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Standard Fire Insurance Co. v. Knowles

Supreme Court of the United States · Civil Procedure

Civil ProcedureClass Action Fairness ActRemovalAmount in ControversyClass ActionsCAFAamount in controversyclass action

Facts

Knowles brought a proposed class action against Standard Fire Insurance Company in Arkansas state court, alleging the insurer failed to include a general contractor fee in certain homeowner's insurance loss payments. He sought to represent a class of 'hundreds, and possibly thousands' of similarly situated Arkansas policyholders. The complaint and an attached affidavit stipulated that Knowles and the proposed class would seek less than $5 million in aggregate damages. The District Court found that absent the stipulation, the aggregated amount in controversy would have exceeded $5 million, but remanded because of the stipulation.

Issue

Whether, under CAFA, a named plaintiff's stipulation made before class certification that he and the proposed class will seek less than $5 million in total damages can prevent removal by reducing the amount in controversy below the statutory threshold.

Rule

Under CAFA, a federal court determines the amount in controversy by aggregating the claims of all persons falling within the definition of the proposed class. A precertification stipulation limiting damages cannot defeat CAFA jurisdiction unless it is binding, and a proposed class representative cannot legally bind absent class members before the class is certified.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Ohio state court, Maya Patel files a proposed class action against Lakeview Home Assurance, alleging underpayment on roof-loss claims. Her complaint defines a class of more than 1,000 Ohio policyholders and states that "plaintiff and the proposed class will seek no more than $4.9 million total," but the insurer submits evidence showing the aggregated claims otherwise exceed $5 million.

If Lakeview removes under CAFA, how should the federal court treat the damages limitation when deciding the amount in controversy?

Explanation. Under the majority's rule, CAFA requires aggregation of the claims of all persons who fall within the definition of the proposed or certified class. A stipulation matters only if it is binding. Before certification, the named plaintiff cannot legally bind absent class members, so a precertification cap on class recovery must be disregarded when determining whether the amount in controversy exceeds $5 million.