Standard Fire Ins. Co. v. Knowles

(Slip Opinion) OCTOBER TERM, 2012 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus STANDARD FIRE INSURANCE CO. v. KNOWLES CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT No. 11–1450. Argued January 7, 2013—Decided March 19, 2013 The Class Action Fairness Act of 2005 (CAFA) gives federal district courts original jurisdiction over class actions in which, among other things, the matter in controversy exceeds $5 million in sum or value, 28 U. S. C. §§1332(d)(2), (5), and provides that to determine whether a matter exceeds that amount the “claims of the individual class members must be aggregated,” §1332(d)(6). When respondent Knowles filed a proposed class action in Arkansas state court against petitioner Standard Fire Insurance Company, he stipulated that he and the class would seek less than $5 million in damages. Pointing to CAFA, petitioner removed the case to the Federal District Court, but it remanded to the state court, concluding that the amount in controversy fell below the CAFA threshold in light of Knowles’ stipu- lation, even though it found that the amount would have fallen above the threshold absent the stipulation. The Eighth Circuit declined to hear petitioner’s appeal. Held: Knowles’ stipulation does not defeat federal jurisdiction under CAFA. Pp. 3−7. (a) Here, the precertification stipulation can tie Knowles’ hands be- cause stipulations are binding on the party who makes them, see Christian Legal Soc. Chapter of Univ. of Cal., Hastings College of Law v. Martinez, 561 U. S. ___. However, the stipulation does not speak for those Knowles purports to represent, for a plaintiff who files a proposed class action cannot legally bind members of the pro- posed class before the class is certified. See Smith v. Bayer Corp., 564 U. S. ___, ___. Because Knowles lacked authority to concede the amount in controversy for absent class members, the District Court wrongly concluded that his stipulation could overcome its finding that the CAFA jurisdictional threshold had been met. Pp. 3−4. 2 STANDARD FIRE INS. CO. v. KNOWLES Syllabus (b) Knowles concedes that federal jurisdiction cannot be based on contingent future events. Yet, because a stipulation must be binding and a named plaintiff cannot bind precertification class members, the amount he stipulated is in effect contingent. CAFA does not forbid a federal court to consider the possibility that a nonbinding, amount- limiting, stipulation may not survive the class certification process. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over sub- stance, and run counter to CAFA’s objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It may be simpler for a federal district court to value the amount in controversy on the basis of a stipulation, but ignoring a nonbinding stipulation merely requires the federal judge to do what she must do in cases with no stipulation: aggregate the individual class members’ claims. While individual plaintiffs may avoid removal to federal court by stipulating to amounts that fall below the federal jurisdic- tional threshold, the key characteristic of such stipulations—missing here—is that they are legally binding on all plaintiffs. Pp. 4−7. Vacated and remanded. BREYER, J., delivered the opinion for a unanimous Court. Cite as: 568 U. S. ____ (2013) 1 Opinion of the Court NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash- ington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press. SUPREME COURT OF THE UNITED STATES _________________ No. 11–1450 _________________ THE STANDARD FIRE INSURANCE COMPANY, PETITIONER v. GREG KNOWLES ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT [March 19, 2013] JUSTICE BREYER delivered the opinion of the Court. The Class Action Fairness Act of 2005 (CAFA) provides that the federal “district courts shall have original juris- diction” over a civil “class action” if, among other things, the “matter in controversy exceeds the sum or value of $5,000,000.” 28 U. S. C. §§1332(d)(2), (5). The statute adds that “to determine whether the matter in controversy exceeds the sum or value of $5,000,000,” the “claims of the individual class members shall be aggregated.” §1332(d)(6). The question presented concerns a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope? In our view, it does not. I In April 2011 respondent, Greg Knowles, filed this proposed class action in an Arkansas state court against petitioner, the Standard Fire Insurance Company. Knowles claimed that, when the company had made cer- 2 STANDARD FIRE INS. CO. v. KNOWLES Opinion of the Court tain homeowner’s insurance loss payments, it had un- lawfully failed to include a general contractor fee. And Knowles sought to certify a class of “hundreds, and pos- sibly thousands” of similarly harmed Arkansas policyhold- ers. App. to Pet. for Cert. 66. In describing the relief sought, the complaint says that the “Plaintiff and Class stipulate they will seek to recover total aggregate damages of less than five million dollars.” Id., at 60. An attached affidavit stipulates that Knowles “will not at any time during this case . . . seek damages for the class . . . in excess of $5,000,000 in the aggregate.” Id., at 75. On May 18, 2011, the company, pointing to CAFA’s jurisdictional provision, removed the case to Federal Dis- trict Court. See 28 U. S. C. §1332(d); §1453. Knowles argued for remand on the ground that the District Court lacked jurisdiction. He claimed that the “sum or value” of the “amount in controversy” fell beneath the $5 million threshold. App. to Pet. for Cert. 2. On the basis of evi- dence presented by the company, the District Court found that that the “sum or value” of the “amount in contro- versy” would, in the absence of the stipulation, have fallen just above the $5 million threshold. Id., at 2, 8. Nonethe- less, in light of Knowles’ stipulation, the court concluded that the amount fell beneath the threshold. The court con- sequently ordered the case remanded to the state court. Id., at 15. The company appealed from the remand order, but the Eighth Circuit declined to hear the appeal. Id., at 1. See 28 U. S. C. §1453(c)(1) (2006 ed., Supp. V) (providing discretion to hear an appeal from a remand order). The company petitioned for a writ of certiorari. And, in light of divergent views in the lower courts, we granted the writ. Compare Frederick v. Hartford Underwriters Ins. Co., 683 F. 3d 1242, 1247 (CA10 2012) (a proposed class-action representative’s “attempt to limit damages in the com- plaint is not dispositive when determining the amount in Cite as: 568 U. S. ____ (2013) 3 Opinion of the Court controversy”); with Rolwing v. Nestle Holdings, Inc., 666 F. 3d 1069, 1072 (CA8 2012) (a precertification “bind- ing stipulation limiting damages sought to an amount not exceeding $5 million can be used to defeat CAFA jurisdiction”). II CAFA provides the federal district courts with “original jurisdiction” to hear a “class action” if the class has more than 100 members, the parties are minimally d