Legal Alert: Supreme Court Holds That Damages Stipulation Cannot Bind Class and Defeat Federal Jurisdiction

The Supreme Court unanimously held yesterday in Standard Fire Ins. Co. v. Knowles , 2013 WL 1104735, that a damages - limiting stipulation by the named plaintiff in a putative class action is not binding on absent class members before class certification and therefore cannot defeat removal of a class action under the Class Action Fairness Act of 2005 (CAFA).

Knowles is a proposed class action filed in an Arkansas state court claiming that Standard Fire Insurance Company unlawfully failed to include general contractor fees (for overhead and profit) when it settled homeowners’ insurance claims. In the complaint, and in an attached affidavit, the named plaintiff stipulated that he “will not at any time during this case . . . seek damages for the class . . . in excess of $5 million in the aggregate.” (Slip op. at 2.) The district court concluded that the stipulation was enforceable and binding on the class and defeated CAFA jurisdiction. The Eighth Circuit declined to hear an interlocutory appeal under the CAFA procedure.

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