Facts
- Greg Knowles filed a putative class action in Arkansas state court against Standard Fire Insurance Company on behalf of Arkansas homeowners insured under Standard Fire policies.
- The complaint alleged Standard Fire systematically underpaid covered losses by omitting general contractor fees from claim payments.
- Knowles sought to represent hundreds or thousands of policyholders and asserted aggregated class damages “no more than $5 million,” supported by an affidavit stipulating the class would seek less than $5 million.
- Standard Fire removed the case to federal court under the Class Action Fairness Act of 2005 (CAFA), which provides jurisdiction when aggregated class claims exceed $5 million.
- The district court found the aggregated amount in controversy would likely exceed $5 million absent the stipulation, but remanded based on the stipulation.
- The court of appeals declined discretionary review, and the Supreme Court granted certiorari.
Issues
- Whether a named plaintiff in a putative class action may defeat CAFA jurisdiction by stipulating, before class certification, that the class will seek less than $5 million in damages.
Decision
- The Supreme Court vacated the remand order and remanded for further proceedings.
- A named plaintiff’s precertification stipulation limiting class damages below $5 million does not defeat CAFA jurisdiction because it cannot bind absent class members before certification.
- Federal courts must determine the amount in controversy by aggregating the claims of the proposed class members without treating a nonbinding stipulation as controlling.
Legal Principles
- Stipulations bind the party who makes them, but a proposed class representative cannot bind absent class members before a class is certified.
- Under CAFA, the amount in controversy is assessed by aggregating the claims of individual class members; a nonbinding damages cap does not alter the aggregation analysis.
- Jurisdictional analysis at removal turns on the real value of the aggregated claims shown by evidence, not on an unenforceable unilateral limitation that depends on future certification outcomes.
Conclusion
CAFA jurisdiction cannot be avoided through a precertification damages stipulation by the named plaintiff, because such a stipulation is not enforceable against absent class members and therefore does not control the aggregated amount in controversy.