Class Actions -- 2013



Standard Fire Ins. Co. v. Knowles   (U.S. Supreme Court)

Procedure for removal of class action cases to federal court

The Class Action Fairness Act of 2005 (CAFA) was designed to reduce abuse by allowing federal courts to hear class action cases of national importance. In this case, the plaintiffs promised they would not seek damages in excess of the $5,000,000 amount that is required for a case to be heard by a federal court, and the federal court allowed the case to be heard in state court instead. The lower court held that the plaintiff's voluntary limit on damages was binding on all members of the class, even though that plaintiff had never been authorized to represent the class as a whole.

On March 19, 2013, the Supreme Court decided that the single plaintiff's stipulation limiting the damages sought is not binding on the class as a whole, and that the case could be moved to federal court. This is a favorable outcome to prevent class representatives from artificially limiting the amount in controversy as a way to avoid federal jurisdiction.

While the parties argued over this point, the NAM filed a unique amicus brief drawing the Court's attention to the express language of the removal provision of CAFA, which allows federal courts broader authority to remove a case than to exercise jurisdiction over a case first filed there. If a case is filed in federal court, CAFA includes the $5,000,000 requirement, but that limitation is not included in the statute authorizing a case to be transferred from state to federal court. We argued that lower courts have incorrectly assumed that the criteria for bringing a class action in federal court should be transposed onto discussions of removal jurisdiction. Those courts have not explained why they have abandoned the express language of the statute to read into it provisions that do not apply when cases are being removed from state court.

In its decision, the Court did not mention the NAM's argument, but did not foreclose it either. If a court should agree with it, the argument will make it much easier for defendant manufacturers to move class actions from state to federal court, thus accomplishing the goals of Congress when it enacted CAFA.


Related Documents:
NAM brief  (October 29, 2012)