WASHINGTON, D.C.- (Mealey's) Courts must calculate the
amount in controversy in class suits rather than focus on the amount being
sought by a class representative in deciding in which jurisdiction a class
complaint belongs, Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher in
Los Angeles argued before the U.S. Supreme Court Jan. 8 (The Standard Fire
Insurance Company v. Greg Knowles, et al., No. 11-1450, U.S. Sup.; See
12/6/12, Page 5) (lexis.com subscribers may access Supreme Court briefs for this case).
Representing the defendant, The Standard Fire Insurance
Co., Boutrous told the justices, "I believe that the Court's decision in Hertz[Corp.
v. Friend (130 S. Ct. 1181 )] said if there is a sign of manipulation
that is meant to thwart jurisdiction or affect jurisdiction, the Court can look
through that to look to competent proof of what the actual facts are. And
I think that what has happened here is the plaintiff's lawyers, in addition to
these stipulations, they're slicing and dicing the classes up into pieces to
thwart jurisdiction and manipulate jurisdiction."
While he admitted when questioned that it was an odd
position to be in-a defendant arguing that the amount in controversy is more
than the plaintiff claims-he argued that a court must "look at the complaint
and say what's the maximum amount the plaintiff can get on their best day under
the claims they've pled based on the facts and the proof and the
evidence. Here, the uncontradicted evidence, put aside the statute of
limitations question or any other claim they could have brought, it exceeds $5
On April 13, 2011, Greg Knowles filed a putative class
complaint in the Miller County, Ark., Circuit Court against Standard Fire
Insurance Co. Knowles alleged breach of contract due to Standard's
underpayment of claims for loss or damage to real property made pursuant to
certain homeowners insurance policies.
Knowles' home was damaged by hail in March 2010.
Knowles requested payment from Standard Fire for the damage. He claimed
that Standard Fire failed to pay for charges reasonably associated with
retaining the services of a general contractor to repair or replace damaged
Standard Fire removed the case to the U.S. District Court
for the Western District of Arkansas on May 18, 2011. It argued that
Knowles fraudulently framed the definition of the purported class in order to
limit recovery to two years, rather than the five years available under the applicable
statute of limitations. Standard Fire also asserted that although Knowles
signed a stipulation limiting his recovery and the purported recovery for the
class, Knowles' counsel failed to sign a stipulation that they would not seek
or accept an award of attorney fees that would allow the total amount in
controversy to exceed state court jurisdictional limits. Moreover,
Standard Fire argued that Knowles lacked the authority to place a limit on
recovery that would bind the other class members.
On June 6, 2011, Knowles moved to remand the case to
state court, citing his binding stipulation executed prior to removal that
limited his and the class' recovery to within state jurisdictional
The District Court held that Standard Fire satisfied its
burden of establishing that the $5 million threshold was satisfied.
However, the District Court went on to find that Knowles' stipulation was
sufficient for him to prove to a "legal certainty" that the amount in
controversy fell below $5 million. It further held that a named plaintiff
may avoid removal under Class Action Fairness Act (CAFA) by stipulating to a
purportedly "binding" limit on the damages being sought.
Standard Fire petitioned the Eighth Circuit U.S. Court of
Appeals for permission to appeal pursuant to CAFA. The Eighth Circuit
denied permission to appeal without explanation. Standard Fire then
petitioned for rehearing en banc. That petition also was denied
after the appellate court issued its ruling Rolwing v. Nestle Holdings, Inc.
(666 F.3d 1069 [8th Cir. 2012]). In that case, the appellate court
affirmed an order of remand under CAFA based on a stipulation by the named
plaintiff purporting to limit the damages of putative class members to below $5
million. Such a stipulation was allowed to defeat federal jurisdiction
even where the actual amount in controversy otherwise was over $12 million,
more than twice the $5 million threshold.
Standard Fire then petitioned the U.S. Supreme Court.
