Supreme Court will consider reach of Class Action Fairness Act

Insurance company wants to move class action suit from state court to federal court

With the start of its new term just a few weeks away, the Supreme Court on Friday agreed to hear a case that could alter corporate class actions.

In Standard Fire Insurance Co. v. Knowles, Greg Knowles filed a class action lawsuit against Hartford, Conn.-based Standard Fire Insurance Co. in Arkansas state court for allegedly underpaying his claims after his house sustained substantial hail damage. Standard Fire sought to move the case to federal court under the Class Action Fairness Act (CAFA) of 2005, a federal law that allows class action defendants to transfer cases involving more than $5 million from plaintiff-friendly state courts to federal courts, which traditionally offer greater protection to corporate defendants.

But a federal judge in Arkansas said Knowles’ suit could remain in state court because Knowles had signed a document in which he promised to seek less than $5 million in damages for himself and other class members. The 8th Circuit upheld that decision, and Standard Fire appealed to the Supreme Court.

In an amicus brief, the U.S. Chamber of Commerce supported Standard Fire and told the high court that the case is “of exceptional importance” to the business community. As it stands, CAFA allows plaintiffs to easily avoid federal courts by promising to limit the amount of money at stake in class actions.

The Associated Press reports that the case likely will be argued after Thanksgiving.

Read more InsideCounsel stories about class actions:

Federal courts scrutinize class certification petitions

Securities class action settlements go down in number

2011 saw surge in securities class actions against Chinese companies

Plaintiffs firms secure big settlements in securities class actions

Federal securities law doesn’t preclude state law class actions

Despite uptick in class actions, in-house counsel plan to spend less

Misclassification case could end statistical evidence in class actions

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