Judge Richard Posner, writing for a panel of the Seventh Circuit, recently articulated the principles governing removal under the Class Action Fairness Act (CAFA) when the court reversed a district court’s remand of a CAFA-removed class action on the basis of the $5 million amount in controversy requirement. Johnson v. Pushpin Holdings, LLC, No. 14-8006, 2014 U.S. App. LEXIS 6554 (7th Cir. April 9, 2014). The plaintiff alleged violations of Illinois’ consumer fraud statute and common law torts against defendant Pushpin relating to allegedly wrongful debt collection efforts, and in the complaint asserted that the total damages would be “no more” than $3.5 million. The district court ultimately remanded the case based on an argument that most of the putative class members’ claims were barred by the Rooker-Feldman doctrine, but the Seventh Circuit rejected that reasoning and addressed the issue of whether the plaintiff’s attempt to limit the potential damages below the $5 million dollar threshold was adequate to keep the action in state court.
Judge Posner first agreed with the district court’s reiteration of the rule that in order to remand to state court after CAFA removal based on the amount in controversy, it must be a “legal certainty” that the damages will not exceed $5 million (or a “legal impossibility” that they could exceed that figure). Second, Judge Posner pointed out that the court had previously held that Illinois law requires a “binding stipulation or affidavit” to make a damages limit legally binding. Although he could not find such a procedural requirement in Illinois law himself, he observed that “what at least is clear is that an unattested statement in a complaint won’t do.” And third, he indicated that even if a stipulation on a damages limitation were present, the Supreme Court’s recent decision in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 185 L.Ed. 2d 439 (2013) held that such a stipulation cannot limit the amount of potential damages, and thus cannot “affect removability under the Class Action Fairness Act.”
Ultimately, the district court’s decision, based on what the Seventh Circuit held was a misapplication of the Rooker-Feldman doctrine, was reversed and remanded so that the district court could “determine anew whether the amount in controversy reaches the statutory minimum.”