U.S. Supreme Court

SCOTUS: Class action plaintiff can't avoid federal court by stipulating to amount in controversy


Federal courts aren’t bound by plaintiffs in proposed class actions who try to keep cases in state court by stipulating to the amount in controversy, the U.S. Supreme Court has ruled.

The court ruled on Tuesday in a unanimous opinion (PDF) by Justice Stephen G. Breyer. Lead plaintiffs don’t have the authority to bind others prior to class certification and their stipulations don’t make “a critical difference,” Breyer said.

At issue were provisions in the Class Action Fairness Act giving federal courts original jurisdiction in class actions when the aggregated amount in controversy exceeds $5 million and there are more than 100 class members.

Lead plaintiff Greg Knowles had filed his suit in Miller County, Ark., and stipulated that the amount in controversy was less than $5 million. His would-be class action against Standard Fire Insurance Co. had alleged the insurer underpaid claims for hail damage. According to the complaint, “hundreds, and possibly thousands” of people in Arkansas had similar claims.

A federal court considering Knowles’ bid to send the case back to state court had found that the amount in controversy would have exceeded $5 million, absent the stipulation.

Breyer said Knowles’ stipulation does not remove the case from the scope of the federal class-action law. “The stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class,” Breyer wrote. “For this reason, we believe the district court, when following the statute to aggregate the proposed class members’ claims, should have ignored that stipulation.”

The case is Standard Fire Insurance Co v. Knowles.

Prior coverage:

ABAJournal.com: “Supreme Court to Hear Class Action Case; Dispute Is over Removal to Federal Court”

ABA Journal: “A Touch of Class: Certification, Says One Brief, ‘Is the Ballgame’ “

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