As I mentioned last week, on Monday, the U.S. Supreme Court heard oral argument in Standard Fire Ins. Co. v. Knowles, No. 11-1450. The argument was heated and it is unclear whether the Court will permit circumvention of federal removal jurisdiction under the Class Action Fairness Act (“CAFA”) by stipulating in the complaint that the named plaintiff/putative class representative will not seek damages in excess of $5 million, the requisite jurisdictional amount under the Act.
There was significant concern from the bench that precluding the named plaintiff from stipulating to the amount in controversy limits a plaintiff’s ability to control the lawsuit filed. The Justices seemed to take comfort in CAFA’s provision that allows for later removal should the stipulation be challenged based on subsequent discovery. (Congress exempted class actions from the one-year limitation under the general removal statute.) This may, however, prove to be cold comfort because, as argued by Standard Fire’s counsel, once discovery ensues, the purpose behind early removal has already been thwarted.
At one point during the argument, Chief Justice Roberts characterized Standard Fire’s position as “perverse,” arguing against a limit on damages that may be recovered against it. While there is some truth to his remark, if the Court upholds this practice, then the implications may prove to be far more perverse for all class action litigants.