Stipulation Limiting Damages Cannot Circumvent CAFA Jurisdiction

On March 19, 2013, a unanimous Supreme Court rejected the idea that a stipulation by a class action plaintiff, prior to certification, that he and the class would not seek damages that exceed $5 million in total, removes a case from the scope of The Class Action Fairness Act of 2005 ("CAFA").1 Such a stipulation should have been disregarded by the district court, concluded the Supreme Court, as it cannot tie the hands of the uncertified class.

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 that would allow the total amount to exceed state jurisdictional limits. Defendant also asserted that Plaintiff lacked the authority to bind the other class members by agreeing to a limited recovery.6

In response to the removal, Plaintiff filed a motion to remand, citing his binding stipulation and the fact that as plaintiff, he was the master of his complaint and could limit his...