Hood v. AstraZeneca Pharmaceuticals, LP, No. 1:10CV104-SA-JAD, 2010 WL 3951906 (N.D. Miss. Oct 07, 2010).

A district court in Mississippi remanded the action to state court holding that because the State is not a citizen for purposes of establishing diversity, the existence of the State as a real party in interest destroys subject matter jurisdiction pursuant to CAFA

The State of Mississippi, through its Attorney General, brought a state court action against pharmaceutical companies AstraZeneca Pharmaceuticals, L.P., AstraZeneca, L.P., AstraZeneca P.L.C., AstraZeneca, A.B., and AstraZeneca U.K. Ltd. The complaint alleged the claims of violation of the Mississippi’s Medicaid law, violation of the Mississippi Consumer Protection Act, fraud and misrepresentation, unjust enrichment and negligence.

The defendant pharmaceutical companies removed the action to the District Court alleging, among other things, diversity jurisdiction under CAFA. 

The State moved for remand, and the District Court remanded the action to state court holding the State was real party in interest, which destroyed complete diversity of parties. (Editors’ Note: The CAFA Law Blog takes a different (and more correct) view allowing the removal of select Attorney General cases to federal court in the following article: “Removal of Attorney General Actions Under the Class Action Fairness Act of 2005,” BNA, Inc. Class Action Litigation Report, Vol. 12, No. 9, May 13, 2011. 

Although the parties agreed that the amount in controversy exceeded the jurisdictional minimum imposed by CAFA, the plaintiff contended that complete diversity was destroyed because the plaintiff was the State of Mississippi, which was not a citizen for purposes of establishing diversity. The plaintiff argued that removal was improper, notwithstanding the fact that the defendants were not citizens of Mississippi. 

The defendants argued that despite the fact that the caption of the complaint named the “State of Mississippi” as the only plaintiff, the complaint also asserted claims on behalf of the Schools Employees Life and Health Plan (“Employees Plan”). The defendants asserted that complete diversity was satisfied because the Employees Plan was a Mississippi citizen, a real party in interest, and a separate and distinct entity from the State. 

The Court maintained that to determine whether diversity jurisdiction exists, a court must look beyond the named parties and consider the citizenship of the real parties in interest. The State, as a quasi-sovereign, is the real party in interest when an action concerns a type of “injury” that the state either has addressed or would likely attempt to address through its laws to further the “well-being of its populace.” Courts analyze real party in interest questions by examining the State’s interest in a lawsuit as a whole.

The Court observed that here, the State of Mississippi, through the Attorney General, had addressed the injury at issue in this case under its Medicaid laws, consumer protection laws, and various state law tort actions. Under Mississippi law, the Attorney General is a constitutional officer and is charged with managing all litigation on behalf of the State. He has the right to institute suits necessary for the enforcement of the laws of the State, preservation of order and the protection of public rights. The Attorney General in this case brought the suit on behalf of the State, and thus the State was the party with a substantial interest in the outcome. The Court maintained that the fact that another party may benefit from a favorable resolution of this case does not minimize or negate the State’s substantial interest.

The Court observed that because it was established that the State of Mississippi was a real party in interest, the Court must take the State into consideration for diversity purposes. 

The defendants, however, contended that complete diversity existed because the Employees Plan—a Mississippi citizen was also a real party in interest, and that the defendants were not citizens of Mississippi.

Because federal courts are courts of limited jurisdiction, they can act only where the Constitution and Congress endow them with some affirmative ground to do so. In particular, Congress has not empowered the federal courts to exercise diversity jurisdiction over the states because by the express terms of §1332 provide that diversity jurisdiction does not ever extend to the states. The Court stated that the grant of diversity jurisdiction does not extend to actions in which a state is a party in interest because “a state cannot in the nature of things, be a citizen of any state.” 

Ordinarily, in an action where a state is a party, there can be no federal jurisdiction on the basis of diversity of citizenship because a state is not a citizen for purposes of diversity jurisdiction. While there is an exception when the state is merely a nominal party, that was not the case here. Consequently, the Court stated that even if Employees Plan was also a real party to this controversy, the Court nonetheless lacked subject matter jurisdiction over the lawsuit under §1332 because complete diversity was destroyed by the presence of the State of Mississippi. 

The defendants argued that the presence of a state as a party may be disregarded for the purpose of determining complete diversity. 

The Court disagreed because the defendants’ argument conflicted with Louisiana v. Union Oil Co. of California, 458 F.3d 364 (5th Cir. 2006). In Union Oil Co. of California, the State of Louisiana and the School Board of Vermilion Parish brought an action against oil companies for the claims arising out of oil and gas exploration activities. The court held that the State was a real party in interest, and, despite the fact that all defendants were diverse from the co-plaintiff School Board, the State’s presence in the action defeated diversity jurisdiction.

The proposition that a state, as a quasi-sovereign, is not a "citizen" for diversity purposes is a long-standing one that enjoys acceptance in history, and approval with the passage of time.  For this reason, the Court found the existence of the State of Mississippi as a real party in interest to this action destoryed subject matter jurisdiction pursuant to §1332.