WASHINGTON (Legal Newsline) - A recent ruling in a case brought by West Virginia Attorney General Darrell McGraw makes it harder for out-of-state defendants to remove class actions to federal court, the Washington Legal Foundation is arguing.
The WLF, which says its mission is the defense and promotion of free enterprise, filed an amicus brief Friday with the U.S. Supreme Court while the court is deciding if it will hear the appeal of a group of drug stores. McGraw, through private attorneys, sued the drug stores, claiming they do not pass savings on generic drugs to consumers.
The six stores said McGraw's case is a class action and removed it to federal court under the Class Action Fairness Act. The U.S. Court of Appeals for the Fourth Circuit said it was not a class action and remanded it to state court.
"Amici believe that out-of-state defendants, in order to ensure that their cases will be heard in an impartial forum, ought to be permitted to remove the cases from state to federal court," the brief says.
"Congress adopted CAFA to ensure that the right of removal is protected for most such defendants, particularly in cases seeking significant damages and in which the plaintiff (as here) is suing in a representative capacity on behalf of numerous individuals.
"Amici are concerned that the decision... if not corrected, will allow plaintiffs' lawyers to "game" the system to prevent removal - the very scenario that Congress sought to avoid when it adopted CAFA."
The six drug stores are national chains Wal-Mart, CVS, Kmart, Kroger, Target and Walgreen. Earlier this month, they asked the U.S. Supreme Court to hear their appeal of a 2-1 Fourth Circuit decision.
"Indeed, the West Virginia Attorney General's role here is 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," the Fourth Circuit's 2-1 judgment says. "Yet, the Supreme Court has concluded that such a regulator's action is not a class action of the kind defined in Rule 23."
Judge Ronald Lee Gilman dissented in the judgment and was the only member of the three-judge panel to vote for a stay. Even though the action was brought under state statutes, it doesn't take away the "essence" of the case, he wrote in his dissent.
"(T)he elements of numerosity, commonality, typicality and adequacy of representation have not been specifically pleaded," Gilman wrote. "But I submit that these are subsidiary factors that do not detract from the essence of the action.
"They are, in other words, 'bells and whistles' whose absence in the pleadings do not prevent the Attorney General's suit from being considered a class action under CAFA."
Gilman wrote that similar lawsuits filed by McGraw's outside counsel in other states are undisputed class actions.
WLF says the case presents issues of "exceptional" importance.
"Federal district courts are repeatedly called on to determine whether a case that is representative in nature has been properly removed from state court," the brief says. (The U.S. Supreme Court) has never issued a decision construing CAFA.
"As evidenced by the conflicting lower-court decisions regarding when (for CAFA removal purposes) a state statute should be deemed 'similar' to Fed.R.Civ.P. 23, the lower courts are in need of guidance regarding the scope of CAFA's jurisdictional grant. Review is warranted to provide that guidance and to resolve the conflict identified by CVS."
McGraw hired two private firms - Bailey & Glasser and DiTrapano Barrett & DiPiero - for the case. The two firms have contributed more than $60,000 to McGraw's campaign fund over the years, including $11,800 for his 2008 race against Republican Dan Greear.
Bailey & Glasser brought similar lawsuits in Michigan and Minnesota. The Michigan suits were dismissed by a state judge because the only specific pricing information was obtained by a West Virginia whistleblower who worked at Kroger.
The Minnesota lawsuit, brought on behalf of unions that provide health care for their members, was initially dismissed in November 2009 by former U.S. District Judge James Rosenbaum, who had harsh words for the plaintiffs attorneys.
Rosenbaum was peeved that the complaint, filed against 13 defendants, only contained specific pricing information about two of them.
"(T)his Complaint utterly fails to state a cause of action on any basis. There are no, none, factual allegations touching any defendant other than CVS and Walgreen's," Rosenbaum said Nov. 20, 2009.
"There being no facts from which a fact finder could infer any liability concerning (the other defendants), and you asked me to sustain a complaint based upon that. It's not only laughable, it's absolutely reprehensible."
A federal magistrate judge is currently deciding if that lawsuit will be remanded to a Minnesota court.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.