Supreme Court Holds Class Plaintiff Cannot Avoid Removal by Stipulating Damages Under CAFA’s Jurisdictional Threshold

Posted on March 25th, 2013 in Consumer Finance, Courts By BuckleySandler

On March 19, the Supreme Court held that a class action plaintiff’s pre-class certification stipulation that the class would not seek damages exceeding the Class Action Fairness Act’s (CAFA) $5 million amount-in-controversy requirement could not be binding on the class, and therefore, the stipulation would not affect federal jurisdiction under CAFA. Standard Fire Ins. Co. v. Knowles, No. 11-1450, 2013 WL 1104735 (2013). The district court determined that the value of the putative class members’ claims would have exceeded $5 million, but for the named plaintiff’s stipulation limiting damages to less than that amount, and based on that stipulation, remanded the case to state court. On appeal, the Supreme Court explained that while a plaintiff may disclaim his or her own damages, such damages stipulations or any pre-certification stipulation “cannot legally bind members of the proposed class before the class is certified.” The Court thus held that because the class representative “lacked the authority to concede the amount-in-controversy issue for the absent class members,” the district court wrongly concluded that the “precertification stipulation could overcome its finding that the CAFA jurisdictional threshold had been met.” The Court vacated the District Court’s order remanding the case to state court, and remanded the class action for further proceedings in the federal district court.

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