SCOTUS Unanimously Rules that Class Action Plaintiffs Can’t Stipulate Their Way Out of Federal Court Jurisdiction

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.

About Brian Jones

I represent clients in all aspects of business litigation, but focus my practice on complex litigation and arbitration matters concerning insurance and reinsurance, antitrust, class actions, securities, real estate disputes, and contract matters. I am the co-chair of the Bose McKinney & Evans Insurance Group. I was listed in the 2017 and 2016 "Best Lawyers in America" for Insurance Coverage and named a "Rising Star" in Insurance Coverage by Super Lawyers in Indiana in 2014. I was also named a "Rising Star" in Business Litigation by Super Lawyers in Indiana in 2013 and 2012, and a 2010 “Rising Star” in Business Litigation in Texas. I am a member of the State Bars of Indiana and Texas, the Defense Research Institute, a former member of the Pro Bono College of the State Bar of Texas, and I am licensed to practice before all state courts in Indiana and Texas, as well as all federal courts in Indiana, the Northern, Western, and Southern Districts of Texas, the Northern District of Illinois, and the United States Courts of Appeals for the Fifth, Seventh, and Eleventh Circuits. I received my bachelor’s degree, cum laude, in political science and my master’s degree in teaching from Trinity University, where I was elected to Phi Beta Kappa. I received my doctor of jurisprudence degree from the University of Texas School of Law, where I was the Director of Communications for the Legal Research Board and a member of the Phi Delta Phi Honor Society. Before attending law school, I taught high school geography, government and economics in San Antonio, Texas.
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