Standard Fire Insurance Co. v. Knowles

Case Updates

The Court vacated and remanded the case to the Eighth Circuit holding that the stipulation does not defeat federal jurisdiction under the Class Action Fairness Act. The Court noted that “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. For this reason, we believe the District Court, when following the statute to aggregate the proposed class members' claims, should have ignored that stipulation.”

NCLC urged the U.S. Supreme Court to clarify that a would-be class action representative may not evade federal court jurisdiction over the class action by claiming to waive for herself and absent class members recovery above $5 million. The Class Action Fairness Act of 2005 (CAFA) - which Congress intended to move economically significant class actions out of class action-friendly state courts and into neutral federal courts - allows defendants to transfer class actions with damage claims greater than $5 million into federal courts. In order to evade federal court jurisdiction over the case, the putative class representative purported to stipulate on behalf of the entire class to limit the damages requested to $5 million, the CAFA threshold for federal court jurisdiction, even though the potential damages exceeded that amount.

In its amicus brief on the merits, NCLC argued that district courts must not automatically remand putative class actions to state courts merely because a plaintiff has allegedly stipulated to limit the class's recovery to less than the CAFA threshold. Instead, NCLC argued, district courts must conduct a meaningful analysis to determine with legal certainty whether the stipulation will truly limit the ability of absent class members to recover no more than the stipulated amount, and whether the stipulation is consistent with due process. If allowed to stand, NCLC warned that the lower court's decision would result in an enormous CAFA loophole allowing plaintiffs to drag businesses into class action-friendly state court systems. In addition to encouraging meritless litigation that forces defendants who have done nothing wrong to settle highly dubious claims, the lower court's decision will also force businesses to simultaneously defend against a litany of related class actions in state courts throughout the country.

Click here to view the Chamber's amicus brief.