Often the first step for a carrier in defending an insurance class action filed in state court is to determine if the $5 million amount in controversy under the Class Action Fairness Act (“CAFA”) can be met for removal to federal court, and how the amount in controversy can be proven.  In Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Company, No. 11-8003 (7th Cir. Apr. 1, 2011), the issue was whether punitive damages could be considered in determining the amount in controversy where punitives were not requested in the complaint, but a state court potentially could award them on the causes of action pled.  The Seventh Circuit held that punitive damages could be considered, and that the defendant does not have to establish the amount in controversy by a preponderance of evidence.  Rather, the defendant’s estimate of the amount in controversy controls unless the plaintiff can show it is legally impossible for more than $5 million to be recovered: 

The legal standard was established by the Supreme Court in St. Paul Mercury:  unless recovery of an amount exceeding the jurisdictional minimum is legally impossible, the case belongs in federal court.  Only jurisdictional facts, such as which state issued a party’s certificate of incorporation, or where a corporation’s headquarters are located, need be established by a preponderance of the evidence.

. . .

[T]he estimate of the dispute’s stakes, advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible.  So the question here is not whether the class is more likely than not to recover punitive damages, but whether Illinois law disallows such a recovery.  (Slip opinion at 4-5) 

The court also made an interesting comment about how the named plaintiff could not, after removal, attempt to disavow any claim by the putative class for punitive damages in order to reduce the amount in controversy.  In addition to mentioning the settled rule that actions taken to reduce the amount in controversy after removal cannot deprive the federal courts of jurisdiction, the court explained that: 

[Plaintiff] has a fiduciary duty to its fellow class members.  A representative can’t throw away what could be a major component of the class’s recovery.  Either a state or a federal judge might insist that some other person, more willing to seek punitive damages, take over as representative.  What [Plaintiff] is willing to accept thus does not bind the class and therefore does not ensure that the stakes fall under $5 million.  (Slip opinion at 6.) 

Lessons Learned for Insurance Class Actions:  The lightened burden should make it easier for insurers to win battles over the amount in controversy under CAFA.  But this is only the Seventh Circuit speaking, and other circuits have imposed a preponderance of the evidence standard.  For plaintiffs who want to bring a class action for less than $5 million, the lesson is that the complaint must be very specific because plaintiffs will have only one chance to “get it right.”

Tags: Seventh Circuit
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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and most of the class actions I’ve defended have been brought against insurance companies. I’ve also handled some involving products liability, managed care, health care, utilities, financial services, higher education and environmental issues.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at work, you might find me running lines or watching a musical with my teenage daughter who hopes to be a Broadway star (or taking her to voice or dance lessons) or reading a good book.

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