One of the issues that lawyers debated after the Supreme Court’s decision in Standard Fire Ins. Co. v. Knowles (blog post) was whether the Court had effectively overturned precedent in the Ninth Circuit and Third Circuit on the burden of proof that the party asserting federal jurisdiction bears in establishing the amount in controversy under the Class Action Fairness Act (“CAFA”).  Knowles held that a named plaintiff could not stipulate to an amount in controversy below $5 million in order to evade federal jurisdiction under CAFA.  But the Ninth and Third Circuits had previously held that when a plaintiff alleges an amount in controversy below $5 million, the defendant must establish an amount in controversy over $5 million to a legal certainty.  Some other circuits had adopted a preponderance of the evidence standard.  So, did the Supreme Court, by invalidating stipulations (and, by implication, allegations) regarding the amount in controversy, overrule the Ninth and Third Circuits?  Yes, according to the Ninth Circuit.

In Rodriguez v. AT&T Mobility Services, LLC, No. 13-56149, 2013 U.S. App. LEXIS 17851 (9th Cir. Aug. 27, 2013), the plaintiff had attempted to waive any claim by the class over $5 million, in order to avoid federal jurisdiction.  Based on that waiver, the district court remanded the case prior to the Knowles decision.  AT&T appealed, and the remand order obviously had to be vacated after Knowles was decided.  The Ninth Circuit also took the opportunity, however, to address whether the burden of proof rule had changed. 

The panel explained that it was bound to follow prior Ninth Circuit precedent unless an intervening Supreme Court decision was “clearly irreconcilable” with the prior precedent.  The court held that the Knowles decision met this standard essentially for two reasons: 

  • First, the Ninth’s Circuit’s prior decision imposing a “legal certainty” standard on defendants was based, in part, on a principle that “plaintiff is the ‘master of her complaint’ and can plead to avoid federal jurisdiction.’”  Id. at *14.  The court explained that this “legal certainty standard [was] a consequence of a plaintiff’s ability to plead to avoid federal jurisdiction” and “[t]hat principle is not viable in actions involving absent class members,” in light of KnowlesId. at *17-18.  Knowles had thus “effectively overruled” prior circuit precedent.  Id. at *18. 
  • Second, the Ninth Circuit’s prior case law had “reasoned that the initial jurisdictional determination derives from the complaint, while Standard Fire mandates that courts determine their jurisdiction by aggregating all potential class members’ individual claims,” and “[t]o do so, district courts must necessarily ‘look beyond the four corners of the complaint’ when the complaint alleges damages below the jurisdictional minimum     . . . .”  Id. at *16-17. 

This decision is quite helpful to defendants not only in correcting the Ninth Circuit’s burden of proof standard to a more lenient preponderance standard, but also in demonstrating how, in light of Knowles, plaintiffs cannot use pleading tactics designed to avoid federal jurisdiction where, based on the nature of the claims being asserted on behalf of the putative class, the dispute properly belongs in federal court.  As the Ninth Circuit explained, the plaintiff is no longer “master of her complaint” if she is acting contrary to the interests of the absent class members, and it is a district court’s responsibility to look beyond the pleadings to determine what claims the individual class members have, and what is truly at stake.