Supreme Court grants defendant’s petition about federal jurisdiction over state class actions

Today, the Supreme Court granted a petition that asks whether the named plaintiff in a class action filed in state court can prevent removal of the case to federal court under the Class Action Fairness Act of 2005 (CAFA) by filing with the complaint a “stipulation” that states that the class will not damages of less than $5 million—the threshold for federal jurisdiction under CAFA.

In the case before the Court, Standard Fire Insurance Co. v. Knowles, the plaintiff filed in state court and alleges only state-law claims. As described by the federal district court, the plaintiff then filed a stipulation stating “he will not at any time during the pendency of the case ‘seek damages for myself or any other individual class member in excess of $75,000 (inclusive of costs and attorneys’ fees) or seek damages for the class as alleged in the complaint to which this stipulation is attached in excess of $5,000,000 in the aggregate (inclusive of costs and attorneys'’fees).” The defendant/petitioner argues that the actual amount in controversy, absent the stipulation, exceeds $5 million. The defendant’s calculation, which includes actual damages, a statutory penalty, pre-judgment interest, and attorneys’ fees, comes to $5,024,150.

It seems to me that the defendant’s calculation of damages in the case raises its own issues. But putting that aside and assuming that the value of the claims for the class as a whole would exceed $5 million, can a named plaintiff, prior to class certification, promise to limit the class recovery for the purpose of staying out of federal court? The case will be argued in December or January, and we will find out the answer when the Court rules next year.

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