Amount In Controversy
David C. Frederick, representing Knowles, argued before
the high court justices that the decision about the amount in controversy needs
to be made by the person bringing the complaint. "What we do know is that
there is a civil action, it has been filed by a putative class representative,
that putative class representative in good faith, the district court found had
acted in good faith in stipulating to a lower amount than $5 million -- and the
question is should that be given legal effect, where everybody knows it will be
binding if the class is certified, and it will be binding on the class
representative if the class is not certified," he argued.
Frederick conceded, when questioned by Chief Justice John
G. Roberts Jr. that should an adequacy hearing ever occur and it was
demonstrated that the amount in controversy was, in fact, $10 million, that
Knowles would no longer be considered an adequate representative. "A
second outcome could be at that point, if an alternate class member comes in
and files an intervened complaint and says: This case really is worth $10
million, at that point [28 U.S. Code] section 1453(b) applies and they can
remove to federal court," Frederick said.
Boutrous and Wystan M. Ackerman of Robinson & Cole in
represent Standard Fire. Frederick of
Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington and Jonathan S.
Massey of Massey & Gail in Washington
Cory L. Andrews of Washington Legal Foundation in Washington filed an amicus
brief on behalf of Washington Legal Foundation, Allied Education Foundation and
International Association of Defense Counsel. Jess Askew of Williams
& Anderson in Little Rock, Ark., filed an amicus brief on behalf of
Arkansas State Chamber of Commerce.Deputy Solicitor General Andrew L. Brasher
of the Office of Alabama Attorney General in Montgomery, Ala., filed an amicus
brief on behalf of Alabama, Arizona, Colorado, Connecticut, Florida, Georgia,
Indiana, Kansas, Michigan, Nebraska, North Dakota, Ohio, Oklahoma, South
Dakota, Texas, Utah, Washington and West Virginia.Brian G. Brooks of
Greenbrier, Ala., filed an amicus brief on behalf of Arkansas Trial
Lawyers Association.G. Eric Brunstad Jr. of Dechert in Hartford,
Conn., filed an amicus brief on behalf
of Professors E. Donald Elliott and John J. Watkins.Charles J. Cooper of Cooper
& Kirk in Washington filed an amicus
brief on behalf of Partnership for America.Senior Assistant Attorney General
Eric B. Estes of Little Rock filed an amicus brief
on behalf of Arkansas,et
al. Gregory G. Katsas of Jones Day in Washington filed an amicus brief on
behalf of the National Association of Manufacturers.
Jeffrey A. Lamken of MoloLamken in Washington
filed an amicus brief on behalf of Chamber of Commerce of the United States of America and the Retail
Litigation Center Inc.Scott L. Nelson of Public Citizen Litigation Group in Washington filed an amicus
brief on behalf of Public Citizen Inc. and Public Justice P.C. David B.
Rivkin Jr. of Baker & Hostetler in Washington filed an amicus brief
on behalf of Cato Institute.Thomas T. Rogers of Austin, Texas, filed an amicus
brief on behalf of 21st Century Casualty Co., 21st Century Insurance Co., 21st
Century Insurance Company of the Southwest and 21st Century Insurance Group.Jeremy
B. Rosen of Horvitz & Levy in Encino, Calif., filed an amicus brief
on behalf of Manufactured Housing Institute, American National Property and
Casualty Co., American National General Insurance Co., Anpac Louisiana
Insurance Co., Pacific Property &Casualty Co. and American National County
Mutual Insurance Co.Mary M. Ross of Defense Research Institute in Bloomfield
Hills, Mich., filed an amicus brief on behalf of Defense Research
Institute. Paul H. Schwartz of Boulder,
Colo., filed an amicus
brief on behalf of Hartford Underwriters Insurance Co. J. Tracy Walker of
McGuire Woods in Richmond, Va., filed an amicus brief on behalf
of Center for Class Action Fairness.
subscribers can access enhanced versions of the opinions and annotated versions
of the statutes cited in this article:
Corp. v. Friend, 130 S. Ct. 1181 (2010)
v. Nestle Holdings, Inc., 666 F.3d 1069 (8th Cir.
U.S.C. § 1453
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