United States Supreme Court Rejects Attempt to Circumvent CAFA

2013 | Topic: Class Actions

The Supreme Court’s recent decision in Standard Fire Insurance Co. v. Knowles, No. 11-1450, 2013 U.S. LEXIS 2370 (U.S. Mar. 19, 2013) marks a victory for out-of-state corporate defendants facing state court class actions.

The Court addressed whether “a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total” removes the case from the Class Action Fairness Act’s (“CAFA”) scope.  (Id. at *5.)  The Court unanimously ruled that it does not, and its reasoning was based on two straightforward legal principles: 1) stipulations must be binding; and 2) a named plaintiff cannot bind precertification class members.  (Id. at *7-9.)  The Court held that because Knowles’ precertification stipulation did not bind anyone but himself, Knowles did not reduce the value of the putative class members’ claims, and the stipulation therefore had no effect on the amount in controversy.  This ruling bodes well for defendants facing putative class representatives’ attempts to prevent removal under CAFA.