers did not include the common law power to investigate and prosecute cases at will. The attorney general appealed to the state Supreme Court and 16 states, led by Missouri, filed an amicus brief in the Kentucky Supreme Court in support of the Kentucky attorney general.
In their brief, the attorneys general said that the court of appeals “has read the statutes expansively and the common law narrowly—so narrowly, in fact, that the attorney general, the state’s chief law enforcement officer, is deprived of the ability to look at whether a state law has been violated.” The amici attorneys general filed the brief because they “also rely on ancient common law authority to fulfill the role assigned to them [and] have an interest in the declaration of common law by the Commonwealth of Kentucky.”
The amici argued that most attorneys general possess common law powers that are so broad that they are not enumerated by state statute. In light of these broad powers and their historic status, the brief argued that “in order for the legislature to take away any of the common law powers of the office of the attorney general, the legislature must pass a statute that expressly takes away those powers, or delegates them exclusively to another entity.” In situations where the legislature merely allows another entity to exercise some powers, the attorney general retains those powers as well. One of the attorney general’s well-recognized common law powers is the power to investigate crimes. The fact that another entity also has jurisdiction to investigate certain crimes (e.g., Department of Natural Resources investigates illegal dumping, Department of Labor investigates prevailing wage violations) does not mean the attorney general may not also investigate. Commonwealth v. Johnson, No. 2012-SC-402-DG, Brief of Amici Curiae Attorneys General of Missouri et al., In Support of Appellant Commonwealth of Kentucky, (Ky. S. Ct.. May 13, 2013).
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