On March 19, 2013, the United States Supreme Court issued its long awaited decision in Standard Fire Insurance v. Knowles rejecting class action plaintiffs’ attempt to manipulate the jurisdictional amount in controversy in order to avoid federal jurisdiction. At issue is the “amount in controversy” requirement of the Class Action Fairness Act (“CAFA”), which provides that district courts shall have jurisdiction over a civil class action if “the matter in controversy exceeds the sum or value of $5,000,000.” 28 U.S.C. §§ 1332(d)(2), (5). In order to determine whether the amount in controversy exceeds $5 million, “the claims of the individual class members shall be aggregated.” § 1332(d)(6).
Knowles filed his class action in Arkansas state court, along with a stipulation stating that he would not seek damages for the class in excess of $5 million. The Defendant removed the action to Federal court under CAFA; Knowles sought remand based on his stipulation. The District Court remanded the action to state court, because plaintiff’s stipulation put the amount in controversy below the $5 million jurisdictional threshold under CAFA.
The Supreme Court vacated the District Court judgment, holding that the stipulation was only binding as to Knowles, who could agree to limit the amount of damages he was seeking, but could not bind other class members before a class is certified. The District Court should have ignored the stipulation and instead undertaken to determine whether, in the aggregate, individual class members’ claims meet the $5 million jurisdictional requirement. “To hold otherwise,” the Court concluded, “would … run directly counter to CAFA’s primary objective: ensuring ‘Federal court consideration of interstate cases of national importance.’” This decision is significant as it should put an end to plaintiffs’ efforts to avoid Federal courts by artificially limiting the amount of damages sought to total amounts less than the requisite amount in controversy under CAFA.