Smith v. American Bankers Ins. Co. of Florida, 2011 WL 6399526 (W.D. Ark. Dec. 21, 2011).

While declining to stay the remand order pending appellate review, a District Court in Arkansas held that because CAFA requires that the Court of Appeals complete any review of a remand order within 60 days, this expedited review process undercuts any chances that parties would suffer harm through time and resources wasted in state court.  

The plaintiff, Edward F. Smith, brought a putative class action in the state court, against the defendant, American Bankers Insurance Company of Florida, alleging breach of contract due to the defendant’s underpayment of claims for loss or damage to real property made pursuant to certain homeowners’ insurance policies.

The plaintiff expressly disclaimed in his complaint any actual or potential entitlement to punitive damages on behalf of himself or the class members, and also attached a ‘Sworn and Binding Stipulation,’ to the complaint, affirming that he would not seek damages for himself and other individual class member in excess of $75,000 or seek damages for the class in excess of $5 million in the aggregate (inclusive of costs and attorneys’ fees). 

The defendant removed the action to the federal district court arguing that the actual amount in controversy exceeded the $5 million jurisdictional limitation. 

The District Court remanded the action to state court based on the plaintiff’s binding stipulations.

The defendant then filed a petition for permission to appeal to the Court of Appeals for the Eighth Circuit, and also filed an expedited motion to stay remand order pending appellate review. 

The District Court, however, denied the motion to stay.

The Court noted that when deciding a motion for stay pending appellate review, a court considers: (1) the likelihood of success on appeal; (2) the threat of irreparable harm to the moving party absent a stay; (3) the prospect of harm to opposing parties if the stay is granted; and (4) the public interest in granting the stay.  Ultimately the court must consider the relative strength of the four factors, "balancing them all."  Examining each of the four factors, the Court held that no stay was warranted.

Regarding the first factor, the Court found that the defendant’s appeal of the remand order had little to no likelihood of success. Specifically, the Court pointed out that it ordered remand after a thorough review of the relevant precedent, including the precedent established by the Eighth Circuit in Bell v. Hershey, 557 F.3d 953 (8th Cir.2009). In Bell, the Eighth Circuit found that federal courts lack CAFA jurisdiction when a plaintiff files a binding stipulation along with his complaint attesting that he will not seek more than $5 million in damages in the aggregate for the purported class.  (Editors’ Note: See CAFA Law Blog analysis of Bell posted on July 28, 2009.)

Like many district courts that followed Bell, the Court, in Tomlinson v. Skechers U.S.A., Inc., No. 11–05042 (W.D. Ark.), had remanded the action to state court due to a lack of subject matter jurisdiction in light of the plaintiff’s binding stipulation. When the Tomlinson defendant petitioned for permission to appeal the remand order, the Eighth Circuit denied the request, and the U.S. Supreme Court also denied the defendant’s petition for writ of certiorari that followed. Almost identical circumstances occurred recently in the case of Tuberville v. New Balance Athletic Shoe, No. 11–1016 (W.D. Ark.), where the Eighth Circuit denied petition to file an interlocutory appeal against remand order. In Tuberville, the Court had held that it lacked subject matter jurisdiction because the named plaintiff’s binding stipulation limited the potential amount in controversy.

The Court found that both Tomlinson and Tuberville relied on the Eighth Circuit’s holding in Bell, and it was evident from the Eighth Circuit’s denial of appellate review in both of those cases that appeal of the case at bar had little likelihood of success.

Second, the Court observed that because CAFA requires that the Court of Appeals complete any review of a remand order within 60 days, this expedited review process undercut the defendant’s argument that it would suffer harm through time and resources “wasted” in state court.

Third, the Court stated that the plaintiffs were likely to suffer a risk of harm if a stay was granted, and thus, there was no cause to delay this matter further. Specifically, the plaintiffs filed their Complaint in state court in May 2011. Seven months later, the case returned to state court in which it was originally filed following the removal process. Thus, there was no justification for delaying the plaintiffs’ opportunity to obtain relief from the damages they were alleged to have suffered. 

Finally, the Court determined that considering the unlikelihood of success of the defendant’s petition to the Eighth Circuit, no judicial resources were likely to be wasted if the case continued forward in state court. Accordingly, the Court denied the defendant’s expedited motion to stay remand order pending appellate review.

As a result, the action continues in the state court although the appeal is pending before the Eighth Circuit.