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Supreme Court to Review Damage Stipulations and the Class Action Fairness Act

Posted on September 24th, 2012

The Supreme Court may make a decision that will greatly affect class action lawsuits and plaintiffs across the nation when it hears the case Standard Fire Insurance v. Knowles, No. 11-1450.  In Knowles, plaintiffs filed a state court class action for breach of contract against the defendant insurance company.  The defendants then removed the case to federal court under the Class Action Fairness Act of 2005 (CAFA), as under the Act, class action lawsuits seeking damages over $5 million give rise to federal jurisdiction.

In support of their remand motion, plaintiffs argued that the written stipulation submitted with their complaint expressly limiting the class’ damages to less than $5 million, avoided removal under CAFA.  The defendants, however, claimed the stipulation to be ineffective, as it would not preclude a verdict over that amount, and that attorney fees are not included in the stipulation.

The U.S. Chamber of Commerce, the largest private big business lobby in the world according to their website, filed an amicus curiae brief on behalf of Standard Fire.  Incidently, the U.S. Chamber of Commerce also heavily lobbied for CAFA under the second Bush administration in 2005 as part of its “tort reform” agenda to curb plaintiff lawsuits against large corporations.

There is currently a split in the circuits regarding whether a damage stipulation will be effective to keep the class action out of the federal courts.  While the Eighth Circuit found in favor of plaintiffs and held the stipulation was effective, the Fifth, Sixth and Seventh Circuit have held that plaintiffs cannot limit damages on behalf of an uncertified class.

This will no doubt be a case for plaintiff trial attorneys to watch this session—it will have a great impact on not just whether to file in federal or state courts, but for the future of class action lawsuits as shaped by CAFA. Our firm offers plaintiff electronic discovery services for class action lawsuits and multidistrict litigation.

ILS – Plaintiff eDiscovery Firm

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