The Master of His Complaint? U.S. Supreme Court Urged to Prevent State Class Action Plaintiffs’ Attempts to Evade Removal Jurisdiction under the Class Action Fairness Act (Part 1 of 3)

          Defendants in state class actions will be interested in this three-part blog series in which we will examine two cases involving the Class Action Fairness Act of 2005 (“CAFA”) that are under consideration by the U.S. Supreme Court: Standard Fire Insurance Co. v. Knowles (S.Ct. No. 11-1450) and Bristol-Myers Squibb Co., et al. v. Anglin (S.Ct. No. 12-147).  Congress passed CAFA, in part, to rectify abuses of the class action process by State and local courts, including demonstrated biases against out-of-state defendants.  See 190 P.L. 2, § 2(a)(4), (b).  CAFA provides that a defendant may remove a state class action case to federal court if there is minimal diversity among the parties, 100 or more plaintiffs in the class, and the matter in controversy exceeds $5,000,000, exclusive of interest and costs.  The provision for removal under CAFA extends to mass actions, which are civil actions in which claims of 100 or more persons are proposed to be tried jointly on the basis that the plaintiffs' claims involve common questions of law or fact, although the action is not fashioned as a representative class action. 

          Claiming to be the masters of their complaints, plaintiffs seeking to keep their class actions and mass actions in state court have employed various tactics to defeat CAFA jurisdiction, including filing stipulations with their class action complaints stating that they will seek less than $5,000,000 in damages or splitting the claims of hundreds of plaintiffs into multiple, identical complaints to ensure that no individual complaint reflects a mass action in which plaintiffs are seeking to try claims of 100 or more persons jointly.  In retort, defendants have called into question whether plaintiffs should be permitted to use such “procedural machinations to evade CAFA removal jurisdiction”?   See, e.g., Bristol-Myers, S.Ct. No. 12-147, 2012 U.S. Briefs 49447, at n.3 (Sept. 11, 2012).  The Supreme Court has granted certiorari to review the Knowles case which came out of the Eighth Circuit with an interesting and exceptional disposition worthy of discussion in its own right.  The Court is still considering the Petition for Writ of Certiorari in the Bristol-Myers case which originated in the Seventh Circuit. 

The Exceptional Disposition of Knowles: Certiorari Review But No Underlying Circuit Court Opinion

          At the heart of Knowles is whether a plaintiff has the ability to bind absent putative class members prior to class certification via a stipulation to limit the aggregate amount of damages sought by the class, even though the actual aggregate damages have been proven to be more.  Yet, Knowles also presents an interesting question regarding the purposes of certiorari review, given the procedural disposition of the case.  One would presume that the Supreme Court has granted certiorari to review the decision of the Eighth Circuit Court of Appeals in Knowles.  But, that is not the case.  The Supreme Court will be reviewing the decision of the United States District Court for the Western District of Arkansas, after the Eighth Circuit refused to grant an interlocutory appeal of the District Court’s ruling. 

          While the Supreme Court has articulated that certiorari review is meant to resolve disagreement among the courts of appeals on a question of national importance, there is no underlying circuit court of opinion to review in Knowles. The Plaintiff-Appellee in Knowles aggressively attacked the petition for certiorari as improper due to the disposition of the case.  So, why was certiorari granted in Knowles?  Interestingly, an Eight Circuit decision was issued in another matter which addressed the same question in Knowles - Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069 (8th Cir. 2012).  According to the Knowles Petitioner’s briefs, the Rolwing decision was issued by the Eighth Circuit after the District Court’s decision in Knowles, after the Eighth Circuit denied permission to appeal the Knowles decision, and after the Knowles defendant filed a petition for rehearing en banc.  The Eighth Circuit denied the petition for rehearing en banc in Knowles, after issuing the Rolwing decision.  The defendant in Rolwing did not seek certiorari review of the case.  The Rolwing decision is addressed at length in the Supreme Court briefs of the Knowles Appellant and Appellee, and now conflicts with a Tenth Circuit Court of Appeals decision - Frederick v. Hartford Underwriters Ins. Co., 2012 WL 2443100 (10th Cir. June 28, 2012) - which was decided after the Knowles Cert. Petition was filed.

          While the Plaintiff-Appellee urged that certiorari review is improper at this stage in the litigation and the questions presented are not of consequence, Knowles will be heard by the High Court.  That the Supreme Court has granted certiorari, given the disposition of Knowles, is an indication that the case does present a question of national importance.  Knowles is worthy of watching and we will keep you informed.

The Heart of the Matter: What Comes Next?

          In the second part of this series, we will delve deeper into Knowles and the tensions between a class action plaintiff’s freedom to craft a lawsuit in order to control the forum in which it is heard and the interests in protecting absent class members and class action defendants served by CAFA. 

          In the final part of this series we will examine Bristol-Myers and the intricacies surrounding federal jurisdiction over state mass actions under CAFA

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