Epstein on Class Actions Before the Supreme Court

Class Action, SCOTUS, and Statutory Evasion
Richard A. Epstein
Ricochet.com
January 8, 2013

There are few problems of greater complexity than developing a set of legal rules that allows for the effective integration of state regulation with individual choice. That problem came to bear on Monday, January 7, 2013 in the oral argument before the United States Supreme Court on the question of how to read the $5 million threshold that is contained in the 2005 Class Action Fairness Act (CAFA), which allows a defendant to remove a case from state court into federal court if the class has more than 100 members and the total amount at stake in the controversy exceeds $5 million.

The point of this limitation was to make sure that defendants were not trapped in certain state court hellholes, which could claim jurisdiction over a national dispute because some small fraction of class members had contact with the state in question.  The competition among certain state districts to bring these actions provoked a huge national outcry that eventually resulted in the passage of a complete statute that did afford much relief to corporations that were so stranded in state court.

All statutes, however, count only as the opening move in a complex series of strategic maneuvers.  More concretely, the question before the Court in The Standard Fire Insurance Company v. Knowles, is whether the plaintiffs can seek by stipulation to limit the class claims to under $5 million in order to avoid the removal into the chillier environment of a federal district court.  That one maneuver raises at least two concerns.