Three days ago, the United States Supreme Court unanimously upheld the federally-backed regime in Cafastan against the latest insurgent assault in Standard Fire Insurance Company v. Knowles, ___ S. Ct. ___, 2013 WL 1104735 (U.S. March 19, 2013). The insurgents, in an attempt to avoid federal jurisdiction under CAFA, resorted to using the local populace (or at least, their purported absent class members’ claims) as a human shield. The insurgents’ ultimatum? Regardless of how much the would-be class’ claims might actually be worth, those claims will be decapitated, so that they cannot recover the minimum CAFA jurisdictional amount, which is $5 million.
The Supreme Court freed the hostages, holding, in accordance with Smith v. Bayer Corp., 131 S. Ct. 2368, 2380 (2011), that putative class representatives and their counsel were without power to bind the supposed class and decapitate their claims in this way:
The stipulation [plaintiff] proffered 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. Because his precertification stipulation does not bind anyone but himself, [plaintiff] has not reduced the value of the putative class members’ claims.
2013 WL 1104735, at *3-4 (citations omitted). Because jurisdiction – and thus, the jurisdictional amount – is determined “as of the time [the action] was filed in state court,” id. at *4, the Court held that the insurgents were subject to extraordinary rendition to Cafastan, where their own claims might be subject to decapitation by stipulation, but not those of absent class members:
[T]he stipulation at issue here can tie [plaintiff’s] 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 [CAFA] to aggregate the proposed class members’ claims, should have ignored that stipulation.
Id. at *6.
That much you could have learned (albeit without the War on Terror snark) from any law firm client release in the aftermath of Knowles. We here at DDL are more interested in where to go next. We might (and our readers might) have cases in state court that wound up there because of similarly unenforceable plaintiff stipulations that the Supreme Court has just declared to be bogus.
Under 28 U.S.C. §1446(b)(3), is the decision in Knowles an “order or other paper from which it may first be ascertained that the case is one which is or has become removable”? If so, we’ve all got 30 days from March 19 (to be conservative) – or until April 18, 2013, in which to remove all class actions that plaintiffs improperly kept in state court due to Knowles-like stipulations concerning the jurisdictional amount.
We took a look. Normally a judicial opinion in an unrelated matter is not considered an “other paper” under §1446(b)(3) such that the defendant gets a new 30-day period for removal to federal court. E.g., Kocaj v. Chrysler, 794 F. Supp. 234 (E.D. Mich. 1992), which held:
[T]he term “other paper” means a paper in the state court action that does not constitute “an amended pleading, motion, [or] order”. . . . Defendant’s interpretation of “other paper,” broadly construing such term to include even a decision in an unrelated action, ignores the preceding language in §1446(b) − “within thirty days after receipt by the defendant, through service or otherwise” − which language plainly refers to items served or otherwise given to a defendant in a state court case.
Id. at 237 (emphasis added). While we would disagree concerning the extent to which this “or otherwise” language in §1446(b)(3) “plainly” references the same action, we offer Kocaj because it does state the majority rule. However, the cases following this majority rule overwhelmingly address judicial opinions that, for one reason or another (such as preemption), would preclude liability as a matter of substantive law.
That’s not the situation with Knowles, where the Supreme Court’s opinion is directly on point rejecting the identical procedural ploy that the plaintiff used to maneuver a case out of CAFA (and into state court) in the first place. That the very procedural ploy that the plaintiff used to avoid CAFA was declared invalid may be grounds for arguing that Knowles, although being a separate matter, was hardly “unrelated.”
As to this situation, there may well be an exception to the general rule. Doe v. American Red Cross, 14 F.3d 196, 198 (3d Cir. 1993), like Knowles, involved a Supreme Court question of federal jurisdiction, rather than the substantive merits of a cause of action. In another case, the Supreme Court had held that the Red Cross, being federally chartered, could avail itself of federal question jurisdiction. The Third Circuit held that, even though the Supreme Court decision was not in the same case, it was sufficiently closely related to be an “order” (not reaching “other paper”) under §1446(b)(3). Insofar as relevant:
We need not decide today whether a subsequent Supreme Court decision that does not involve the same defendant in a similar type of action is “other paper” authorizing removal. . . . Because the Red Cross was the defendant in . . . the litigation in the Supreme Court tracked the factual scenario of the challenged removal cases here, we are construing only the term “order” as set forth in Section 1446(b).
