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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
jurisdiction” 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 certain 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 policyholders.
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 District
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 evidence 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.
Nonetheless, 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 complaint is not dispositive when
determining the amount in controversy”); with
Rolwing v.
Nestle Holdings, Inc., 666 F.3d 1069, 1072 (CA8 2012) (a
precertification “binding 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 diverse, and the
“matter in controversy exceeds the sum or value of $5,000,000.” 28
U. S. C. §§1332(d)(2), (5)(B). To “determine whether the
matter in controversy” exceeds that sum, “the claims of the
individual class members shall be aggregated.” §1332(d)(6). And
those “class members” include “persons (named or unnamed) who fall
within the definition of the
proposed or certified class.”
§1332(d) (1)(D) (emphasis added).
As applied here, the statute tells the District
Court to determine whether it has jurisdiction by adding up the
value of the claim of each person who falls within the definition
of Knowles’ proposed class and determine whether the resulting sum
exceeds $5 million. If so, there is jurisdiction and the court may
proceed with the case. The District Court in this case found that
resulting sum would have exceeded $5 million
but for the
stipulation. And we must decide whether the stipulation makes a
critical difference.
In our view, it does not. Our reason is a simple
one: Stipulations must be binding. See 9 J. Wigmore, Evidence
§2588, p. 821 (J. Chadbourn rev. 1981) (defining a “judicial
admission or stipulation” as an “express waiver made
. . . by the party or his attorney conceding for the
purposes of the trial the truth of some alleged fact” (emphasis
deleted));
Christian Legal Soc. Chapter of Univ. of Cal., Hast-
ings College of Law v.
Martinez, 561 U. S. ___, ___
(2010) (slip op., at 10) (describing a stipulation as
“ ‘binding and conclusive’ ” and “ ‘not subject to
subsequent variation’ ” (quoting 83 C. J. S.,
Stipulations §93 (2000))); 9 Wigmore,
supra, §2590, at 822
(the “vital feature” of a judicial admission is “universally
conceded to be its
conclusiveness upon the party making
it”). The stipulation Knowles prof-fered to the District Court,
however, does not speak for those he purports to represent.
That is because a plaintiff who files a proposed
class action cannot legally bind members of the proposed class
before the class is certified. See
Smith v.
Bayer
Corp., 564 U. S. ___, ___ (2011) (slip op., at 15) (“Neither a
proposed class action nor a rejected class action may bind
nonparties”);
id., at ___ (slip op., at 13) (“ ‘[A]
nonnamed class member is [not] a party to the class-action
litigation
before the class is certified’ ” (quoting
Devlin v.
Scardelletti,
536 U.S.
1, 16, n. 1 (2002) (Scalia, J., dissenting))); Brief for
Respondent 12 (conceding that “a damages limitation . . .
cannot have a binding effect on the merits of absent class members’
claims unless and until the class is certified”).
Because his precertification stipulation does
not bind anyone but himself, Knowles has not reduced the value of
the putative class members’ claims. For jurisdictional purposes,
our inquiry is limited to examining the case “as of the time it was
filed in state court,”
Wisconsin Dept. of Corrections v.
Schacht,
524 U.S.
381, 390 (1998). At that point, Knowles lacked the authority to
concede the amount-in-controversy issue for the absent class
members. The Federal District Court, therefore, wrongly concluded
that Knowles’ precertification stipulation could overcome its
finding that the CAFA jurisdictional threshold had been met.
Knowles concedes that “[f]ederal jurisdiction
cannot be based on contingent future events.” Brief for Respondent
20. Yet the two legal principles to which we have just
referred—that stipulations must be binding and that a named
plaintiff cannot bind precertification class members—mean that the
amount to which Knowles has stipulated is in effect contingent.
If, for example, as Knowles’ complaint asserts,
“hundreds, and possibly thousands” of persons in Arkansas have
similar claims, App. to Pet. for Cert. 66, and if each of those
claims places a significant sum in controversy, the state court
might certify the class and permit the case to proceed, but only on
the condition that the stipulation be excised. Or a court might
find that Knowles is an inadequate representative due to the
artificial cap he purports to impose on the class’ recovery.
E.g.,
Back Doctors Ltd. v.
