Earlier this year, I posted about a Fourth Circuit decision holding that a lawsuit filed by a state attorney general purportedly as a parens patriae suit was not a “class action” under the Class Action Fairness Act (CAFA), and therefore there was no federal jurisdiction. The Ninth Circuit has now joined the Fourth Circuit on this issue.
In Washington State v. Chimei Innolux Corp., 2011 U.S. App. LEXIS 20083 (9th Cir. Oct. 3, 2011), attorneys general in Washington State and California brought antitrust suits alleging that the defendants engaged in price fixing in the market for thin-film transistor liquid crystal display panels. State statutes in both jurisdictions authorized the attorneys general to file these as parens patriae cases. CAFA defines 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.” 28 U.S.C. § 1332(d)(1)(B). The Ninth Circuit held that these suits did not fall within CAFA’s definition of “class action” because “[n]either lawsuit was filed under Rule 23 of the Federal Rules of Civil Procedure or any similar state statute.” Id. at *9. The court further explained that “[u]nlike 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.” Id.
The Ninth Circuit said it agreed with the Fourth Circuit’s opinion earlier this year in West Virginia ex. Rel McGraw v. CVS Pharm., Inc., 646 F.3d 169 (4th Cir. 2011) (see my prior blog post). It distinguished the Fifth Circuit’s decision in In re Katrina Canal Breaches Litig., 524 F.3d 700 (5th Cir. 2008), a case I am involved in, on the grounds that Katrina Canal was expressly filed as a class action by the state attorney general. The Ninth Circuit cited but did not discuss the Fifth Circuit’s opinion in Louisiana ex. rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), which held that a lawsuit filed by the Louisiana attorney general purportedly as a parens patrie suit was a “mass action” subject to federal jurisdiction under CAFA. The Ninth Circuit in Chimei Innolux, like the Fourth Circuit in CVS, did not address the potential applicability of CAFA’s mass action provision (under which only individual claims in excess of $75,000 remain in federal court).
I see these cases as having less of an impact in insurance cases because it is relatively rare for a state statute to expressly grant an attorney general a parens patriae power to sue insurance companies outside of the antitrust context. When such suits are brought, insurers may have a strong argument that the case does not fit the test for a parens patriae case because, among other reasons, the state may not be pursuing a sovereign interest apart from private interests of individual policyholders, there may be no quasi-sovereign interest, and only a relatively small portion of the state’s population will be insureds of any particular insurer. In addition, as I previously noted, some statutes providing an attorney general with the power to sue may fit more closely CAFA’s definition of “class action,” and provide a basis to distinguish the Fourth and Ninth Circuit decisions.