throbber
(Slip Opinion)
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`
`
` OCTOBER TERM, 2012
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`
`Syllabus
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`1
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` NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
`
`
`
` being done in connection with this case, at the time the opinion is issued.
`
`
`
` The syllabus constitutes no part of the opinion of the Court but has been
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` prepared by the Reporter of Decisions for the convenience of the reader.
`
` See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
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`SUPREME COURT OF THE UNITED STATES
`
`
`
` Syllabus
`
`STANDARD FIRE INSURANCE CO. v. KNOWLES
`CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
`
`THE EIGHTH CIRCUIT
` No. 11–1450. Argued January 7, 2013—Decided March 19, 2013
`
`
` The Class Action Fairness Act of 2005 (CAFA) gives federal district
`courts original jurisdiction over class actions in which, among other
`things, the matter in controversy exceeds $5 million in sum or value,
`28 U. S. C. §§1332(d)(2), (5), and provides that to determine whether
`
` a matter exceeds that amount the “claims of the individual class
`members must be aggregated,” §1332(d)(6). When respondent
`Knowles filed a proposed class action in Arkansas state court against
`petitioner Standard Fire Insurance Company, he stipulated that he
`and the class would seek less than $5 million in damages. Pointing
`
`
`to CAFA, petitioner removed the case to the Federal District Court,
`
`but it remanded to the state court, concluding that the amount in
`controversy fell below the CAFA threshold in light of Knowles’ stipu-
`lation, even though it found that the amount would have fallen above
`
`the threshold absent the stipulation. The Eighth Circuit declined to
`hear petitioner’s appeal.
`Held: Knowles’ stipulation does not defeat federal jurisdiction under
`CAFA. Pp. 3−7.
`
`(a) Here, the precertification stipulation can tie Knowles’ hands be-
`cause stipulations are binding on the party who makes them, see
`Christian Legal Soc. Chapter of Univ. of Cal., Hastings College of
`Law v. Martinez, 561 U. S. ___. However, the stipulation does not
`speak for those Knowles purports to represent, for a plaintiff who
`files a proposed class action cannot legally bind members of the pro-
`
`posed class before the class is certified. See Smith v. Bayer Corp.,
`
`564 U. S. ___, ___. Because Knowles lacked authority to concede the
`
`amount in controversy for absent class members, the District Court
`wrongly concluded that his stipulation could overcome its finding
`that the CAFA jurisdictional threshold had been met. Pp. 3−4.
`
`
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`

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` STANDARD FIRE INS. CO. v. KNOWLES
`
`
`Syllabus
`(b) Knowles concedes that federal jurisdiction cannot be based on
`
`
`contingent future events. Yet, because a stipulation must be binding
`
` and a named plaintiff cannot bind precertification class members, the
`amount he stipulated is in effect contingent. CAFA does not forbid a
`federal court to consider the possibility that a nonbinding, amount-
`limiting, stipulation may not survive the class certification process.
`To hold otherwise would, for CAFA jurisdictional purposes, treat a
`nonbinding stipulation as if it were binding, exalt form over sub-
`stance, and run counter to CAFA’s objective: ensuring “Federal court
`consideration of interstate cases of national importance.” §2(b)(2),
`119 Stat. 5.
`
`It may be simpler for a federal district court to value the amount in
`controversy on the basis of a stipulation, but ignoring a nonbinding
`stipulation merely requires the federal judge to do what she must do
`in cases with no stipulation: aggregate the individual class members’
`
`claims. While individual plaintiffs may avoid removal to federal
`court by stipulating to amounts that fall below the federal jurisdic-
`tional threshold, the key characteristic of such stipulations—missing
`here—is that they are legally binding on all plaintiffs. Pp. 4−7.
`Vacated and remanded.
`
`BREYER, J., delivered the opinion for a unanimous Court.
`
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`2
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`

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` Cite as: 568 U. S. ____ (2013)
`
`Opinion of the Court
`
`1
`
`
` NOTICE: This opinion is subject to formal revision before publication in the
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`
`
` preliminary print of the United States Reports. Readers are requested to
`
` notify the Reporter of Decisions, Supreme Court of the United States, Wash-
`
` ington, D. C. 20543, of any typographical or other formal errors, in order
`
`
` that corrections may be made before the preliminary print goes to press.
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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 juris-
`diction” 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 cer-
`
`

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` STANDARD FIRE INS. CO. v. KNOWLES
`
`Opinion of the Court
`tain 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 policyhold-
`
`
`ers. 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 Dis-
`trict 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 evi-
`dence 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. Nonethe-
`less, 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 com-
`plaint is not dispositive when determining the amount in
`
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`2
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`

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` Cite as: 568 U. S. ____ (2013)
`
`Opinion of the Court
`
` controversy”); with Rolwing v. Nestle Holdings, Inc.,
`666 F. 3d 1069, 1072 (CA8 2012) (a precertification “bind-
`ing stipulation limiting damages sought to an amount
`not exceeding $5 million can be used to defeat CAFA
`jurisdiction”).
`
`3
`
`
`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 “deter-
`
`mine 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)
`
`
`
`
`
`
`
`

`
`4
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` STANDARD FIRE INS. CO. v. KNOWLES
`
`Opinion of the Court
`(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 ad-
`
`
`mission 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 nonpar-
`ties”); 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.
`
`
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`
`
`
`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
`
`

`
`
`
` Cite as: 568 U. S. ____ (2013)
`
`Opinion of the Court
`referred—that stipulations must be binding and that a
`named plaintiff cannot bind precertification class mem-
`bers—mean that the amount to which Knowles has stipu-
`lated is in effect contingent.
`If, for example, as Knowles’ complaint asserts, “hun-
`
`dreds, 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 inade-
`quate 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
`
`
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`
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`
`5
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`

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`6
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` STANDARD FIRE INS. CO. v. KNOWLES
`
`Opinion of the Court
`a new, different case. Fourth, CAFA, however, permits the
`federal court to consider only the complaint that the plain-
`tiff 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 con-
`troversy, 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 jurisdic-
`tional 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), 119 Stat. 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.
`
`
`
`
`
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`
`
`
`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 stipu-
`lation 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 indi-
`vidual plaintiffs, who are the masters of their complaints,
`
`to avoid removal to federal court, and to obtain a remand
`
`

`
`7
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` Cite as: 568 U. S. ____ (2013)
`
`Opinion of the Court
`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 plain-
`tiffs. 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 thresh-
`old. We do not consider this issue because Knowles’ stipu-
`lation 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.

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