Tuberville v. New Balance Athletic Shoe, Inc., No. 1:11-cv-01016, 2011 WL 1527716 (W.D. Ark. April 21, 2011).
After learning she literally could not walk her a** off with her new shoes, the plaintiff initiated a class action against the shoe maker. As a matter of first impression, a District Court in Arkansas held that stipulations limiting the amount in controversy to less than the federal court’s jurisdictional minimum do not contravene putative class members’ due process rights.
The plaintiff filed a putative class action in Arkansas state court alleging that the defendants, New Balance Athletic Shoe, Inc. and New Balance, Inc., unfairly and misleadingly represented to consumers that their athletic shoe’s unique design conferred certain health benefits, although such benefits were not supported by scientific evidence, in violation of the Arkansas Deceptive Trade Practices Act. The plaintiff also brought a claim for unjust enrichment.
The plaintiff argued that she and a proposed class of ‘thousands’ of Arkansas consumers purchased the defendants’ athletic shoes because the product was purported to ‘activate muscles’ and ‘increase calorie burn’ in a way that standard athletic shoes did not. The plaintiff’s complaint limited the amount in controversy to $74,000 per class member and/or $5,000,000 for the entire class.
The defendants removed the action to the federal court under CAFA. The plaintiff moved to remand, and filed a “binding stipulation” in the form of two affidavits, one from the plaintiff and one from her attorney, swearing that the plaintiff would not seek damages greater than the federal jurisdictional limits imposed by CAFA.
The District Court remanded the action.
Because the complaint did not specify the total amount at issue in this action, the Court observed that, the defendants, under Bell v. Hershey, 557 F.3d 953, 956 (8th Cir. 2009), must show by a preponderance of the evidence that the amount in controversy exceeded CAFA’s jurisdictional minimum of $5 million. If the defendants met their burden, the plaintiff would have to establish to a legal certainty that her claim was under the $5 million. (Editors’ Note: See the CAFA Law Blog analysis of Bell posted on July 28, 2009).
The question in the instant case, one which no other court had definitively answered, was whether a plaintiff may meet her legal certainty burden by stipulating at the time the complaint is filed that she will not seek more than the federal jurisdictional minimum for herself and the putative class. To answer that question, the Court looked to Bell, which stated that “in order to ensure that any attempt to remove would have been unsuccessful, Bell could have included a binding stipulation with his petition stating that he would not seek damages greater than the jurisdictional minimum upon remand…”
The Court stated that even though the Bell court did not specifically reference the legal certainty burden, it did conclude that a clear stipulation, when submitted in good faith along with the complaint, would meet the Court’s requirements for defeating removal. By extension, it follows that if a stipulation can defeat removal, it can also satisfy the plaintiff’s legal certainty burden.
The defendants, however, thought it inappropriate for the plaintiff to bind the as-yet-unknown class members with her stipulation limiting the total recovery. The defendants raised due process concerns on behalf of the putative class and asserted that allowing the plaintiff to submit a stipulation waiving the rights of all the purported class members she sought to represent would gut CAFA and contravene its very purpose to eradicate class action abuses that were adversely impacting interstate commerce. Further, the defendants took exception to the plaintiff’s attempt here to carve out an ‘Arkansas only’ class action, calling such a move ‘class action abuse.’
The Court observed that the plaintiff is master of the complaint even in a class action subject to CAFA. Furthermore, established U.S. Supreme Court precedent–St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938)–holds that a plaintiff may structure her complaint so as to plead less than the jurisdictional amount in order to avoid trying her case in federal court. As it is the plaintiff’s prerogative to define the class as she chooses, she may limit the class to Arkansas consumers, and she may also define the method and means through which relief is to be obtained for the class. It was of no moment that the plaintiff currently qualified for inclusion in other nationwide class actions concerning the same product. Put simply, the Court said, “the plaintiff may assert her own claims, and she may set the terms for her class.”
The Court next found that Harris v. Sagamore Ins. Co., 2008 WL 4816471, at *3 (E.D. Ark., Nov. 3, 2008) addressed the defendants’ concerns. (Editors’ Note: See the CAFA Law Blog analysis of Harris posted on June 16, 2009). The Harris court summarized a number of due process protections available to defendants who are concerned about CAFA plaintiffs manipulating the judicial process and achieving an award in state court in excess of $5 million. These due process protections include: 1) allowing defendants to remove again later if a plaintiff files pleadings that assert an amount in damages exceeding the jurisdictional maximum; 2) prorating the recoverable damages among the class members; and 3) utilizing the doctrine of judicial estoppel, as recognized by the Supreme Court of Arkansas to bar a plaintiff who has stipulated to a cap on damages from recovering more than the jurisdictional maximum.
Moreover, the Court stated that the plaintiff in this case had not yet been named class representative, nor had the class been certified by any court. In case of class certification, the putative class members could simply opt out of the class and pursue their own remedies or join a different ongoing class action if they feel that the limitations placed on the class by the plaintiff were too restrictive, the Court maintained.
Accordingly, the Court concluded that the plaintiff had shown to a legal certainty that the aggregate damages claimed on behalf of the putative class shall in good faith not exceed the state jurisdictional limitation of $5 million.