By Jonathan Stempel
WASHINGTON, Jan 7 (Reuters) - The U.S. Supreme Court on
Monday weighed whether to impose new limits on class-action
lawsuits, as it reviewed whether a homeowner's lawsuit against
his insurer belonged in a state court considered friendly to
During oral argument, several justices suggested that they
saw problems in the plaintiff's effort to keep his case in a
Miller County, Arkansas, state court known among some insurers
as something of a "magnet" for class-action cases.
Greg Knowles, whose house had sustained hail damage, in his
lawsuit accused Travelers Cos' Standard Fire Insurance Co unit
of refusing to pay for the cost of hiring general contractors.
He signed a stipulation to cap damages for class members at
$5 million, the threshold at which the Class Action Fairness Act
lets companies move class-action lawsuits to federal court.
But some justices suggested that such stipulations were the
kind of tactic that Congress sought to stop with the 2005 law.
"The amount that's demanded seems to be totally
meaningless," Justice Samuel Alito said. "The $5 million just
Chief Justice John Roberts suggested that Knowles' approach
could let two adjacent state county courts hear two $4 million
lawsuits for people with names from A to K and from L to Z,
rather than push the entire $8 million case to federal court.
"I take it you don't have any objection to that?" he asked
David Frederick, a lawyer for Knowles.
Monday's argument is the fourth class-action appeal of the
court's current term, and it came before a court that in recent
cases involving Wal-Mart Stores Inc and other defendants
made it harder to pursue class-action litigation.
SLICING AND DICING
Knowles had limited his case to state law claims by Arkansas
residents and sought to include potential class members his
lawyer did not represent.
The 8th U.S. Circuit Court of Appeals in St. Louis upheld
the stipulation to limit the size of his case. But Standard Fire
argued that this improperly let Knowles bind potential class
members without court approval.
Theodore Boutrous, a lawyer for the Hartford,
Connecticut-based insurer, said Congress adopted CAFA out of
concern about plaintiffs' "abuses and manipulations" of amounts
being sought and wanted to protect defendants and absent class
"What has happened here is the plaintiff's lawyers, in
addition to these stipulations, they're slicing and dicing the
classes up into pieces to thwart jurisdiction," he said.
Frederick countered that a plaintiff, as "master" of his
lawsuit, could pursue his own strategies, and decide in good
faith that his case was worth no more than $5 million.
But Justice Stephen Breyer suggested it would be a
"loophole" that "swallows up all of Congress' statute" for a
plaintiff to define his case narrowly, and for his lawyers to
bring several small cases rather than one large case.
Justice Antonin Scalia, meanwhile, suggested that state
courts would be unwilling to cede jurisdiction even if other
potential plaintiffs were being short-changed.
"The state court could find, and I suspect this state court
would find, that it's worth the money to be in state court," he
A decision is expected by the end of June.
The case is Standard Fire Insurance Co v. Knowles, U.S.
Supreme Court, No. 11-1450.
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