SCOTUS: States are Not “Persons” Under CAFA

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In 2005, Congress enacted the Class Action Fairness Act (“CAFA”) to change the procedures for interstate class action suits.  Notably, CAFA created a new type of suit called a “mass action,” which is any civil suit for monetary relief in which the “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.”  28 U.S.C. § 1332(d)(11)(B)(i).  The United States Supreme Court just clarified CAFA’s “100 or more persons” requirement in Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036 (Jan. 14, 2014). 

AU Optronics posed a straightforward question to the Supreme Court: does the “100 or more persons” requirement permit mass actions to be brought by fewer than 100 named plaintiffs when one of those plaintiffs is a state?  A unanimous Court answered in the negative, rejecting the respondents’ argument that CAFA permits mass action claims by fewer than 100 named plaintiffs when the action is prosecuted by a state (i.e., one plaintiff) on behalf of its citizens (who number more than 100 persons).

The Court laid out eight distinct reasons for holding that claims require at least 100 named plaintiffs to qualify as CAFA mass actions.  The first four reasons concern Congress’s use of the term “person.”  First, Congress simply used the term “persons” for mass actions, while for CAFA class actions, Congress defined “class members” as “persons (named or unnamed)” who are covered by the proposed class’s definition.  That Congress did not explicitly permit mass action plaintiffs to be named or unnamed indicates its intent to require mass action plaintiffs to be named.  Second, “persons” in mass actions are unambiguously described in the same sentence of § 1332(d)(11)(B)(i) as “plaintiffs;”  hence, those “persons” are the named plaintiffs actively proposing to join their claims as a mass action, not some unnamed amalgam of people passively observing the litigation.  Third, reading CAFA as requiring 100 named persons for mass actions would give it an interpretation consistent with Federal Rule of Civil Procedure 20’s use of the terms “persons” and “plaintiffs.”  Fourth, it is unclear how an unnamed group’s claims could be proposed for joint trial based on sharing common questions of law and fact with a completely distinct group of named plaintiffs.  Accordingly, the Court reasoned, the term “person” here means plaintiffs named in the suit.

The next three reasons address Congress’s use of the term “plaintiff.”  First, the plain meaning of the term “plaintiff” is someone who has brought suit, so applying that term to “persons” requires interpreting “persons” as those who have brought suit, not another group of people who have not brought suit.  Second, giving “persons” the meaning proposed by the AU Optronics respondents would, in the Court’s words, create an “administrative nightmare.”   In that scenario, to apply § 1332(d)(11)(B)(i)’s limitation of district courts’ jurisdiction to only those plaintiffs alleging harm of at least $75,000, district courts would need to (1) identify a slew of unidentified plaintiffs and (2) determine the amount in controversy between them and the defendant.  Conversely, requiring plaintiffs to be named would obviate the need for such inquiries.  Third, use of the term “plaintiff” elsewhere in CAFA suggests that only named plaintiffs are included, not unnamed parties in interest.  For example, § 1332(D)(11)(C)(i) states that a mass action removed from state to federal court cannot be transferred out of federal court without “the majority of the plaintiffs in the action” requesting as much.  Courts would be unable to decide whether they may transfer mass actions if they must consult unknown and unnamed parties.  Hence, the Court determined that the term “plaintiff” means actual plaintiffs named in the claim, not an unnamed group of individuals with interests in the claim.

Lastly, the Supreme Court rejected the Fifth Circuit’s application of a “background principle” that courts look to the “substance of the action” in addition to “the labels that the parties may attach.”  The Fifth Circuit held that applying this principle here would permit CAFA mass actions with fewer than 100 named plaintiffs as long as there were at least 100 parties interested in the litigation.  The Supreme Court flatly rejected this application and holding for two reasons.  First, while Congress’s intent to apply a similar background principle to diversity actions can be inferred in order to prevent parties from collusively destroying diversity, nothing suggests Congress intended that background principle to be extended to the mass action context.  Second, CAFA’s definition of mass actions explicitly excludes suits where the claims were joined because of a defendant’s motion, which evinces a congressional intent to give plaintiffs control over the litigation.  Applying the “background principle” here would contravene that intent by requiring district courts to go beyond examining the pleadings when defendants request they do so.  Accordingly, to qualify as a mass action under CAFA, a suit must have 100 or more named plaintiffs.