Standard Fire Insurance Company v. Knowles

PETITIONER: The Standard Life Insurance Co.
RESPONDENT: Greg Knowles
LOCATION: Miller County Circuit Court

DOCKET NO.: 11-1450
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 568 US (2013)
GRANTED: Aug 31, 2012
ARGUED: Jan 07, 2013
DECIDED: Mar 19, 2013

ADVOCATES:
David C. Frederick - for the respondent
Theodore J. Boutrous Jr. - for the petitioner

Facts of the case

On March 10, 2010, Greg Knowles' home was damaged in a hailstorm, and he requested payment from his insurer, Standard Fire Insurance Company, for the full amount of the damage. On April 13, 2011, Knowles filed a class action lawsuit against Standard Fire Insurance Company alleging that he and others had been denied the full payment for damages that their contracts provided.

According to the Class Action Fairness Act of 2005 (CAFA), defendants in a class action lawsuit can move the case to federal court if the potential damages exceed $5 million. In the past, plaintiffs have attempted to avoid federal jurisdiction by stipulating that the potential damages in a given case are worth less than $5 million, and the U.S. Court of Appeals for the Eighth Circuit has allowed such a stipulation.

The defendant, Standard Fire Insurance Company moved the case from the Miller County Circuit Court to the Western District of Arkansas. The district court held that the plaintiffs' stipulation that the potential damages were less than $5 million was sufficient to prove with "legal certainty" that was the case. The U.S. Court of Appeals for the Eighth Circuit affirmed.

Question

Can a plaintiff in a class action case stipulate that the potential damages are less than $5 million, which removes the case from federal jurisdiction?

Media for Standard Fire Insurance Company v. Knowles

Audio Transcription for Oral Argument - January 07, 2013 in Standard Fire Insurance Company v. Knowles

Audio Transcription for Opinion Announcement - March 19, 2013 in Standard Fire Insurance Company v. Knowles

Stephen G. Breyer:

The second case is simpler.

It's called “Standard Fire.”

The Class Action Fairness Act provides that federal “District Court shall have original jurisdiction” of a civil “class-action” if among other things the “matter in controversy exceeds the sum or value of five million dollars.”

The statute adds that to determine whether the matter in controversy exceeds five million dollars, the claims, including the claims of any proposed class member shall be aggregated.

In this case, a plaintiff filed a proposed class-action complaint in Arkansas State Court.

The defendants sought to remove the case to federal court.

The federal court aggregated the claims to those who fit the definition of the purported class.

The Court found that the aggregate amount exceeded five million dollars, but the Court, nonetheless remanded the case to state court because the plaintiff had also filed a stipulation in which he promised the damages would not exceed five million dollars.

This stipulation, the federal court decided, would assure that the sum or value of the claims would still, and nonetheless, fall below the five million dollar threshold.

In our view, however, the stipulation could not defeat otherwise proper federal jurisdiction.

Our reason is a simple one.

The stipulation was not binding.

The class had not yet been certified and a stipulation does not bind proposed class members prior to certification, thus the stipulation cannot assure that the sum or value of the claims will fall below five million dollars.

Our opinion sets forth the authority for these basic legal propositions and it explains our reasoning at somewhat greater length.

Our decision is unanimous.