Supreme Court To Consider Impact Of Stipulation Limiting Damages On CAFA Jurisdiction

On August 31, 2012, the Supreme Court granted a petition for a writ of certiorari in the Standard Fire Insurance Co. v. Knowles case ("Knowles"),1 where the Court may interpret the boundaries of the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1332(d). Specifically, the Court will consider whether a named plaintiff in a putative class action may limit by stipulation the damages sought by the putative class to stay under the CAFA threshold, enabling the plaintiff to defeat removal and stay in state court. This case raises a number of significant issues including the lasting impact of Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), a previous Supreme Court case limiting a named plaintiff's ability to bind putative class members in the context of a prior denial of class certification, and the application of CAFA.

The Knowles case was brought as a putative class action in Arkansas state court against The Standard Fire Insurance Company ("Defendant"). The plaintiff, Greg Knowles ("Plaintiff"), claimed that Defendant breached a contract due to its underpayment of insurance claims. Plaintiff had requested payment for hail damage to his home under his policy but was not fully reimbursed.2 He sought relief for himself and others similarly situated.

In the class action complaint, Plaintiff stated that neither his nor any individual class member's claim was equal to or greater than seventy-five thousand dollars, inclusive of costs and attorneys fees, individually or on behalf of any class member, and that the total aggregate damages of the plaintiff and all class members, inclusive of costs and attorneys fees, were less than five million dollars.3 Plaintiff also stated that he and the class stipulated they would seek to recover total aggregate damages of less than five million dollars.4 Exhibit A to the complaint was a "Sworn and Binding Stipulation," signed by Plaintiff, affirming he would not seek at any time during the pendency of the case damages for himself or any other class member in excess of seventy-five thousand dollars or seek damages as a class in excess of five million dollars (inclusive of costs and fees).5

Defendant removed the case to federal court arguing that Plaintiff had fraudulently framed the class definition to limit recovery to two years (rather than five years) under the applicable statute of limitations, and that Plaintiff's counsel had failed to sign a stipulation that they would not seek or accept attorneys fees...