Two recent federal court of appeals decisions on the Class Action Fairness Act (CAFA) address the measurement of the amount in controversy on a declaratory judgment claim, and a “late” removal based on the Supreme Court’s decision in Standard Fire Ins. Co. v. Knowles.  Both decisions are favorable to defendants.  The Eleventh Circuit’s opinion on declaratory relief claims reaffirms that those claims can be critical in determining the amount in controversy under CAFA, and should not be overlooked when a complaint is close to the $5 million threshold.  The Ninth Circuit’s opinion on “late” removals holds that a case that was remanded because of a stipulation by the named plaintiff, which was later invalidated by the Supreme Court’s decision in Knowles, can be removed again.  This puts another quiver in defendants’ arsenals where a change in the law makes removal proper, at least in some circumstances.

Amount in Controversy for Declaratory Judgment Claims

In South Florida Wellness, Inc. v. Allstate Ins. Co., No. 14-10001, 2014 U.S. App. LEXIS 2787 (11th Cir. Feb. 14, 2014), the plaintiff attempted to avoid federal jurisdiction by pleading only a declaratory judgment claim, and no claim for damages.  The suit alleged that Allstate, in paying claims for personal injury protection (PIP) benefits in Florida, improperly limited payments based on a statutory medical fee schedule.  The plaintiff alleged that the insurance policy failed to contain a provision specifying that the statutory fee schedule would be used, which the plaintiff contended was required by a recent Florida Supreme Court decision.  Id. at *2-4.  (With numerous legislative changes, PIP coverage in Florida continues to be the subject of extensive litigation, including class actions.)  Allstate removed the case to federal court, and filed an affidavit demonstrating that the value of the additional benefits that potentially could be due to the putative class if the fee schedule could not be used to limit payments would exceed $68 million.  Id. at *4-5.  The district court remanded the case, concluding that the value of the declaratory judgment was “speculative” because the requested declaratory judgment would not necessarily result in money being paid to the plaintiffs.  Id. at *6.

The Eleventh Circuit reversed the order of remand.  Applying its general rule that the value of a declaratory relief claim for amount in controversy purposes is measured from the plaintiff’s perspective, the court found Allstate’s evidence more than sufficient.  The court explained that:

Although the putative class members might have to take an extra step or two after obtaining declaratory relief from Allstate, that does not mean that determining that the amount in controversy exceeds $5 million is too speculative of a task.  Estimating the amount in controversy is not nuclear science; it does not demand decimal-point precision.  And the undertaking is not to be defeated by unrealistic assumptions that run counter to common sense.  Given the large number of medical bills at issue and the significant amount of money at stake, we find it unlikely that most insureds and medical care providers, who may be collectively owed $68,176,817.69, would leave the vast majority of that money on the table if a federal court declared that they were entitled to it.

Id. at *11-12 (emphasis added; citation omitted).  The court also noted that, the higher the defendant’s calculation of the amount in controversy, “the easier it is to be confident that collection contingencies should not count for much.”  Id. at *12.  (This language is particularly helpful for cases where precision in the calculation is difficult, but a less precise calculation is high enough that quibbles about the method should not make a difference.)

This result does not surprise me at all here.   Declaratory relief claims have long been included in the amount in controversy.  These claims can be particularly important in an insurance class action where the complaint seeks both money damages for breach of contract and declaratory relief, and the breach of contract claim alone might not reach the $5 million threshold.  The declaratory relief claim should not be overlooked as duplicative of the breach of contract claim – in many instances, it will add additional value (at least with respect to future claims) that potentially can defeat a motion to remand.

“Late” Removal Based on Standard Fire v. Knowles

In my July 9, 2013 blog post, I noted that Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121 (9th Cir. 2013), allowing a “late” removal of a class action (more than 30 days after service), might allow a case to be removed where it had not previously been removed because of binding precedent in the circuit that was contrary to Standard Fire Ins. Co. v. Knowles (blog post).   In Knowles, the Supreme Court held that a named plaintiff’s attempt to stipulate to an amount in controversy below $5 million could not defeat federal jurisdiction  under CAFA.  Prior to that decision, however, some circuits had enforced these stipulations, and numerous defendants had lost motions to remand (or had not bothered to remove cases) based on these stipulations.

In Rea v. Michaels Stores, Inc., No. 14-55008, 2014 U.S. App. LEXIS 2928 (9th Cir. Feb. 18, 2014), the Ninth Circuit confirmed that my prediction in my blog post about Roth was correct.  Rea was initially remanded by the district court based on a stipulation by the named plaintiff that was consistent with Ninth Circuit law, but later invalidated by Knowles.  Shortly after Knowles came down, Rea was removed a second time.  The Ninth Circuit upheld the second removal, reiterating that “as long as the complaint or ‘an amended pleading, motion, order or other paper’ does not reveal that the case is removable, the 30-day time period never starts to run and the defendant may remove at any time.”  Id. at *6.  The Ninth Circuit further concluded that the district court could reconsider its prior ruling because CAFA allows review of remand orders, and because the Supreme Court’s decision in Knowles was a change in circumstances justifying reconsideration.  Id. at *7-8.  It made no difference that, in the meantime, a class had been certified in state court and the certified class was smaller, because jurisdiction had to be determined as of the time of removal, and could not be impacted by subsequent events.  Id. at *4.

So if you think it’s too late to remove, or that you can’t remove a case again based on a change in the law, think again.  Maybe you can.