Supreme Court Closes a Loophole for Class Action Plaintiffs Who Want to Avoid Federal Court

On March 19, 2013, the Supreme Court held that a class action plaintiff cannot avoid federal jurisdiction under the Class Action Fairness Act (“CAFA”) by stipulating prior to class certification that he and the class will not seek damages exceeding $5 million in aggregate value. See Standard Fire Insurance Company v. Knowles. The central premise of the Court’s ruling is that a proposed class representative cannot legally bind the absent members of a putative class before the class is certified. Knowles deals a blow to plaintiff class action lawyers who have tactically employed such stipulations to keep their class actions in friendlier state court fora.

Should a Pre-Certification Stipulation Prevent Federal Jurisdiction Under CAFA?

In April 2011, plaintiff Greg Knowles filed a putative class action complaint in Arkansas state court, asserting state-law claims on behalf of Arkansas residents. Knowles alleged that the Standard Fire Insurance Company had unlawfully failed to include a general contractor fee when the company made certain homeowner’s insurance loss payments. Knowles sought to certify a class of hundreds, or possibly thousands, of similarly-harmed Arkansas policyholders. As alleged in the complaint, Knowles and the class sought to recover aggregate damages of less than $5 million. The complaint attached an affidavit from Knowles, further stipulating that he would not, at any time in the course of litigation, seek damages for the putative class exceeding $5 million in the aggregate.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Topics:  Amount in Controversy, CAFA, Class Action, Damages, Jurisdiction, SCOTUS

Published In: Civil Procedure Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Venable LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »