Standard Fire Ins. Co. v. Knowles

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Over the past few years, a number of plaintiffs’ lawyers have attempted—with some success—to circumvent the “mass action” provisions in the Class Action Fairness Act of 2005 (“CAFA”), which allow defendants to remove to federal court certain cases raising “claims of 100 or more persons that are proposed to be tried jointly.” 28 U.S.C. …

This morning I attended oral arguments at the Supreme Court in Dart Cherokee Basin Operating Co. v. Owens.  The issue presented in Dart Cherokee is whether a defendant who wishes to remove a case to federal court under the Class Action Fairness Act (CAFA) is required to submit evidence supporting federal jurisdiction along with…

We’ve blogged before about plaintiffs’ attempts to circumvent the “mass action” provisions in the Class Action Fairness Act of 2005 (“CAFA”), which  allow defendants to remove to federal court certain cases raising “claims of 100 or more persons that are proposed to be tried jointly.” 28 U.S.C. § 1332(d)(11)(B)(i). To evade removal, creative plaintiffs’ lawyers have subdivided their mass actions into parallel cases of fewer than 100 persons each. Some courts have gone along with the charade. See, e.g., Scimone v. Carnival Corp., No. 13-12291 (11th Cir. July 1, 2013); Abrahamsen v. ConocoPhillips, Co., 503 F. App’x 157, 160 (3d Cir. 2012); Anderson v. Bayer Corp., 610 F.3d 390, 392 (7th Cir. 2010); Tanoh v. Dow Chem. Co., 561 F.3d 945, 950-51 (9th Cir. 2009).

The fight over removal in these gerrymandered mass actions often boils down to one key question:  whether the parallel cases are “proposed to be tried jointly.”  If so, CAFA permits removal.

Recognizing this point, the plaintiffs in these cases frequently remain coy about—or outright deny—an intent to try the parallel mass actions jointly.  But they often go right up to the edge, urging the same state trial court to resolve threshold issues in the cases together—or even simply to consolidate the state-court actions outright. Then, these plaintiffs say, CAFA’s mass-action removal provision doesn’t apply because they say that they have had the claims “consolidated or coordinated solely for pretrial proceedings.” 28 U.S.C. § 1332(d)(11)(B)(ii)(IV) (emphasis added).

But not all courts are falling for this effort to elevate form over substance.

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Earlier today, the Supreme Court issued a unanimous decision in Standard Fire Insurance Co. v. Knowles, No. 11-1450, that should make it a lot harder for plaintiffs and their counsel to avoid federal-court jurisdiction over significant class actions.

The Class Action Fairness Act of 2005 authorizes the removal of class actions to federal court…

The Fair Debt Collection Practices Act (FDCPA), which regulates the conduct of debt collectors, authorizes plaintiffs suing over violations to recover statutory damages of up to $1,000. Because these amounts can rapidly add up to exorbitant numbers in a class action for very minor, technical violations, Congress capped the total amount of statutory damages that…

This morning I attended the oral argument before the Supreme Court in Standard Fire Insurance Co. v. Knowles, the first major case in which the Court will address the provisions of the Class Action Fairness Act of 2005 (CAFA).   For class-action lawyers on both sides, this case has been seven years in the making.   From where I sat, today’s arguments did not disappoint.

In a nutshell, the issue in Standard Fire is whether a named plaintiff may avoid removal to federal court of a putative class action that would otherwise satisfy CAFA’s $5 million amount-in-controversy requirement by stipulating that he or she does not seek to recover more than $5 million.  If the stipulation tactic were permissible, plaintiffs’ lawyers could avoid removal of class actions to federal court with ease.  That would allow a widespread evasion of CAFA, which was enacted in response to the massive abuse of the class-action device by a number of “magnet” state courts that were (and remain) hostile to out-of-state defendants.  (For a more extensive preview of the case, please see our earlier post.)

The oral argument (transcript (pdf)) focused on two disputed questions.

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According to an interesting student note that will soon be published in the Stanford Law Review, the answer to both questions is “yes.” Specifically, the would-be class counsel must “protect[] the substantive legal rights of putative class members . . . from prejudice” “resulting from the actions of class counsel.”

The implications for defendants…

Today, Marcia Coyle of the National Law Journal and Daniel Fisher of Forbes each published previews of the just-commenced Supreme Court term that mention the three cases scheduled for argument that involve issues near and dear to the hearts of class-action practitioners: Standard Fire Insurance Co. v. Knowles, Comcast Corp. v. Behrend, and…

The first question my colleagues and I ask when a client has been sued in a class action in state court is whether the case can be removed to federal court. Often, the only ticket out of state court is the Class Action Fairness Act of 2005 (“CAFA”), which authorizes removal of certain mass and…