Taking the simple road: Supreme Court rejects ‘claim-by-claim’ approach

July 30, 2014

Security guards walk the steps of the Supreme Court before Justice Elena Kagan's investiture ceremony in Washington“When judges must decide jurisdictional matters, simplicity is a virtue.”

The U.S. Supreme Court, in its unanimous decision in Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036, 134 S.Ct. 736 (U.S. Jan. 14, 2014), echoed its previous words in its landmark decision in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013).

The similarities, however, end there, say Anthony Rollo, Michael Ferachi and Kimberly Higginbotham of McGlinchey Stafford PLLC, in their thoughtful discussion of the Hood decision, its contrasts with Standard Fire, and the impact of the Hood decision on the future of class action litigation.

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Upon granting certiorari, the Court evaluated the 5th U.S. Circuit Court of Appeal’s “claim-by-claim” approach for ascertaining the real party in interest in a state court attorney general lawsuit (a/k/a a parens patriae action) for purposes of determining whether the case is removable, pursuant to the provisions of the Class Action Fairness Act.

“Despite its previous expansive interpretation of CAFA in the Standard Fire decision, the Court took a narrower approach in Hood,” the McGlinchey attorneys observed.  They delve extensively into the Court’s rationale of using the restrictive language of CAFA’s mass action provisions to reject the “claim-by-claim” approach and hold that, because the state of Mississippi through its attorney general was the only named plaintiff, the suit was not a CAFA mass action.

“The ‘claim-by-claim” approach sought substance over form by making an assessment of what was really being sought and who the real party in interest was, and appeared consistent with the Standard Fire warning against exalting form over substance,” the authors’ wrote.

“However, in striking down the “claim-by-claim” approach, Hood prohibited a background inquiry for purposes of assessing removal jurisdiction and, ultimately, appears to have been decided on form over substance.

“In the wake of the Hood decision, fewer hurdles will exist for bringing a parens patriae action and avoiding removal.  Therefore, an increase in partnered parens patriae actions where states are represented by both state attorneys general and plaintiffs’ attorneys may be expected. Considering the sharp contrast between its interpretations of CAFA in Standard Fire and Hood, it is less predictable where the Court will go from here.”

Contact Rollo, Ferachi and Higgenbotham via the firm’s website at www.mcglinchey.com.