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Class Action Fairness Act and State Attorney General Suits: Recent Developments

Emily Myers, Antitrust and Special Projects Counsel

Since the Class Action Fairness Act (CAFA) was enacted by Congress in 2005, defendants have frequently sought to remove state court actions brought by state Attorneys General to federal court, arguing that CAFA applies to such actions. A number of recent appellate and district court cases have analyzed the applicability of CAFA to state Attorney General actions, and have decided that CAFA removal is not appropriate for such actions. This article will summarize recent CAFA decisions about Attorneys General actions.

The Class Action Fairness Act (CAFA)

CAFA, 28 U.S.C. § 1332(d), permits removal of a case filed in state court if the case is a class action with more than 100 class members, in which the matter in controversy exceeds $5 million and in which any member of a class of plaintiffs is a citizen of a state different from any defendant. A “class action” is defined 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 one or more representative persons as a class action.” Removal is also available for “mass actions,” defined as “any civil action . . . 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.”

Fourth Circuit

Fourth Circuit (West Virginia)

State ex rel. McGraw v. CVS Pharmacy Inc., 646 F.3d 169 (4th Cir. 2011) cert. den., No. 11-224, 2011 U.S. LEXIS 8531 (Nov. 28, 2011).

The state of West Virginia, by its Attorney General, sued five pharmacies in state court, alleging that they had failed to pass along to consumers savings resulting from the substitution of generic drugs for brand name drugs, in violation of West Virginia statutes. The state’s complaint stated that it was acting in its "sovereign and quasi-sovereign capacity." The state sought injunctive relief, restitution and disgorgement of "overcharges," recovery on behalf of the consumers of "excess charges," civil penalties, interest, costs, and attorneys' fees. The pharmacies removed the case to federal court under CAFA. The district court remanded, holding that the case was a “classic parens patriae” action not subject to CAFA, and the pharmacies appealed.

Defendants argued that the state’s case was brought under a state statute “similar” to F.R.C.P. 23 because the West Virginia statute allows the Attorney General "to represent in a single action thousands of consumers who all suffer a similar injury--excess charges." However, the Fourth Circuit stated,

To begin with, the Attorney General is not designated as a member of the class whose claim would be typical of the claims of class members. Rather, he is authorized to file suit independently of any consumer complaints, as a parens patriae, that is, as the legal representative of the State to vindicate the State's sovereign and quasi-sovereign interests, as well as the individual interests of the State's citizens. Indeed, the fact that the Attorney General is acting to obtain disgorgement of ill-gotten gains, “separate and apart from the interests of particular consumers in obtaining recompense, . . . validates this action as a parens patriae action.” [citations omitted]

The West Virginia statutes under which the Attorney General brought the case do not have the numerosity, typicality or commonality requirements of Rule 23, nor do they require any notice to affected consumers. Nor was the Attorney General a class member. Instead, the Fourth Circuit held, “in representing the citizens, the State acts more in the capacity of trustee representing beneficiaries or a lawyer representing clients, neither of which is the type of representation essential to the representational aspect of a class action.” The court concluded:

[I]in the circumstances presented here, . . . CAFA does not clearly demand that West Virginia's action, which is essentially a parens patriae type of action for enforcement of its own laws on behalf of itself and its citizens, be removed to federal court, even though the Pharmacies are citizens of States different from West Virginia. The Pharmacies are summoned to West Virginia courts only because they do business in West Virginia and, while there, allegedly violated its laws.

Seventh Circuit

Seventh Circuit (Illinois)

LG Display Co. Ltd. v. Madigan, 665 F.3d 768 (7th Cir. Ill. 2011)

In one of several cases involving allegations of price fixing in the market for thin film transistor liquid crystal display (TFT-LCD) panels, the Attorney General of Illinois filed suit in state court against a number of TFT-LCD manufacturers, seeking injunctive relief, civil penalties and treble damages on behalf of the state as a purchaser and on behalf of Illinois citizens as parens patriae. Defendants removed to federal court and the district court remanded the case to state court. Defendants appealed, arguing that the case is a disguised class action or mass action, and that the lower court’s ruling was thus appealable under CAFA. In addition, defendants argued that this case presented a novel issue because the Seventh Circuit has not yet decided whether Illinois citizens are the real parties in interest in this type of CAFA case.

The appellate court declined to hear the appeal, noting that there were no “novel” issues presented, in light of the decisions (summarized in this article) in the Fourth and Ninth Circuits. Turning first to the question of whether this action is a class action, the court noted defendants’ argument that the Illinois Antitrust Act (IAA) states, “no person shall be authorized to maintain a class action in any court of this State for indirect purchasers asserting claims under this Act, with the sole exception of this State’s Attorney General, who may maintain an action parens patriae,” and that this means the legislature considers the Attorney General’s parens patriae action a class action. The court disagreed, because the Attorney General’s action under the IAA does not include the numerosity, commonality and typicality requirements of a class action. The court cited the decisions of the Fourth and Ninth Circuits as support for its interpretation. Nor is the case a mass action, because it does not aggregate the claims of 100 persons. Instead, the Attorney General is the only party with a claim.

