The Cost of Doing Nothing? Injunctive Relief and the Amount in Controversy

by Nelson Brown & Co.
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While plaintiffs in class action cases ordinarily seek monetary damages, many incorporate claims for injunctive or declaratory relief as well. Injunctive and declaratory relief can complicate matters for courts when it comes time to determine whether a case’s amount in controversy exceeds $5 million, as necessary, to support removal under CAFA. This is particularly true when alleged monetary damages alone are insufficient to support removal.

Value of Injunctive and Declaratory Relief in Non-Class Action Cases

For declaratory and injunctive claims in non-class action cases, the U.S. Supreme Court has noted that “it is well established that the amount in controversy is measured by the value of the object of the litigation.” A number of courts have clarified that the value of the sought after injunctive or declaratory relief cannot support removal if it is too speculative or immeasurable. Courts have typically taken one of two approaches in determining the potential value of an injunctive or declaratory claim. Some courts—including the Fifth, Eighth and Eleventh Circuits—apply the “plaintiff viewpoint” rule, which focuses upon the value of the right the plaintiff seeks to enforce. Other jurisdictions (including the First, Seventh, Eighth, Ninth and Tenth Circuits) apply the “either viewpoint” rule. Under the latter approach, courts assess the jurisdictional amount by looking at “either the benefit to the plaintiff or the cost to the defendant of the requested relief.” A number of these jurisdictions have recognized exceptions to this rule for class actions due to the pre-CAFA prohibition on aggregating the claims of multiple plaintiffs in determining the amount in controversy.

Injunctive and Declaratory Relief Under CAFA

According to the Senate Judiciary Committee’s report, removal under CAFA is only proper when the value of the litigation exceeds $5 million from the viewpoint of either party, and “regardless of the type of relief sought.” Some federal courts have therefore held that the “either viewpoint” rule governs injunctive class actions, notwithstanding pre-CAFA case law discussed above. Courts applying the “plaintiff viewpoint” rule have recognized that the value of declaratory or injunctive claims should be aggregated to determine eligibility for removal under CAFA.

South Florida Wellness, Inc. v. Allstate

In its recent decision in South Florida Wellness, Inc. v. Allstate Ins. Co., 745 F.3d 1312 (11th Cir. 2014), the Eleventh Circuit considered whether CAFA establishes federal jurisdiction over a putative class action in which the plaintiffs sought only declaratory relief. The Florida state court complaint specifically sought a declaration that the defendant’s personal injury protection (PIP) insurance policies did not contain language clearly and unambiguously stipulating that PIP payments would be based upon a statutory fee schedule. Under Florida law, insurers that do not base PIP payments upon a statutory fee schedule are instead required to pay 80% of the reasonable costs of medical treatment.

The defendant insurer removed the case to federal court. In support of its contention that the action satisfied CAFA’s amount in controversy requirement, the defendant submitted an employee affidavit stating that if the putative class members received the declaratory judgment, they would be entitled to receive over $68 million in additional PIP benefits. In remanding, the trial court held that the defendant’s argument was “too speculative” because the insurer failed to demonstrate that the declaratory judgment “will necessarily trigger a flow of money to the plaintiffs.”

In reversing the trial court, the Eleventh Circuit noted that although the potential class claimants “might have to take an extra step or two” to recover damages after prevailing on their declaratory claims, it was not true that “determining that the amount in controversy exceeds $5 million is too speculative of a task.” Instead, the court observed that claimants were unlikely to leave the substantial amount of money at issue on the table if they obtained declaratory relief.

The court also stated that this conclusion does not conflict with its determination in a previous case that the amount in controversy requirement could not be satisfied by an injunctive claim that sought to preclude an auto rental company from selling insurance to its customers. While in the previous case the amount in controversy was measured in potential future transactions, the present case concerned transactions that already occurred.

The Eleventh Circuit concluded by emphasizing that federal jurisdiction is not foreclosed by the potential that claimants may not recover the full amount at issue. The relevant issue for removal is the amount in controversy, not the amount that could be recovered.

As South Florida Wellness demonstrates, a defendant can satisfy CAFA’s $5 million amount in controversy showing in a declaratory or injunctive action by presenting a detailed and well-supported analysis of the expected costs associated with the proposed relief. Defendants should keep in mind, however, that this kind of analysis may not be feasible in many cases where the requested relief concerns changes affecting future business practices instead of retroactive relief.

 

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.

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