On January 1, 2012, we published “The CAFA Year in (Appellate) Review: A Look Back at the Class Action Fairness Act in the Circuit Courts of Appeals in 2011.” In the 18 months between January 1, 2012 and June 30, 2013, ten circuit courts of appeals rendered notable published decisions on various issues under the Class Action Fairness Act (“CAFA”). The United States Supreme Court weighed in as well, resolving a conflict among the circuits on a recurring issue: whether a plaintiff can avoid federal CAFA jurisdiction by a pleading or stipulation as to the amount of damages at issue.
In fact, the Supreme Court appears to be focused on class actions. It has issued five class action opinions since January 2013. That trend, of which CAFA jurisprudence is a part, looks likely to continue in the coming year. As described later in this article, The Supreme Court has already granted certiorari on one CAFA case for the October 2013 Term.
1. The SCOTUS says federal CAFA jurisdiction cannot be avoided by plaintiff’s stipulation as to damages amount.
In Campbell v. Vitran Express, Inc., 471 Fed. Appx. 646 (9th Cir. 2012), the Ninth Circuit ruled that federal jurisdiction existed where the plaintiff merely pleaded in the complaint that he was seeking less than $5 million but refused to support that pleading with a judicially binding admission. All of the evidence established damages would exceed $5 million if the plaintiff prevailed. The court emphasized that, in assessing the amount in controversy, the court assumes the plaintiff will establish the alleged liability claims in all respects.
Thereafter, the Tenth Circuit held, in Frederick v. Hartford Underwriters Ins. Co., that a proposed class representative’s “attempt to limit damages in the complaint is not dispositive when determining the amount in controversy” for purposes of determining the correctness of removal under CAFA. 683 F.3d 1242, 1247 (10th Cir. 2012). A mere allegation by the plaintiff that the amount in controversy was less than $5 million could not preclude the defendant from proving that the damages might exceed that amount.
On the other hand, in Rolwing v. Nestle Holdings, Inc., the Eighth Circuit held that a party’s affirmative allegation in his complaint that he “and the class” did not seek and would not accept any damages or other relief “in excess of $4,999,999” was a binding stipulation under Missouri law and thus the plaintiff “has shown it is legally impossible for the amount in controversy in this case to meet CAFA’s threshold….” 666 F.3d 1069, 1073 (8th Cir. 2012).
Because of the “divergent views of the lower courts,” the Supreme Court granted a writ of certiorari. See Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1348 (2013). Then, agreeing with the Tenth Circuit, the Supreme Court held that a putative class action plaintiff cannot avoid federal court jurisdiction under CAFA by stipulating not to seek more than $5 million in damages. Id. at 1348-49.
The district court in Knowles found that the “resulting sum” of the claims of all persons within the proposed class “would have exceeded $5 million but for the stipulation” that the plaintiffs would “‘not at any time during this case . . . seek damages for the class’” in excess of that amount, in the aggregate. Id. at 1347 (quoting App. to Pet. for Cert. 75). Nonetheless, adhering to Rolwing, the district court granted remand based on the plaintiffs’ stipulation. Knowles v. Standard Fire Ins. Co., No. 4:110-cv-04044, 2011 WL 6013024, at **4-6 (W.D. Ark. Dec. 2, 2011). Thereafter, the Eighth Circuit denied review of the remand order. Knowles v. Standard Fire Ins. Co., No. 11-8030, 2012 WL 3828845, at *1 (8th Cir. Mar. 1, 2012). As a result of this procedural posture, the Supreme Court was reviewing the substance of the district court’s reasoning, which was, of course, derived from prior Eight Circuit precedent.
Writing through Justice Breyer, the Supreme Court unanimously determined the answer was “simple” – the plaintiff’s stipulation could not determine the jurisdictional issue. “That is because a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.” Standard Fire Ins. Co., 133 S. Ct. at 1349. The Court rejected the plaintiff’s argument that “CAFA . . . permits the federal court to consider only the complaint that the plaintiff has filed,” saying:
We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5 million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective. Id. at 1350.