Id. at 202. That exception – defining the word “order” – was extended to non-jurisdictional decisions by Green v. R.J. Reynolds Tobacco Co., 274 F.3d 263 (5th Cir. 2001), where the decision in another case involved the “same defendants, and a similar factual situation and legal issue.” Id. at 268.
But neither of those cases addressed the Knowles situation, which necessarily involves a different defendant in a different case. However, Knowles involves the “identical” jurisdictional question, not merely a “similar” set of facts or legal issue. Any law? We didn’t found anything great, but a number of decisions with adverse results (that is, they remanded the cases before them) include dictum that they would consider decisions in other cases under certain circumstances. For example, in Rhodes v. Mariner Health Care, Inc., 516 F. Supp. 2d 611, 615 (S.D. Miss. 2007), the court may have been willing to consider an opinion in another case if the plaintiff had “manipulated federal law in order to avoid federal subject matter jurisdiction.” The court also cited Doe and Green as creating a “sufficiently related” case test. 516 F. Supp.2d at 613 n.1. The kind of shenanigans disapproved in Knowles would seem to us to fit the former part of the description in Rhodes, and that Knowles rejected the identical stratagem, may well fit the latter. See also Wells Fargo Bank, N.A. v. American General Life Insurance Co., 2010 WL 7526986, at *5 (N.D. Tex. Feb. 24, 2010) (dictum suggesting removability upon an “intervening, precedent-setting order . . . directly addressing jurisdiction”); McCormick v. Excel Corp., 413 F. Supp.2d 967, 971 (E.D. Wis. 2006) (dictum suggesting that removal based on a separate Supreme Court decision might be possible if the decision “involve[d] similar facts”). In Dudley v. Putnam Investment Funds, 472 F. Supp.2d 1102 (S.D. Ill. 2007), the court remanded where an order in another case did not expressly “authorize removal.” Id. at 1108-09. Knowles, in contrast, did practically nothing but expressly authorize removal.
Another possibly fruitful avenue is the distinction drawn between a “voluntary” versus an “involuntary” act – meaning that, if the plaintiff did something “voluntary,” that makes an action removable. E.g., Poulos v. Naas Foods, Inc., 959 F.2d 69, 71-72 (7th Cir. 1992). This comes from the legislative history of §1446, 1949 U.S. Code & Cong. Serv. at 1248, 1254, 1268, adopting the rationale of an old Supreme Court case, Powers v. Chesapeake Railway Co., 169 U.S. 92 (1898), which rejected time limits on removal to prevent that right “from being defeated by circumstances wholly beyond [the defendant’s] control.” Id. at 100.
While the situation is not an exact fit, we’d have to say: (1) that the sort of stipulation that the Supreme Court rejected in Knowles was absolutely a “voluntary” act by the plaintiffs, and (2) that, where pre-Knowles precedent allowed plaintiffs to get away with it, removal was prevented by “circumstances” that were beyond the removing defendant’s control. The differentiating point – that the plaintiff’s voluntary act was declared jurisdictionally ineffective in a different case, would not in this instance do violence to the “voluntary/involuntary” distinction. The jurisdictional situation was created solely because the plaintiff offered a stipulation that was invalid under Knowles.
Anyway, we don’t have infinite time, and there are almost an infinite number of §1446 “other paper” cases. If you find yourself in the situation we’ve been addressing, we recommend approaching the research issue by first Shepardizing the Doe and Green cases. Finally, unlike previous “other paper” precedent, remember this is CAFA. The non-CAFA cases justify their result in part on a presumed intent of Congress requiring that removal statutes be read narrowly. That’s not the case with CAFA – don’t forget that you have the Congressional purpose in enacting CAFA filling your sails – “ensuring Federal court consideration of interstate cases of national importance.” Knowles, 2013 WL 1104735, at *5.