United States: Supreme Court Closes A Loophole For Class Action Plaintiffs Who Want To Avoid Federal Court

On March 19, 2013, the Supreme Court held that a class action plaintiff cannot avoid federal jurisdiction under the Class Action Fairness Act ("CAFA") by stipulating prior to class certification that he and the class will not seek damages exceeding $5 million in aggregate value. See Standard Fire Insurance Company v. Knowles. The central premise of the Court's ruling is that a proposed class representative cannot legally bind the absent members of a putative class before the class is certified. Knowles deals a blow to plaintiff class action lawyers who have tactically employed such stipulations to keep their class actions in friendlier state court fora.

Should a Pre-Certification Stipulation Prevent Federal Jurisdiction Under CAFA?

In April 2011, plaintiff Greg Knowles filed a putative class action complaint in Arkansas state court, asserting state-law claims on behalf of Arkansas residents. Knowles alleged that the Standard Fire Insurance Company had unlawfully failed to include a general contractor fee when the company made certain homeowner's insurance loss payments. Knowles sought to certify a class of hundreds, or possibly thousands, of similarly-harmed Arkansas policyholders. As alleged in the complaint, Knowles and the class sought to recover aggregate damages of less than $5 million. The complaint attached an affidavit from Knowles, further stipulating that he would not, at any time in the course of litigation, seek damages for the putative class exceeding $5 million in the aggregate.

In May 2011, Standard Fire removed the case to the United States District Court for the Western District of Arkansas, relying on CAFA's jurisdictional provisions. Under CAFA, a federal district court has original jurisdiction over a class action if, among other things, the "matter in controversy exceeds the sum or value of $5 million." CAFA also directs that in determining the amount in controversy, "the claims of the individual class members shall be aggregated" from the "persons (named or unnamed) who fall within the definition of the proposed or certified class." Knowles moved to remand the case to the state court, arguing that CAFA did not apply because his stipulation guaranteed that the amount in controversy would fall below the $5 million statutory threshold. In opposition, Standard Fire emphasized that the amount in controversy would indisputably exceed CAFA's threshold, but for the named plaintiff's purported stipulation. The Western District of Arkansas agreed that, on the face of the pleading, the amount in controversy was slightly more than $5 million—but held that under existing Eighth Circuit precedent, Knowles' stipulation foreclosed Standard Fire from demonstrating a higher amount in controversy to meet CAFA's jurisdictional threshold, and remanded the case to the state court. Standard Fire sought to appeal the remand order, but the Eighth Circuit declined to hear the case.

A split among federal circuit courts existed on the question whether a named plaintiff's stipulation to limit class damages is effective to avoid CAFA jurisdiction. Some federal appellate courts have held that a putative class representative's attempts to limit damages in his complaint—or, as with Knowles, in a stipulation—are not dispositive in determining the amount in controversy, while others have held that such efforts defeat CAFA jurisdiction. The Supreme Court agreed to review the Knowles case to resolve that split.

The Supreme Court's Simple Answer Is "No"

The Supreme Court ruled that a named plaintiff may not avoid CAFA removal jurisdiction simply by stipulating that she will not seek damages in excess of CAFA's $5,000,000 jurisdictional threshold. Delivering the unanimous opinion of the Court, Justice Stephen Breyer reasoned that Knowles' proffered stipulation could not bind absent class members that he purported to represent, before the putative class was certified. Timing is critical: for jurisdictional purposes, a federal court's inquiry is limited to examining the case as of the time it was filed in state court. At the time Knowles filed his action in state court, he lacked the authority to concede the amount in controversy issue on behalf of absent class members. Consequently, Knowles' pre-certification stipulation did not bind anyone but himself, and thus could not reduce or limit the aggregate value of the putative class members' claims. The District Court, therefore, erred in concluding that Knowles' pre-certification stipulation trumped where the CAFA jurisdictional threshold had otherwise been satisfied. As the Supreme Court stated succinctly in reversing: "Our reason is a simple one: Stipulations must be binding."

Because stipulations must be binding, and because a named plaintiff cannot bind absent class members prior to certification, the sub-$5 million amount in controversy to which Knowles stipulated was, in effect, contingent. As the Court pointed out, there are a variety of reasons why Knowles' contingent stipulation might not survive the class certification process. For instance, because a class representative bears a fiduciary duty not to "throw away" what could be a major component of the class's recovery, a court might find that Knowles' artificial cap on damages made him an inadequate representative for the class. Or, another class member might intervene and file an amended complaint—with no stipulation—and the court might permit the case to proceed with the new representative.

It follows that, for purposes of determining the amount in controversy, CAFA does not forbid a federal court to consider the very real possibility that a non-binding, class-limiting stipulation may not survive the class certification process. In the Supreme Court's view, treating a nonbinding stipulation as if it were binding would "exalt form over substance" and run directly counter to CAFA's primary objective of ensuring federal court consideration of interstate cases of national importance. Federal courts must ignore nonbinding stipulations about the amount in controversy.

Practical Impact of Knowles

The Court's ruling deals a blow to a growing practice among plaintiff class action lawyers, who had been unilaterally stipulating, often successfully, to limit the class's recovery in order to keep the litigation in state courts, where class certification is sometimes easier to achieve. Federal judges are now directed to ignore pre-certification stipulations concerning damages and, as CAFA requires, simply aggregate claims to determine the amount in controversy. The Court was clear that a putative class representative lacks the authority, pre-certification, to bind absent class members.

Finally, it is worth noting that the Court declined to consider whether pre-certification stipulations limiting attorney's fees can be binding. Unlike proposed class members, attorneys usually are present at the time a case is filed in state court and, at least arguably, can agree to be bound by stipulations limiting their requested fees. Indeed, the logic employed by the Court in Knowles regarding stipulations as to damages might compel the opposite result when it comes to stipulations concerning attorney's fees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.