by Brian Wolfman
The Supreme Court held this morning in Standard Fire Insurance v. Knowles that a named plaintiff's stipulation that the plaintiff class is seeking less than the Class Action Fairness Act's minumum jurisdictional amount does not preclude a federal district court from assuming jurisdiction under the Act. Justice Breyer's unanimous opinion is just seven pages. The opinion's first two paragraphs set the stage and sum up the ruling:
The Class Action Fairness Act of 2005 (CAFA) providesthat the federal “district courts shall have original jurisdiction” over a civil “class action” if, among other things,the “matter in controversy exceeds the sum or value of $5,000,000.” 28 U. S. C. §§1332(d)(2), (5). The statute adds that “to determine whether the matter in controversyexceeds the sum or value of $5,000,000,” the “claims of the individual class members shall be aggregated.” §1332(d)(6).
The question presented concerns 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. Does that stipulation remove the case from CAFA’s scope? In our view, it does not.
CAFA was enacted in 2005. Today's ruling is the Supreme Court's first CAFA decision, and it's a win for defendants. Plaintiffs love to choose the forum, and, with many exceptions, the law generally accords plaintiffs their choice of forum. But CAFA sought to give defendants a substantial say over the forum in class actions, allowing them to litigate in many instances in their preferred forum: federal court. Today's decision eliminates a potential tool — the "we-will-seek-no-more-than-$5-million" stipulation — for a class plaintiff seeking a state-court forum.
0 thoughts on “Supreme Court issues its first CAFA decision”
Though I think the ruling in Knowles is neither outrageous or unexpected, I think both of Mr. Goldfarb’s points are wrong. First, the Eighth Circuit — and a number of other federal courts — accepted the idea that the plaintiff could seek less than the jurisdictional amount, and those courts are hardly associated with the antics in Madison County. Second, allowing plaintiffs to keep cases out of federal court by stipulating to less than the jurisdictional amount would not have been tantamount to repeal of the law. It would narrow CAFA’s reach to some degree. But, in most large class cases, plaintiffs would not downsize their recoveries that drastically. In fact, there’s no evidence that plaintiffs’ lawyers were using this technique in a large number of cases. They were using it rarely because in most cases it made sense to seek well in excess of $5 million.
This was a no brainer for the Supremes. Not even a Madison County Court would have allowed this end run around CAFA. A ruling for plaintiffs would have been tantamount to repeal of the law.