Ninth Circuit Joins Fourth Circuit in Holding That CAFA's Class Action Removal Provisions Do Not Apply to State Parens Patriae Suits

It has certainly taken me long enough to get around to posting about it, but the Ninth Circuit issued an opinion earlier this month that raises an important issue for those of us who defend consumer class actions: what is a removable "class action" under the Class Action Fairness Act. Now remember that CAFA was passed to end the procedural games that were being played by plaintiffs' counsel to keep cases in state court where they could "hometown" the defendants. You know, things like fraudulently joining local defendants against whom they had no plausible cause of action, pleading myriad one-state classes, etc. CAFA was supposed to fix the problem by making all of these actions removable to federal court, and it was to be liberally applied. Well, now we have the issue of so-called parens patriae actions, which are brought by the state attorney general. Such actions, the AGs assert, are "state" "enforcement" actions that are not removable to federal court. Well, frogs swim, and you can call a frog a fish, but that doesn't give him gills. And calling these parens patriae actions "state actions" doesn't change their essential character. They are brought on behalf of — and assert the rights to recover of — individual citizens, not the State. They seek restitution, which is a compensatory remedy for the real party in interest — which is not the State, but the absent group of individual consumers. They require notice, opt-out rights, and court approval of any settlement. These are class actions. If it looks like a duck, walks like a duck and quacks like a duck, it's a duck. The Ninth Circuit recently rejected this common-sense approach, holding that parens patriae actions brought by the AGs of California and Washington were not "class actions" under CAFA (and thus not removable) because they were not brought under the state equivalent of Rule 23 and provide fewer procedural protections for absent class members than Rule 23 does. Washington v. Chimei Innolux Corp., 2011 WL 4543086 (9th Cir. Oct. 3, 2011). In reaching this conclusion, the court followed the Fourth Circuit's recent similar holding in West Virginia ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d 169 (4th Cir. 2011). These hypertechnical readings of CAFA, if allowed to stand, have lighted the path for the enterprising class action lawyer to avoid federal court and subject out-of-state defendants to the same sort of hometown tactics that they could use before CAFA was passed. Rather than going to the trouble of even having a representative plaintiff, simply get your friend the Attorney General to appoint your firm as special counsel for the State to prosecute a parens patriae suit that, although nominally is the State's, in reality belongs to the group of consumers and provides all of the coercive benefits of aggregation. Let's hope that someday soon the Supreme Court accepts review of CVS, Chimei Innolux, or another similar suit in order to give CAFA the broad interpretation that Congress intended.

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