In conclusion, the Supreme Court reiterated that the stipulation would “tie [the plaintiff’s] hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.” Id. The Court did not consider the plaintiff’s alternative argument that “a stipulation is binding to the extent it limits attorney’s fees,” thereby precluding CAFA jurisdiction, explaining that the “stipulation did not provide for that option.” Id.
2. Other issues are decided with respect to the $5 million jurisdictional threshold.
In addition to holding in Frederick that the plaintiff’s allegations of the amount in controversy were not dispositive of federal CAFA jurisdiction, the Tenth Circuit further held that such jurisdiction did not exist simply because “punitive damages in some unspecified amount may be possible.” 683 F.3d at 1248. The defendant may, however, “point to facts alleged in the complaint, the nature of the claims, or evidence in the record to demonstrate that an award of punitive damages is possible.” Id. Otherwise, punitive damages cannot be considered in determining whether to remand.
The amount in controversy requirement of CAFA was at the bottom of the issue whether the defendant timely removed a proposed class action seeking rescission for over 200 customers of a vehicle financing contract. Kuxhausen v. BMW Financial Services NA LLC, 707 F.3d 1136 (9th Cir. 2013). The original complaint simply said that the amount in controversy exceeded $50,000.00. After an amended complaint was filed to add a new class, the defendant removed the case, claiming its business records showed the amount in controversy of the whole case was more than $10 million, but the district court remanded.
The Ninth Circuit reversed, declining to hold that “materials outside the complaint start the thirty-day clock” for removal. Id. at 1141. “By leaving the window for removal open, it forces plaintiffs to assume the costs associated with their own indeterminate pleadings.” Id. Because nothing on the face of the complaint showed that the amount in controversy satisfied the requirements of CAFA, the removal clock was not triggered.
The court further held that the removal clock did not begin to run when the plaintiff was granted leave to file an amended complaint with a new class along the lines she ultimately did; no such amended complaint had been filed at that time and it might never have been filed. The defendant was not required to take a “blind leap” and file a potentially “baseless notice of removal” before the amended complaint was actually filed. Id. at 1142 (citations omitted).
More recently, the Eleventh Circuit determined that CAFA’s amount in controversy requirements were satisfied and affirmed the denial of a remand. McGee v. Sentinel Offender Service, LLC, 2013 WL 2436658 (11th Cir. June 6, 2013). Because the complaint did not plead a specific amount of damages, the court accepted the defendant’s declaration of the actual fees it had collected from persons who were convicted of certain violations and under the defendant’s supervision. The plaintiff “failed to show or even suggest that these amounts are uncertain, erroneous, or otherwise based on guesswork.” The court also refused to consider whether claims to some of the fees might be barred by the statute of limitations, saying that “courts cannot look past the complaint to the merits of a defense that has not yet been established.”
Finally, at the very end of our period of coverage, the Eighth Circuit waded back into the amount-in-controversy issue again. In Raskas v. Johnson & Johnson, the court confronted a remand order arising from three separate putative class-action suits originally filed in Missouri state court. 2013 WL 3198177 (8th Cir. June 26, 2013).
The plaintiffs alleged that defendants “violated the Missouri Merchandising Practices Act . . . and conspired with unknown third parties to deceive customers into throwing away medications after their expiration dates, knowing that the medications were safe and effective beyond the expiration date.” 2013 WL 3198177, at *1. After defendants removed the class actions, the district court consolidated the plaintiffs’ remand motions for purposes of the hearing. After the hearing, the district court remanded the actions, ruling that defendants had not established that the amount in controversy was met.
On review, the Eighth Circuit vacated the district court’s order. Although plaintiffs argued that defendants’ affidavits, which relied upon their sales figures in Missouri during the relevant time period, were overinclusive...