Metropolitan Property
& Cas. Ins. Co., 637 F.3d 827, 830–831 (CA7 2011) (noting a
class representative’s fiduciary duty not to “throw away what could
be a major component of the class’s recovery”). Similarly, another
class mem- ber could intervene with an amended complaint (without a
stipulation), and the District Court might permit the action to
proceed with a new representative. See 5 A. Conte & H. Newberg,
Class Actions §16:7, p. 154 (4th ed. 2002) (“[M]embers of a
class have a right to intervene if their interests are not
adequately represented by existing parties”). Even were these
possibilities remote in Knowles’ own case, there is no reason to
think them farfetched in other cases where similar stipulations
could have more dramatic amount-lowering effects.
The strongest counterargument, we believe, takes
a syl-logistic form: First,
this complaint contains a
presently nonbinding stipulation that the class will seek damages
that amount to less than $5 million. Second, if the state court
eventually certifies that class, the stipulation will bind those
who choose to remain as class members. Third, if the state court
eventually insists upon modification of the stipulation (thereby
permitting class members to obtain more than $5 million), it will
have in effect created a new,
different case. Fourth, CAFA,
however, permits the federal court to consider only the complaint
that the plaintiff has filed,
i.e., this complaint, not a
new, modified (or amended) complaint that might eventually
emerge.
Our problem with this argument lies in its
conclusion. We do not agree that CAFA forbids the federal court to
consider, for purposes of determining the amount in controversy,
the very real possibility that a nonbinding, amount-limiting,
stipulation may not survive the class certification process. This
potential outcome does not re-sult in the creation of a new case
not now before the federal court. To hold otherwise would, for CAFA
jurisdictional purposes, treat a nonbinding stipulation as if it
were binding, exalt form over substance, and run directly counter
to CAFA’s primary objective: ensuring “Federal court consideration
of interstate cases of national impor-tance.” §2(b)(2), 119Stat. 5.
It would also have the ef- fect of allowing the subdivision of a
$100 million action into 21 just-below-$5-million state-court
actions simply by including nonbinding stipulations; such an
outcome would squarely conflict with the statute’s objective.
We agree with Knowles that a federal district
court might find it simpler to value the amount in controversy on
the basis of a stipulation than to aggregate the value of the
individual claims of all who meet the class description. We also
agree that, when judges must decide jurisdictional matters,
simplicity is a virtue. See
Hertz Corp. v.
Friend,
559 U.S.
77, 94 (2010). But to ignore a nonbinding stipulation does no
more than require the federal judge to do what she must do in cases
without a stipulation and what the statute requires, namely
“aggregat[e]” the “claims of the individual class members.” 28
U. S. C. §1332(d)(6).
Knowles also points out that federal courts
permit individual plaintiffs, who are the masters of their
complaints, to avoid removal to federal court, and to obtain a
remand to state court, by stipulating to amounts at issue that fall
below the federal jurisdictional requirement. That is so. See
St. Paul Mercury Indemnity Co. v.
Red Cab Co.,
303 U.S.
283, 294 (1938) (“If [a plaintiff] does not desire to try his
case in the federal court he may resort to the expedi-ent of suing
for less than the jurisdictional amount, and though he would be
justly entitled to more, the defendant cannot remove”). But the key
characteristic about those stipulations is that they are legally
binding on all plaintiffs. See 14AA C. Wright, A. Miller, & E.
Cooper, Fed-eral Practice and Procedure §3702.1, p. 335 (4th
ed. 2011) (federal court, as condition for remand, can insist on a
“
binding affidavit or stipulation that the plaintiff will
continue to claim less than the jurisdictional amount” (em-phasis
added)). That essential feature is missing here, as Knowles cannot
yet bind the absent class.
Knowles argues in the alternative that a
stipulation is binding to the extent it limits attorney’s fees so
that the amount in controversy remains below the CAFA threshold. We
do not consider this issue because Knowles’ stipulation did not
provide for that option.
In sum, the stipulation at issue here can tie
Knowles’ hands, but it does not resolve the amount-in-controversy
question in light of his inability to bind the rest of the class.
For this reason, we believe the District Court, when following the
statute to aggregate the proposed class members’ claims, should
have ignored that stipulation. Because it did not, we vacate the
judgment below and remand the case for further proceedings
consistent with this opinion.
It is so ordered.
