Supreme Court Grants Cert. in Knowles v. Standard Fire Insurance

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Almost lost amidst the holiday weekend news vortex, last Friday the United States Supreme Court agreed to hear a case that is likely to add to the Court’s aggressive remaking of class action jurisprudence. See Knowles v. The Standard Fire Ins. Co., No. 11-04044, Petit. for Writ of Certiorari (available here). In addressing the damages threshold under the Class Action Fairness Act of 2005 (CAFA) for invoking federal jurisdiction, Knowles could result in a substantial change in the division of class actions between state and federal courts. See 28 U.S.C. § 1332(d) (“district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000”). 

The Knowles case addresses whether a named plaintiff can effectively promise to seek less than $5 million in aggregate damages, not just on his own behalf but on behalf of all class members, and thereby prevent the case’s removal under CAFA. In the underlying case, the named plaintiff alleged only state-law claims and filed a stipulation — purportedly binding on all prospective class members — that less than $5 million in aggregate damages would be sought in the action. The Eighth Circuit upheld the plaintiff’s stipulation, even though the defendant was able to show that the amount in controversy, absent the stipulation, would exceed $5 million. The plaintiff accomplished the “legal certainty” requirement by seeking to recover damages for a period shorter than the applicable statute of limitations. Strangely, the defendant’s calculation of the aggregate amount in controversy only exceeded the threshold by a mere $24,150.

Knowles is expected to test the maxim that a plaintiff is the “master” of his or her complaint — all the more with the claims of prospective, not-yet-represented class members also at stake. See, e.g., Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir. 2005) (“[A] removing defendant can’t make the plaintiff ’s claim for him; as master of the case, the plaintiff may limit his claims (either substantive or financial) to keep the amount in controversy below the threshold.”). Existing caselaw appears to affirm the plaintiff’s position that the “master of his/her complaint” principle should be strictly interpreted. Potentially decisive will be how the Court applies the body of authority holding that class counsel functions in something other than a pure stranger relationship vis-à-vis prospective class members, notwithstanding that a formal attorney-client relationship does not attach pre-certification.

The case will be argued sometime this winter, with a decision expected in mid-2013.