19 March 2013

Law in Plain English: The Standard Fire Insurance Co. v. Knowles

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Knowles filed a proposed class action lawsuit in an Arkansas state court and agreed (in legal terms, this is called a stipulation) that he (and the class) would seek less than $5 million in damages. This amount is important because the Class Action Fairness Act of 2005 (CAFA) gives federal courts jurisdiction over class actions where the amount exceeds $5 million. Knowles wanted to keep the case in state court because some state courts, particularly in Arkansas, are more favorable for class actions than federal courts. CAFA was passed to address this problem, and Knowles was trying to find a way around CAFA. The Standard Fire Insurance Co. removed the case to federal court, but the federal district court remanded it back to Arkansas state court because of the amount in controversy. Standard Fire appealed to the Eighth Circuit, who refused to hear the case. The question before the Court was whether Knowles's stipulation was actually binding on other members of the proposed class. In a unanimous opinion, the Supreme Court ruled that this was not the case; Knowles's stipulation could not bind members of a proposed class action before the class was certified. The practical impact of this decision is that class action plaintiffs won't be able to avoid federal jurisdiction by stipulating amounts in controversy less than the amount specified in CAFA before the class is certified. This ruling gives additional teeth to CAFA in allowing defendants to remove class actions to federal courts.
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