The Seventh Circuit next addressed defendants’ argument that the state may be the real party in interest for the enforcement claims, but individual citizens of Illinois are the parties in interest for the damages claims. The court declined to follow the “claim-by-claim” analysis employed by the Fifth Circuit in Louisiana ex rel. Caldwell v. Allstate Insurance Co., 536 F.3d 418 (5th Cir. 2008), stating that there is no basis for such an approach in the language of CAFA. Quoting the lower court decision in the Ninth Circuit’s TFT-LCD case (described in this article), the court stated, “just because CAFA was meant to expand federal courts’ jurisdiction over class actions, it does not follow that federal courts are required to deviate from the traditional ‘whole complaint’ analysis when evaluating whether a State is the real party in interest in a parens patriae case.

Ninth Circuit

Ninth Circuit (California)

Washington v. Chimei Innolux Corp., 659 F.3d 843 (9th Cir. 2011)

The Attorneys General of Washington and California filed parens patriae actions in their states’ courts alleging a price-fixing conspiracy among manufacturers of thin film transistor liquid crystal display (TFT-LCD) panels. The states alleged that state agencies and consumers were injured by paying inflated prices for products containing TFT-LCD panels. Washington sought “(1) declaratory and injunctive relief; (2) civil penalties; (3) and damages and restitution to the State of Washington on behalf of its state agencies and consumers.” California sought “(1) declaratory and injunctive relief; (2) civil penalties; and (3) restitution and treble damages for state agencies, municipalities, and California residents.” Defendants sought removal under CAFA, the district court remanded the case to the state courts, and defendants appealed.

The Ninth Circuit upheld the district court’s remand of the two cases. The court found that the language of CAFA was unambiguous, and that it applied only to class actions, which are cases brought under FRCP Rule 23 or an equivalent state rule. The court noted, “Unlike private litigants, the Attorneys General have statutory authority to sue in parens patriae and need not demonstrate standing through a representative injury nor obtain certification of a class in order to recover on behalf of individuals.” Nor do they need to satisfy the numerosity, typicality, commonality requirements of class actions or show that they are an adequate class representative. The Attorney General’s role as protector of the public may even be inconsistent with the interests of individuals in a class. The court stated, “Class actions are always representative actions, but representative actions are not necessarily class actions.” The court concluded that in order to be removable pursuant to CAFA, “A state action must be filed under a statute that is both “similar” to Rule 23 and authorizes an action “as a class action.” That is not the case here.

Ninth Circuit (Nevada)

Nevada v. Bank of America Corp., No. 3:11-cv-00135 (9th Cir., March 2, 2012)

The state, through the Attorney General, filed suit in state court, alleging seven types of misrepresentation in connection with mortgages issued by the defendant. The state sought declaratory judgment, an injunction against any practices declared to be unlawful, civil penalties, restitution and the costs of investigation and attorney's fees. The defendants removed the case to federal court under CAFA, among other reasons, and the district court denied the state’s motion for remand, stating it was bound by the Ninth Circuit’s decision in Dep't of Fair Emp't & Hous. v. Lucent Tech., Inc., 642 F.3d 728 (9th Cir. 2011). In Lucent, which involved employment claims, the appeals court held that because individuals would have a cause of action under the same statute invoked by the state, they were real parties in interest. Although the state was also a real party in interest, with respect to the claims for injunctive relief and civil penalties, its presence in the case could not defeat diversity jurisdiction.

Citing its decision Washington v. Chimei Innolux (described above), the Ninth Circuit reversed the trial court and held that “[p]arens patriae suits lack the defining attributes of true class actions. As such, they only ‘resemble’ class actions in the sense that they are representative suits.” Therefore, the Nevada Attorney General’s case was not a class action within the meaning of CAFA and should not have been removed. Turning to the question of whether the parens patriae suit was a “mass action” under CAFA, the Ninth Circuit distinguished its decision in Lucent, which was relied on by the district court:

Our rationale for finding that the aggrieved individual was the real party in interest in Lucent compels the conclusion that Nevada is the real party in interest here. Unlike the California DFEH, which sued on behalf of a single aggrieved employee, here, the Nevada Attorney General sued to protect the hundreds of thousands of homeowners in the state allegedly deceived by Bank of America, as well as those affected by the impact of Bank of America’s alleged frauds on Nevada’s economy.

