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Supreme Court Agrees to Consider Question of Law Regarding Class-action

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published September 03, 2012

By Author - LawCrossing
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09/03/12

Supreme Court Agrees to Consider Question of Law Regarding Class-action
On Friday, the U.S. Supreme Court agreed to consider the constitutionality of a legal tactic that can influence the capacity of companies to defend against class-action lawsuits. The question of law raised in Standard Fire Insurance Co v. Knowles, U.S. Supreme Court, No. 11-1450 is as follows:

QUESTION PRESENTED:

Last Term, this Court held that in a putative class action “the mere proposal of a class … could not bind persons who were not parties.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant's right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a "stipulation" that attempts to limit the damages he "seeks" for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the "stipulation," exceeds $5 million, is the "stipulation" binding on absent class members so as to destroy federal jurisdiction?
The Supreme Court has granted the request for a review, which would take place on the next term starting October 1 and ending next June.

The real stakes involve whether a company can be forced to defend itself in a state court, rather than in a federal court if a plaintiff’s lawyer has his client sign a binding “stipulation” limiting the size of the case. Currently, in cases where more than $5 million is at stake, companies can use the Class Action Fairness Act of 2005 to move to federal courts from state courts provided other jurisdictional conditions are fulfilled.

In the instant case, Standard Fire Insurance Co was sued in Miller County, Arkansas over underpayment of homeowner claims. The company said that the plaintiff, whose house sustained hail damage, had signed a stipulation limiting damages and binding potential class members, including people his lawyer did not yet represent.

A federal judge in Arkansas holding that the plaintiff had shown a “legal certainty” that damages for all class members could not exceed $5 million approved the stipulation. The decision was upheld later by the 8th U.S. Circuit Court of Appeals.

Standard Life appealed arguing that the lower courts have ignored the 2011 decision of the Supreme Court in Smith v. Bayer Corp. in which it was held that a named plaintiff seeking class-action status cannot bind others who could join the class without court approval.
  1. Legal Jobs
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  6. Supreme Court Agrees to Consider Question of Law Regarding Class-action

published September 03, 2012

By Author - LawCrossing
( 2 votes, average: 3.6 out of 5)
What do you think about this article? Rate it using the stars above and let us know what you think in the comments below.

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