Plaintiffs’ lawyers will need to get more creative if they want to keep class actions in state court. Today, the Supreme Court of the United States ruled unanimously that class action plaintiffs can’t avoid the Class Action Fairness Act’s amount-in-controversy requirement by simply stipulating that the claims of the class are less than the minimum amount.
In Standard Fire Ins. Co. v. Knowles, the named plaintiff filed a class action alleging that the insurer unlawfully failed to include a general contractor fee with certain homeowner’s loss payments. The class was said to number in the thousands, but Knowles stated in his complaint that both he and the class “stipulate they will seek to recover total aggregate damages of less than five million dollars”–a clear attempt to avoid CAFA’s jurisdictional minimum of $5 million. The insurer removed the case to federal court despite the stipulation, and the district court found that the sum of all of the proposed class members’ claims exceeded $5 million. But because the plaintiff stipulated that the sum was less than $5 million, the district court ordered remand. The insurer appealed, the Eighth Circuit declined to hear the appeal, and the Supreme Court granted certiorari to resolve a circuit split.
Justice Breyer wrote the unanimous opinion, describing the issue as “whether the stipulation makes a critical difference” as to CAFA jurisdiction. The Court held it does not because a plaintiff cannot legally bind members of a class prior to class certification. So Knowles’ stipulation could only bind him–not the class. Thus, since the amount of the unnamed class members’ claims exceeded $5 million, removal under CAFA was appropriate.
