Being a fan of Les Miz, I was pleasantly surprised by Sacha Baron Cohen’s performance of the great musical number “Master of the House” in the recent film adaptation.  It’s probably my second favorite version after Lawrence Tierney’s memorable rendition in the classic Seinfeld episode “The Jacket.”  Now, the Supreme Court will soon decide which party, for purposes of removal will be considered the Master of the House, or rather the Complaint, for purposes of CAFA removal.

In Standard Fire Insurance Co. v. Knowles, the Court will hear its first case under the  Class Action Fairness Act (“CAFA”), the 2005 statute which conferred original federal jurisdiction to any class action where minimal diversity existed at the amount-in-controversy exceeds $5 million.  At issue in Knowles is whether the named plaintiff, as a putative class representative, can stave off a defendant’s right to remove under CAFA by filing any accompanying “stipulation” that limits the damages sought, so as to bind absent class members and to ensure that the $5 million threshold for federal jurisdiction will not be reached, even in cases where the claim(s) have the potential to exceed the jurisdictional minimum.

This issue is particularly relevant to practitioners in the area because Knowles arises out of the 8th Circuit and the authority relied upon by the court below deals with the use of such stipulations under Missouri law. In Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069 (8th Cir. 2012), the Eighth Circuit affirmed a remand order based on a similar stipulation purporting to limit class damages to less than $5 million, even though the defendant submitted evidence that the potential total of the putative class’ claims would exceed CAFA’s jurisdictional threshold. Id. at 1070–72.  The Eighth Circuit held that the use of such stipulations would not later prejudice the defendants because they were independently enforceable under in Missouri law based on the doctrine of judicial estoppel.  Id. at 1072.

The Supreme Court’s ruling in Knowles will no doubt be significant for class action practitioners on both sides of the aisles but the unintended consequences of a ruling favoring either plaintiffs or defendants are obvious.  For example, if the Court finds the case to be removable, it will in large part abrogate the traditional rule that Plaintiffs are  deemed to be the “Master” of their own complaint, seemingly taking away their ability to control who to sue, what claims to bring, or the type of relief sought (i.e., damages versus injunctive relief).

But, as pointed out by commentators such as the SCOTUS blog, the plain language of CAFA may not be on the defendant’s side, and courts typically construe removal statutes fairly strictly; Congress could have prohibited the use of such stipulations to avoid federal jurisdiction, but chose not to do so.  And the Court may not willing to expand CAFA even further when the statute already expands federal jurisdiction to class actions beyond traditional diversity boundaries (for example, removing the one-year limit on removal, minimal diversity, consent of other defendants not needed).

In any event, this is a case that we will be watching very closely.  As always, an excellent breakdown of the case can be found at SCOTUS blog here.

 

 

 

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