In what may become a more common trend in CAFA litigation based on the Supreme Court’s decision in Standard Fire Ins. Co. v. Knowles, ––– U.S. ––––, 133 S.Ct. 1345 (2013), the Seventh Circuit reversed the district court’s order remanding the case back to state court.

The district court had determined that the defendant failed to show that the amount in controversy in the litigation exceeded $5 million, as required by the Class Action Fairness Act.  The district court’s decision was apparently based in part on the statement in the Complaint that Plaintiffs’ damages would not exceed $3.5 million.  However, in Knowles, the Court held that a stipulation by the named plaintiff in his complaint—even though accompanied by an affidavit signed by him before the class is certified—does not limit the amount of potential damages that the class would be able to recover and so does not affect removability under CAFA.

Writing for the Seventh Circuit, Judge Posner first remarked that neither party even cited Knowles.  Judge Posner then expressed his surprise that the Knowles Court did not discuss whether a substantive damages limitation under state law would affect CAFA removability.  Likewise, Judge Posner observed that the Knowles Court failed to discuss the tradeoff between class counsel’s giving up a part of the class damages claim and, by doing so, being able to litigate in a forum believed to be more favorable to the class.

In the end, Judge Posner recognized that the court was bound by Knowles and reversed the remand order.  Before doing so, however, Judge Posner corrected the district court’s inaccurate determination that the Rooker–Feldman rule precluded most of the claims of the class and further corrected the district court’s “mistaken” statement that “there is a strong presumption in favor of remand” when a case has been removed under the CAFA.

Johnson v. Pushpin Holdings, LLC, No. 14–8006 (7th Cir. Apr. 9, 2014)

For an additional application of Knowles, see our discussion of the Ninth Circuit’s decision in Rea v. Michaels Stores, Inc., No. 14-55008 (9th Cir. Feb. 18, 2014).