STANDARD FIRE INSURANCE COMPANY v. KNOWLES

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Case Basics
Docket No. 
11-1450
Petitioner 
The Standard Life Insurance Co.
Respondent 
Greg Knowles
Decided By 
Advocates
(for the petitioner)
(for the respondent)
Term:
Facts of the Case 

According to the Class Action Fairness Act of 2005 (CAFA), defendants in a class action lawsuit can move the case to federal court if the potential damages exceed $5 million. In the past, plaintiffs have attempted to avoid federal jurisdiction by stipulating that the potential damages in a given case are worth less than $5 million, and the U.S. Court of Appeals for the Eighth Circuit has allowed such a stipulation.

The defendant, Standard Fire Insurance Company moved the case from the Miller County Circuit Court to the Western District of Arkansas. The district court held that the plaintiffs’ stipulation that the potential damages were less than $5 million was sufficient to prove with “legal certainty” that was the case. The U.S. Court of Appeals for the Eighth Circuit affirmed.

Question 

Can a plaintiff in a class action case stipulate that the potential damages are less than $5 million, which removes the case from federal jurisdiction?

Conclusion 
Decision: 9 votes for Standard Fire Insurance Company, 0 vote(s) against
Legal provision: Class Action Fairness Act of 2005

No. Justice Stephen G. Breyer, writing for a unanimous court, vacated the lower court decision and remanded. To defeat jurisdiction the stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before the class is certified. Knowles only has the authority to bind himself to a stipulated claim amount. Federal jurisdiction cannot be based on contingent future events, and the non-binding stipulation may not survive the certification process. For example, the complaint may clearly show an amount in controversy over $5 million, Knowles may be an inadequate class representative, or another party might intervene with an amended complaint. Individual plaintiffs may control jurisdiction through stipulation, but a named plaintiff in a not yet certified class action cannot.

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STANDARD FIRE INSURANCE COMPANY v. KNOWLES. The Oyez Project at IIT Chicago-Kent College of Law. 01 September 2014. <http://www.oyez.org/cases/2010-2019/2012/2012_11_1450>.
STANDARD FIRE INSURANCE COMPANY v. KNOWLES, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2010-2019/2012/2012_11_1450 (last visited September 1, 2014).
"STANDARD FIRE INSURANCE COMPANY v. KNOWLES," The Oyez Project at IIT Chicago-Kent College of Law, accessed September 1, 2014, http://www.oyez.org/cases/2010-2019/2012/2012_11_1450.