Standard Fire Insurance Co. v. Knowles

Federal court jurisdiction under the Class Action Fairness Act of 2005 is not determined based on a stipulation made prior to class-action certification that the plaintiffs will not seek damages above the statutory threshold because the stipulation is not binding on nonparty members.

Respondent filed a proposed class action against Petitioner in state court, alleging that Petitioner failed to include certain fees when making homeowner's loss insurance payments. Respondent stipulated that the class would not seek damages over five million dollars in the aggregate. Petitioner removed the case to Federal District Court based on the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. §§1332(d), which provides district courts with "original jurisdiction" for civil actions “in which the matter in controversy exceeds” five million dollars. Respondent argued the District Court lacked jurisdiction because the amount in controversy requirement was not met, and the court remanded the case finding the amount failed to meet the threshold due to the stipulation.

The Court reversed and remanded to the district court. According to the Court, a plaintiff's stipulation limiting the amount of damages class members will seek that is made prior to class certification is not to be considered in determining federal court jurisdiction under CAFA because “a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”