California Labor &
Employment Law Blog

Mar. 20 2013

Class Action Plaintiff Cannot Avoid Removal Under CAFA by Stipulating to Cap on Damages

Topics: Class Actions, Court Decisions

Yesterday, the United States Supreme Court issued its decision in Standard Fire Ins. Co. v. Knowles, resolving a split of authority among the federal circuit courts as to whether a class action plaintiff filing in state court can prevent the defendant from removing the case to federal court under the Class Action Fairness Act (CAFA) by stipulating that plaintiff and the putative class will not seek damages in excess of $5 million (the jurisdictional minimum for CAFA removal).  Several circuits, including the Ninth Circuit (which governs California's federal courts) had ruled that a class action plaintiff could successfully avoid CAFA removal by signing a stipulation at the beginning of the case agreeing not to seek damages in excess of $5 million.  Other circuits had held that this practice was ineffective and could not be used to avoid removal under CAFA because a named plaintiff cannot bind absent class members in an uncertified class action.  As such, regardless of any stipulation by the named plaintiff to limit damages, a defendant could still remove under CAFA by demonstrating that the parties are diverse and that the amount in controversy is sufficient under CAFA.  Yesterday, in a unanimous decision authored by Justice Breyer, the United States Supreme Court in Knowles agreed with the latter view, thereby eliminating one forum shopping tool used by plaintiffs' class action lawyers to avoid federal court.  The Knowles decision overrules prior bad Ninth Circuit precedent to the contrary in Lowdermilk v. U.S. Bank National Association, which is good news for California employers.  The full opinion of the Supreme Court in Knowles is here.

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For over 20 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor

Robin Largent represents employers, including major food and retail companies, in all types of employment litigation: wrongful termination, retaliation, breach of contract, wage and hour (California Labor Code) and unfair competition. She also regularly counsels and advises California employers on issues of compliance with California and federal employment laws.
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