Motions to remand under the Class Action Fairness Act (CAFA) in insurance class actions often focus on whether the amount in controversy exceeds $5 million.  This is because the “local controversy” and “home state” exceptions to CAFA jurisdiction are inapplicable if the defendant is not a citizen of the state where suit is filed.  Thus, if the plaintiffs’ attorneys sue outside of the defendant’s state of incorporation and principal place of business, the only way they can avoid federal jurisdiction is if the amount in controversy is found to be below $5 million.  Last week, in Frederick v. Hartford Underwriters Ins. Co., No. 12-1161, __ F.3d. __, 2012 WL 2443100 (10th Cir. June 28, 2012), the Tenth Circuit addressed several issues that are at the heart of these disputes, resolving all three issues in a manner favorable to defendants: 

  • Burden of Proof:  The Tenth Circuit agreed with the majority of other circuits that a defendant must establish that the amount in controversy exceeds $5 million by a preponderance of the evidence. This standard (or a similar formulation) applies in the First, Second, Fourth, Sixth, Seventh, Eighth and Eleventh Circuits.  But the Third and Ninth Circuits require a defendant to establish to a “legal certainty” that the amount in controversy exceeds $5 million.  This is a well-developed circuit split (ten of the twelve circuits have weighed in) that the Supreme Court might be inclined to decide, if presented with an appropriate case. 
  • Allegation That Plaintiff Seeks Less Than $5 Million:  In Frederick, the complaint alleged that the named plaintiff was seeking “a total award for compensatory and punitive damages [that] does not exceed $4,999,999.99.”  Id. at *1.  The district court held that this allegation, by itself, required a remand, but the Tenth Circuit reversed.  The court of appeals explained that “a plaintiff’s attempt to limit damages in the complaint is not dispositive when determining the amount in controversy.  Regardless of the plaintiff’s pleadings, federal jurisdiction is proper if a defendant proves jurisdictional facts by a ‘preponderance of the evidence’ such that the amount in controversy may exceed $5,000,000.  Once a defendant meets this burden, remand is appropriate only if the plaintiff can establish that it is legally impossible to recover more than $5,000,000.  Id. at *3.  The district court erred when it “treated the plaintiff’s pleadings as dispositive” because “[a] court may not forgo an analysis of a defendant’s claims regarding the amount in controversy merely because a plaintiff pleads that he is seeking less than the jurisdictional minimum.”  Id. at *4.  The Tenth Circuit noted in footnote 3 of its opinion that the Jurisdiction and Venue Clarification Act of 2011 (“JVCA”), Pub. L. No. 112-63, was inapplicable because the JVCA did not become effective until after Frederick was filed.  Regardless of that, the JVCA amendments appear to plainly apply only to diversity jurisdiction under § 1332(a), not CAFA jurisdiction under § 1332(d).  See 28 U.S.C. § 1446(c)(2).  (For more on the JVCA, see my January 6, 2012 blog post.)  Frederick did not involve a purported binding stipulation by a named plaintiff as to the amount in controversy, but the district court treated the allegation as binding, so the court might treat a stipulation in the same fashion.  For more on stipulations, see my February 7, 2012 blog post
  • Punitive Damages:  The Tenth Circuit further held that, with respect to punitive damages, a defendant must show “merely that: (1) state law permits a punitive damages award for the claims in question; and (2) the total award, including compensatory and punitive damages, could exceed $5,000,000.”  Frederick, 2012 WL 2443100, at *4 (emphasis added).  The Tenth Circuit explained that this showing may be made based upon “facts alleged in the complaint, the nature of the claims, or evidence in the record to demonstrate that an award of punitive damages is possible.”  Id.  This does not appear to be an onerous standard for defendants to satisfy.  If applicable state law on one or more causes of action permits an award of punitive damages and the maximum amount awardable under state law would bring the amount in controversy over $5 million, that would appear to satisfy the Tenth Circuit’s test.
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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 at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

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 my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.