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6th Cir. Holds ‘Class Action’ Brought by Michigan AG Did Not Qualify Under CAFA

CAFAThe U.S. Court of Appeals for the Sixth Circuit recently held that a lawsuit brought by the attorney general of Michigan on behalf of Michigan residents did not qualify as a “class action” under the federal Class Action Fairness Act (CAFA).

The Court reasoned that the state statute authorizing “class actions” by the Michigan attorney general lacked the core requirements of typicality, commonality, adequacy, and numerosity necessary to certify a class under Federal Rule of Civil Procedure 23.

A copy of the opinion in Dana Nessel v. AmeriGas Partners is available at:  Link to Opinion.

The attorney general of Michigan sued a provider of residential propane in Michigan (“propane provider”) alleging violations of the Michigan Consumer Protection Act (MCPA) including unfair trade practices and illegal pricing schemes.

Section 10 of the MCPA, titled “class actions by attorney general for actual damages,” authorized the attorney general to bring suit on behalf of Michigan residents. Section 10 provides in part:

“The attorney general may bring a class action on behalf of persons residing in or injured in this state for the actual damages caused by any of the following: (a) A method, act or practice in trade or commerce defined as unlawful under section 3 [unfair, unconscionable, or deceptive methods, acts, or practices].”

The propane provider removed the case to federal court, arguing the attorney general’s lawsuit is a class action under the federal Class Action Fairness Act of 2005.

The trial court remanded the case to state court, finding that it lacked subject matter jurisdiction over the action.

The propane provider petitioned the Sixth Circuit for permission to appeal the trial court’s order. The Sixth Circuit granted permission based on its discretion to accept appeals presenting CAFA issues.

As you may recall, under CAFA, a federal court has original jurisdiction over a class action when (1) there is minimal diversity of citizenship between the parties; (2) the aggregate amount in controversy exceeds $5 million; and (3) the proposed class contains at least 100 members. 28 U.S.C. § 1332(d)(2)–(6); see Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 84–85 (2014).

CAFA defines a 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).

Rule 23 specifies four prerequisites that must be satisfied before a member of a class may sue or be sued as a representative party: numerosity, commonality, typicality, and adequate representation.

Under CAFA, removal jurisdiction exists only when a class action is brought pursuant to Rule 23 itself or a “similar” state statute. 28 U.S.C. § 1332(d)(1)(B).

The Sixth Circuit first looked to the plain text of the statute to determine whether removal jurisdiction exists under CAFA, holding “the Attorney General’s lawsuit brought pursuant to Section 10 of the MCPA does not satisfy any of these core requirements [numerosity, commonality, typicality, and adequate representation], most notably typicality and adequate representation, and so is not similar to a class action brought pursuant to Rule 23.”

The Sixth Circuit noted “Section 10 does not require the Attorney General to have suffered an injury at the hands of Defendants or to bring a claim that is otherwise typical of each class member’s claim.” See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (“We have repeatedly held that ‘a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.’” (quoting E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977))).” The attorney general herself need not purchase any propane or have otherwise been harmed and thus her claims are not “typical” of the proposed class members on whose behalf she brings the lawsuit.

Next, the Sixth Circuit used the same logic in determining the MCPA does not satisfy the requirement of adequate representation, noting “just because the Attorney General is authorized to seek damages on behalf of a group of consumers who were allegedly harmed by [the propane provider’s] practices does not mean that the Attorney General is an ‘adequate representative’ of that class.”

Finally, the Sixth Circuit added, Section 10 does not require the attorney general to join the affected consumers as named plaintiffs in her lawsuit, “thus, it is unclear how the requirements of numerosity and commonality could ever be satisfied in a Section 10 lawsuit.”

The propane provider responded that although Section 10 does not require satisfaction of numerosity, commonality, typicality, and adequate representation, Michigan Rule 3.501, titled “class actions,” does, and is Michigan’s analog to Rule 23. In addition, the propane provider argued that Section 10 of the MCPA incorporates Michigan Rule 3.501.

However, the Sixth Circuit noted that Michigan Rule 3.501 provides that “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members in a class action only if” there is numerosity, commonality, typicality, adequate representation, and superiority. Mich. Ct. R. 3.501(A).

Thus, as the Sixth Circuit described in its Section 10 analysis, the attorney general is not a “member” of the class and does not have claims that are typical of it. Therefore, the Sixth Circuit held, by its plain language, Michigan Rule 3.501 does not apply to an action brought by the attorney general pursuant to Section 10.

Accordingly, the Sixth Circuit affirmed the trial court’s order remanding the case to state court.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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