WASHINGTON, D.C. - (Mealey's) A class representative's
stipulation that damages being sought were less than $5 million does not defeat
federal jurisdiction under the Class Action Fairness Act (CAFA), a unanimous
U.S. Supreme Court ruled March 19 (The Standard Fire Insurance Company v.
Greg Knowles, et al., No. 11-1450, U.S. Sup.; See 1/18/13, Page 4) (lexis.com
subscribers may access Supreme Court briefs and the opinion for this case).
"Our reason is a simple one: Stipulations must be
binding. . . . The stipulation [plaintiff Greg] Knowles proffered
to the District Court, however, does not speak for those he purports to
represent. . . . Because his precertification stipulation does not
bind anyone but himself, Knowles has not reduced the value of the putative
class members' claims. For jurisdictional purposes, our inquiry is
limited to examining the case 'as of the time it was filed in state court,' Wisconsin
Dept. of Corrections v. Schacht, 524 U.S. 381, 390 (1998). At that
point, Knowles lacked the authority to concede the amount-in-controversy issue
for the absent class members. The Federal District Court, therefore,
wrongly concluded that Knowles' precertification stipulation could overcome its
finding that the CAFA jurisdictional threshold had been met," Justice Stephen
G. Breyer wrote for the court.
On April 13, 2011, Knowles filed a putative class
complaint in the Miller County, Ark., Circuit Court against Standard Fire
Insurance Co. Knowles alleged breach of contract because of 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 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 before removal that
limited his and the class's recovery to within state jurisdictional limits.
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 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. Oral arguments were held Jan. 7.
Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher
in Los Angeles and Wystan M. Ackerman of
Robinson & Cole in Hartford,
Conn., represent Standard
Fire. David C. 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
curiae 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,
Nebraska, North Dakota,
South Dakota, Texas,
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
Jeffrey A. Lamken of MoloLamken in Washington filed an amicus brief on
behalf of the U.S. Chamber of Commerce 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.
Mealey's is now available in eBook
For more information about LexisNexis
products and solutions connect with us through our corporate site.