Noting the enormous toll that foreclosures have had on the state, the appeals court stated, “Nevada brought this suit pursuant to its statutory authority under the [state consumer protection statute] because of its interest in protecting the integrity of mortgage loan servicing…Nevada’s sovereign interest in protecting its citizens and economy from deceptive mortgage practices is not diminished merely because it has tacked on a claim for restitution.” The state’s interest is further illustrated by the types of relief sought, including 1) enforcement of a prior Consent Judgment, which only the state may enforce; 2) civil penalties under the state consumer protection statute, which are not available to individual consumers; 3) injunctive relief, “with respect to which the State faces a much lower standard of proof than would be required for a lawsuit brought by individual consumers,” and 4) recovery of state investigative costs, a claim belonging only to the state. The court held that because the state was the real party in interest, the suit was not a CAFA mass action.

District Court Cases


Arizona ex rel. Horne v. Countrywide Financial Corp., 2011 U.S. Dist. LEXIS 35203 (D.Ariz. 2011), appeal den. 2012 U.S. App. LEXIS 15 (9th Cir. 2012).

The state through its Attorney General, sued several defendants, alleging violations of a 2009 consent decree entered in state court and violations of the Arizona Consumer Fraud statute. The state sought civil penalties, injunctive relief and restitution. Defendants moved the case to federal court under CAFA, among other grounds, and the state argued that removal was improper because the state is the real party in interest in parens patriae actions, and since the state is not a citizen for diversity purposes, there is no diversity. The defendants argued that because the state was seeking restitution under the state consumer fraud statute, individual consumers were the real parties in interest.

The court distinguished this case from a Fifth Circuit decision, Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), in which the court held that policy holders were the real parties in interest for the treble damage claims brought by the state. The Arizona court distinguished Caldwell because individuals in Arizona, unlike those in Louisiana, have no right to enforce the state statute. The court stated, “simply because some individual citizens may recover restitution does not render those individuals the real parties in interest” and “the State has a strong public policy interest in pursuing restitution because restitution will benefit the public welfare by penalizing past unlawful conduct and deterring future wrongdoing.” [citations omitted]

Even if the state were not the real party in interest, the court held that the state’s suit was not subject to removal because it was neither a class action nor a mass action as defined in CAFA. The case was not brought under rule 23 of the Federal Rules of Civil Procedure or any similar state rule and the state’s consumer fraud statute did not require the certification and opt-out procedures of such statutes. The statute specifically authorizes the Attorney General to sue on behalf of the state, not as a class representative. It is not a mass action because the state is the only named party. The court found that removal was improper and remanded the case.


In re: Vioxx Products Liability Litigation,2012 U.S. Dist. LEXIS 2526 (E.D.La. 2012)

Kentucky, through its Attorney General, filed suit under its consumer protection laws against Merck, the manufacturer of Vioxx. As a result of cardiovascular problems resulting from the use of Vioxx, a large number of suits were filed against Merck, and were consolidated in the U.S. District Court in Louisiana. The Kentucky Consumer Protection Act (KCPA) provides for two separate causes of action. The Attorney General may seek injunctive relief against an unlawful practice, and can recover civil penalties. A separate section of the KCPA allows private parties to recover damages and attorneys’ fees for violations of the act. Kentucky’s suit, which was filed in state court, alleged a single count under the KCPA and sought injunctive relief, civil penalties and attorneys’ fees.


Characterizing the Attorney General’s action as a parens patriae claim, the court addressed the question of whether the “class action” defined by CAFA is broad enough to encompass a parens patriae claim. The court first described the Fifth Circuit decision in Louisiana ex rel. Caldwell v. Allstate Insurance Co., 536 F.3d 418, 424 (5th Cir. 2008), in which the court held that a parens patriae action by the Attorney General of Louisiana, which sought damages for individual citizens as well as injunctive relief and penalties, was a “mass action” under CAFA.The Fifth Circuit specifically did not address whether the case was a “class action” as defined by CAFA. The district court then described the decisions by the Fourth, Seventh and Ninth Circuits (described in this article), in which the courts concluded that a parens patriae case was not a class action because they did not require any showing of commonality, typicality, numerosity, or adequacy of representation, nor provide notice or opt-out rights.

The court agreed that this case is not a “class action” under CAFA because, “Congress chose to define “class action” not in terms of joinder of individual claims or by representative relief in general, but in terms of the statute or rule the case is filed under. . . . If this is a formalistic outcome, it is a formalism dictated by Congress. Moreover, it is an understandable bright-line rule.” The court also rejected Merck’s claims that there was minimal diversity because, unlike the Allstate case, the state was not seeking damages for individual consumers. Merck argued that the state’s citizens were parties in interest because the state’s claims advanced the interests of its citizens. The court disagreed, stating, “a state can hardly ever be said to take any action that does not advance the interest of its citizens,” and the scope of CAFA would therefore be overly broad.

