On Tuesday, the U.S. Supreme Court unanimously concluded that class action plaintiffs cannot prevent removal of their cases from state court to federal court by stipulating before class certification that the proposed class will not seek damages in excess of the federal jurisdictional amount.
In April 2011, Greg Knowles filed a class action complaint against Standard Fire Insurance Co. in Arkansas state court. Knowles alleged that Standard Fire underpaid homeowners’ property loss claims by refusing to pay general contractor fees. Knowles sought to certify a class of similarly harmed policyholders in Arkansas.
The complaint purported to stipulate that Knowles, as class representative, and the proposed class would seek less than $5 million in damages. Standard Fire removed the suit to federal court based on the Class Action Fairness Act, which authorizes removal when, among other things, the aggregated amount in controversy exceeds $5 million. Relying on Knowles’ stipulation, the federal district court remanded the case back to state court finding that the $5 million minimum jurisdictional amount was not satisfied.
The U.S. Court of Appeals for the Eighth Circuit declined to hear Standard Fire’s appeal, and Standard Fire petitioned the Supreme Court for review. In a unanimous opinion authored by Justice Breyer, the Court reasoned that Knowles could not legally bind unnamed class members until the class was certified. Because the class was not certified at the time the lawsuit was filed, the purported stipulation in the class action complaint was not binding upon the absent class members.
The Court concluded that the district court should have ignored Knowles’ purported stipulation and aggregated the claims of the individual class members to determine whether the $5 million jurisdictional amount was met. Thus, the Court’s opinion makes it impossible for class action plaintiffs to avoid federal court by stipulating to limit their damages to less than the jurisdictional amount.
Follow the link for the Court’s opinion: Standard Fire Ins. Co. v. Knowles.
Prepared by Abbott Marie Jones