The Eighth Circuit holds that stipulations filed contemporaneously with a complaint limiting damages to an amount below CAFA’s jurisdictional threshold may be used to defeat CAFA jurisdiction
In Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069 (8th Cir. Feb. 2, 2012), the Eighth Circuit affirmed the district court’s remand of a putative class action filed on behalf of all book-entry shareholders of Ralston Purina against Nestle Holdings, Inc. The plaintiff-shareholder alleged that Nestle’s payment for the purchase price of the Ralston Purina stock was delinquent by six days, and, therefore, the shareholders were entitled to interest on the delayed payment. In the complaint’s prayer for relief, the plaintiffs sought judgment in an amount “that is fair and reasonable in excess of $25,000 but not to exceed $4,999,999.” According to the complaint, this was done for the express purpose of avoiding federal court jurisdiction under CAFA.
In addition to the statements in the complaint, the plaintiff filed contemporaneously with the complaint two stipulations, one signed by plaintiff as class representative, and one signed by plaintiff’s counsel. The plaintiff stipulated that he would not seek or accept any recovery in excess of $4,999,999. Plaintiff’s counsel stipulated that he would not seek or accept attorney’s fees other than a contingent fee out of a maximum recovery of $4,999,999. Nestle removed the case, arguing that CAFA’s jurisdictional amount was met because the merger agreement was governed by Missouri law, and Missouri law allowed for a 9% annualized interest rate. Using that rate, the interest sought would exceed $2 million each day for the six days the payment allegedly was delinquent. Nestle asserted that Missouri law, therefore, would not give effect to the stipulations or the prayer for relief. Nestle also argued that the stipulations would be unenforceable because they constituted a breach of the class representative’s duties to the other class members.
The Eighth Circuit held that the stipulations would be enforceable under Missouri based upon the doctrine of judicial estoppel. Since the Court found the stipulations to be enforceable it did not need to address whether the prayer for relief in the complaint was enforceable. The Eighth Circuit then turned to Nestle’s claim that the stipulations constituted a breach the class representative’s fiduciary duty to the class. Nestle’s concern was that a court might ultimately insist that the plaintiff-class representative be replaced, that his counsel not be approved as class counsel, or that the stipulation not be enforced against the class members. The Eighth Circuit concluded that while this could happen, the Court was restricted to consideration of the jurisdictional facts present at the time of removal. And, if the facts were to change, a party removing pursuant to CAFA is not limited to a one-year time limit for removal. Consequently, the case was properly remanded by the district court because the stipulations were enforceable against the plaintiff and the plaintiff had shown that it was legally impossible for the amount in controversy to be met.