Over the years, the plaintiffs’ bar has used a wide variety of stratagems to try to prevent defendants from removing class actions to federal court. We’ve previously blogged about several of them. A recent Eleventh Circuit decision addresses yet another page from the plaintiffs’ playbook.
Defendants often can remove significant class actions under the Class Action Fairness Act (CAFA) when there is at least minimal diversity of parties and the amount in controversy exceeds $5 million. In South Florida Wellness, Inc. v. Allstate Insurance Co. (pdf), the plaintiffs tried to prevent the defendant from satisfying CAFA’s $5 million amount-in-controversy requirement by suing for only a classwide declaratory judgment. The plaintiffs’ theory of liability apparently would have put roughly $68 million at stake—the difference between the formula for reimbursement that the defendant insurance company had used and the formula the plaintiffs alleged should have been used. But the plaintiffs argued that because they weren’t directly seeking money damages, it would be “too speculative” to value the declaratory relief at issue as exceeding CAFA’s $5 million threshold; not every class member necessarily would capitalize on the declaratory judgment, the plaintiffs contended.
The district court agreed with the plaintiffs’ argument and remanded the case. But the Eleventh Circuit reversed, holding that the value of the declaratory judgment sought could be calculated concretely enough. The appropriate touchstone for that value is “how much will be put at issue,” not the expected value of the plaintiff’s claims “discounted by the chance[s] that the plaintiffs will lose on the merits,” that “the putative class will not be certified, or that some of the unnamed class members will opt out.” “[F]or amount in controversy purposes,” the Eleventh Circuit reaffirmed, “the value of injunctive or declaratory relief is the value of the object of the litigation measured from the plaintiff’s perspective.”
The defendant insurance company had offered unrebutted evidence that the difference between the amount in claims that it in fact had paid to class members and the amount that class members could receive if the theory outlined in plaintiffs’ complaint was entirely successful was $68 million. That calculation, the Eleventh Circuit held, satisfied CAFA’s $5 million amount-in-controversy requirement. In so holding, the Eleventh Circuit rejected the plaintiffs’ contention that the additional steps needed to convert the declaratory judgment into dollars in each class member’s pockets—i.e., mailing a demand letter and potentially filing a lawsuit supported by proof on some elements—made the value of the declaratory judgment too speculative for removal purposes.
The Eleventh Circuit’s decision in South Florida Wellness should be helpful to businesses trying to remove class actions that seek only declaratory relief. In fact, the court’s reminder that CAFA’s amount-in-controversy requirement looks to the maximum potential value of the claims rather than the discounted expected value following litigation should be helpful in explaining why removal is proper under CAFA in cases seeking all kinds of relief.