New York

In Re: Oxycontin Antitrust Litigation, 2011 U.S. Dist. LEXIS 111068 (S.D.N.Y. 2011)

Kentucky, through its Attorney General, sued the manufacturer of the drug Oxycontin, alleging that it had misled doctors and consumers as to the risks of addiction associated with the drug. The state alleged the defendants’ conduct gave rise to claims under the state’s Medicaid Fraud statute, public nuisance laws, state antitrust statutes and constituted common law fraud. The state sought damages for its Medicaid program as well as injunctive relief. Defendants removed the action to federal court under CAFA, and it was transferred to the Southern District of New York, where there was a multidistrict case. The state sought remand to state court.


The court determined that the state was the real party in interest, and that the action was therefore not a class action under CAFA. Unlike many of the other CAFA cases, the state brought this action to recover damages that the state itself, through its Medicaid program, had incurred. The state did not seek damages for any consumers. As part of its requested equitable relief, the state sought to establish a “medical monitoring program.” The court held that, to the extent this program is a claim that benefits individual consumers, it is possible that the state may not obtain the requested relief, but it does not mean the case is not brought in the state’s parens patriae capacity. Similarly, with regard to claims for negligence and strict liability, which the defendants argue can only be brought by individual consumers, the court stated, “the mere fact that the Commonwealth might not prevail on its strict liability and negligence claims--due to a lack of standing or for failure to state a claim--does not render Kentucky citizens the real parties in interest in this action.” The court remanded the case to Kentucky state court.

South Carolina

State of South Carolina v. AU Optronics Corp., 2011 U.S. Dist. LEXIS 104213 (D.S.C. Sept. 14, 2011).

South Carolina sued thin film transistor liquid crystal display (TFT-LCD) panel manufacturers in state court, alleging that the defendants engaged in a conspiracy to fix prices for TFT-LCD panels. The state sought civil forfeitures for violations of the South Carolina Antitrust Act; restitution on behalf of the citizens of the state and statutory penalties for violations of the South Carolina Unfair Trade Practices Act (SCUTPA). Defendants removed to federal court in South Carolina, arguing that the case was a class action or mass action under CAFA. The state sought remand, and the district court agreed.

The court addressed three questions: 1) is there minimal diversity (who are the real parties in interest for diversity purposes); 2) is this a class action as defined by CAFA; and 3) is this a mass action as defined by CAFA? The court first reviewed the cases deciding whether claim-by-claim analysis should be applied to determine whether the state is the real party in interest. In deciding to follow the reasoning of the courts that have used the “whole complaint” theory, rather than a claim-by-claim analysis, the court stated that the state may have a quasi-sovereign interest even if individual consumers will recover damages.

While individual consumers may benefit from the restitution sought by the state in this case, the remedies sought in this case also generally inure to all residents of South Carolina by making it less likely these defendants will engage in future price-fixing and by recovering taxpayer money paid to the defendants as overcharges.

The court next concluded that this case is not a class action, following the Fourth Circuit’s reasoning in State ex rel. McGraw v. CVS Pharmacy Inc. (see above), because it was not brought under F.R.C.P. 23 or its state equivalent. Finally, the court determined that the case was not a mass action because the state, rather than the individual consumers, was the real party in interest.

West Virginia

West Virginia ex rel. McGraw v. JPMorganChase and Co., 2012 U.S. Dist.LEXIS 16403 (S.D.W.Va. 2012)

The state sued credit card companies, alleging that their practices in connection with selling and administering “payment protection plans” violated the West Virginia Consumer Credit and Protection Act (WVCCPA). Defendants removed the case to federal court alleging, among other grounds, that they were disguised class or mass actions subject to CAFA removal.

The court held that the Attorney General’s suit was not a class action under CAFA. Although the defendants argued that the Attorney General was seeking recovery for individual consumers, the court held that it was bound by State v. CVS Pharmacy (above) in which the court found that the Attorney General’s action did not include the essential elements of a class action. Turning to the question of whether the Attorney General’s suit was a “mass action,” the court noted the question in determining whether a case is a mass action turns on the real party in interest. The court declined to follow a decision by the Fifth Circuit in which the court looked at the case on a “claim-by-claim” basis and determined that for some of the claims, the real parties in interest were the consumers who would receive restitution. The court instead used a “whole complaint” analysis, under which the court examines the “essential nature and effect of the proceeding.” In this case, the essential nature of the complaint was to forward the state’s sovereign and quasi-sovereign interests in enforcing its laws and disgorging ill-gotten gains.

The court distinguished Lucent (discussed in this article) as involving the California Department of Employment Services and a case that involved one employee. The court stated,

[A]ny benefits inuring to the State, such as anti-discrimination training of a corporation's employees, were “tangential” to the substantial benefits sought for the one former employee--back pay, interest, damages for suffering, and punitive damages. . . The present case, which alleges damage to more than one individual, and which seeks a number of substantial types of relief which will inure to the State, can be distinguished on these facts.

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