With insurance-related class actions on the rise, the requirements pertaining to federal diversity under the Class Action Fairness Act (“CAFA”) are important and may be the subject of dispute in such class action litigation. Previous Alerts have discussed interpretation of jurisdictional requirements under CAFA. See November 2010 Alert (Eleventh Circuit rules that CAFA does not require any one individual plaintiff to meet the minimum amount in controversy set forth in the federal diversity statue); June 2011 Alert (Ninth Circuit rules that CAFA does not allow a party joined to an action as a counterclaim defendant to remove the case to federal court).
The U.S. Supreme Court is poised to rule on another CAFA jurisdictional question. On August 31, 2012, the Supreme Court granted certiorari to determine whether “a named plaintiff [can] defeat a defendant’s right to removal under [CAFA] by filing … a ‘stipulation’ that attempts to limit the damages he ‘seeks’ for the absent putative class members to less than the $5 million threshold for federal jurisdiction” under CAFA. Standard Fire Ins. Co. v. Knowles, 2012 WL 1966025 (Aug. 31, 2012). This marks the first time that the Supreme Court has agreed to review a question arising under CAFA.
Plaintiff filed a class action complaint in Arkansas state court against Standard Fire Insurance Company. The complaint included an affidavit stating that plaintiff would not seek damages for the class in excess of $5 million in the aggregate. Defendant Standard Fire removed the case to an Arkansas federal district court, and plaintiff moved to remand. The district court remanded the case, relying in part on a state statute that allows a plaintiff to file a binding stipulation with respect to the amount in controversy in order to establish subject matter jurisdiction. Standard Fire petitioned the Eighth Circuit for permission to appeal the district court ruling, which was denied. Standard Fire then petitioned the Supreme Court for certiorari, arguing that putative class members are not bound by actions taken by a named plaintiff before class certification. Standard Fire also argued that allowing a named plaintiff to bind absent putative class members to a limitation on damages for jurisdictional purposes not only contravenes the text of the CAFA but also violates the due process rights of those members. In contrast, plaintiff argued that the decision to limit damages to a certain amount is “no different from innumerable other decisions that class representatives inevitably make as masters of their complaints.” The Supreme Court granted certiorari, and will review the Standard Fire case this coming term.