The U.S. Supreme Court said on Tuesday a homeowner seeking to sue his insurer could not file suit in a state court considered friendly to plaintiffs.
Continue Reading Below
In a unanimous vote, the court held that the case belongs in federal court.
The ruling is important in the context of class action cases because it will likely prevent plaintiffs' lawyers from what critics view as an effort to circumvent a federal law aimed at keeping certain cases in federal court.
Greg Knowles, whose house had sustained hail damage, accused Travelers Cos' Standard Fire Insurance Co unit of refusing to pay for the cost of hiring general contractors.
He signed a stipulation to cap damages for class members at $5 million, the threshold at which a 2005 law, the Class Action Fairness Act, lets companies move class-action lawsuits to federal court.
The aim was to keep his case in a Miller County, Arkansas, state court known among some insurers as a ``magnet'' for class-action cases.
In a brief seven-page ruling, Justice Stephen Breyer wrote that the stipulation was not enough to keep the case in state court, for the simple reason that it was not binding. The damages could easily have exceeded $5 million, he said.
The stipulation only applied to Knowles himself, not the other class members, Breyer wrote.
"At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members,'' he added.