When a state attorney general files a lawsuit that is not expressly pled as a class action, but the suit seeks a recovery on behalf of consumers that would put money in their pockets just like a class action, is that a “class action” within the meaning of the Class Action Fairness Act (CAFA)?  The Fourth Circuit answered “No” on the facts presented by West Virginia ex. rel. McGraw v. CVS Pharmacy, Inc.  In a 2-1 decision, the majority concluded that “[b]ecause this action was brought by the State under state statutes that are not ‘similar’ to Federal Rule of Civil Procedure 23, we conclude that it is not removable under CAFA as a class action.”  Under this decision, a state attorney general who wants to bring a suit equivalent to a class action but wants to stay out of federal court likely can find a way to frame the suit to have a strong chance of staying in state court.  The Fifth Circuit, however, reached a contrary result in an attorney general suit it found was a “mass action” under CAFA, see Louisiana ex.. rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008).

In this case, the attorney general brought suit under the West Virginia Pharmacy Act, which requires pharmacists to fill prescriptions with generic drugs, when appropriate, and pass on certain savings to consumers.  The attorney general contended that various pharmacies named as defendants failed to comply with this statute and also violated the West Virginia Consumer Credit Protection Act.  The attorney general sought monetary refunds on behalf of all affected West Virginia consumers.

The court focused on CAFA’s definition of “class action,” which is “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.”  28 U.S.C. § 1332(d)(1)(B).  The majority reasoned that:  (1) CAFA’s definition of “class action” should be interpreted to require that the state statute or rule at issue have typicality and adequacy of representation requirements, which are not applicable to West Virginia’s Pharmacy Act or Consumer Credit Protection Act; (2) the attorney general’s role was “more analogous to the role of the EEOC or other regulator when it brings an action on behalf of a large group of employees or a segment of the public”; and (3) a finding of federal jurisdiction “would risk trampling on the sovereign dignity of the State,” although the court does not find that the Eleventh Amendment applies.

The dissent was by Judge Gilman, a senior circuit judge of the Sixth Circuit, sitting on the Fourth Circuit by designation.  He concluded that: (1) this case would meet Black’s Law Dictionary’s definition of “class action” because the plaintiff seeks to represent the interests of a group of people; (2) the real parties in interest on the primary claim were consumers; (3) the legislative history of CAFA, including rejection of an amendment that would have exempted attorney general suits from CAFA, supports finding that jurisdiction exists; and (4) sovereign immunity concerns were inapplicable where the state voluntarily brought the suit.  Judge Gilman’s most quotable line was:

In sum, there is a saying that if something looks like a duck, walks like a duck, and quacks like a duck, it is probably a duck.  To my mind this case “quacks” much more like a CAFA class action than a parens patriae case.

Here are my thoughts: 

  • Look for an en banc petition or petition for certiorari in this case.  The strong dissent, the conflict with the Fifth Circuit decision (although that involved a “mass action”) and the prominence of this issue might lead to further review.  The Fourth Circuit takes more en banc petitions than most circuits.  If further review is sought, industry associations may want to weigh in with amicus briefs. 
  • Attorney general and insurance commissioner suits may increase.  Depending on the political climate in particular jurisdictions, insurers may see an increase in the filing of “class action-like” suits, particularly in the event of catastrophes.  In some states insurance commissioners can file suits on their own, in others they have to go through the attorney general. 
  • CAFA jurisdiction in each case still will depend on its own facts.  Under the Fourth Circuit’s test for what is a “class action,” each state statute asserted by an attorney general must be analyzed carefully to determine whether it is sufficiently “similar” to Federal Rule 23 for CAFA to apply.  It appears that key issues will include whether there are requirements similar to typicality and adequacy of representation.