While it may be common knowledge for many that state attorneys general (State AGs) bring enforcement actions under state consumer protection laws, it is likely less well-known that the State AGs also serve a role under the Class Action Fairness Act (CAFA). State AGs typically receive notice through CAFA as “appropriate state officials” if the settlement proposed includes class members in their state. States may monitor these CAFA notices to varying degrees, but are typically looking to both:
- monitor the fairness of the action as intended by CAFA, and
- protect the states’ own interests, whether related to active investigations or potential future ones.
Since 2014, states have had to contend with the holding of California v. Intelligender in the 9th Circuit, which found that the state was precluded from obtaining restitution after the class action obtained monetary relief. Though this holding could potentially be limited due to the specific facts of the case, states are taking this potential outcome seriously as demonstrated by New Mexico’s recent attempt to intervene in the In re: Facebook, Inc. class action last month.
The court denied New Mexico’s motion to intervene, however, stating:
It should be obvious to the New Mexico Attorney General that a private class action settlement cannot prevent a state from pursuing a lawsuit against the defendant based on the same conduct to vindicate its police powers (for example, to impose penalties or obtain junctive relief). But it should be equally obvious that Facebook could argue that New Mexico is barred from obtaining a financial recovery on behalf of residents who participated in this class action settlement.
The court goes on to say that New Mexico should have raised their argument longer ago, and that their concern of not being able to seek restitution for consumers is unfounded because the states likely cannot recover a larger amount for their residents. In an abundance of caution however, the court allowed for an additional comment period for interested states to file an objection or request changes to the class action notice. Ultimately, no states commented. The court preliminarily approved the settlement last week, again referencing that New Mexico’s concerns that states may not be able to later recover restitution “do not provide a basis for rejecting the settlement.”
So, remember:
- While a prior class action settlement may prevent “double recovery” of restitution from a State AG enforcement action, courts say a private settlement may NOT prevent a State AG from obtaining penalties and injunctive relief on the same conduct.
- States watch class action settlements and weigh in usually through amicus briefs with mixed results. But courts are typically willing to at least listen to what states have to say.