11th Circuit Holds That Class Action Seeking Only Declaratory Relief May Be Removable Under Class Action Fairness Act

February 27, 2014

On Feb. 14, the U.S. Court of Appeals for the 11th Circuit held in South Florida Wellness, Inc. v. Allstate Insurance Co. that a putative class action seeking only declaratory relief can satisfy the amount-in-controversy requirement for a federal court to have jurisdiction of the case under the Class Action Fairness Act of 2005 (CAFA). This decision marks a significant ruling that will allow defendants to remove cases with greater confidence and less litigation.

In this recent decision, South Florida Wellness sued Allstate, claiming that Allstate had not complied with Florida insurance law governing what Allstate was required to pay South Florida Wellness for treating someone insured under an Allstate policy. Rather than demanding monetary damages, South Florida Wellness filed a putative class action on behalf of all other similarly situated health care providers, seeking a declaratory judgment that Allstate had violated the Florida law. After Allstate removed the case under CAFA, the district court held that the monetary value of the relief requested was too speculative and granted South Florida Wellness’ motion to remand.

On appeal, the 11th Circuit reversed the district court’s decision, holding that CAFA’s amount-in-controversy requirement was satisfied. Under CAFA, a class action is removable if (1) at least one plaintiff resides in a different state than one defendant, (2) the proposed class includes at least 100 people and (3) the aggregate amount in controversy is $5 million. Focusing on this third requirement, the Court of Appeals applied the same analysis to determining the amount in controversy for this class action as it applies in non-class action cases — that is, how much was at issue, to a sufficient degree of certainty, in the case from the plaintiff’s perspective at the time of removal. The Court of Appeals agreed with Allstate that the amount in controversy was the difference between what Allstate had paid and what South Florida Wellness claims Allstate should have paid (which was more than $68 million) and that this amount was not too speculative because, if South Florida Wellness prevailed, health care providers would likely pursue claims based on that judgment. The court therefore held that the case met the amount-in-controversy requirement and was properly removed under CAFA.

This decision represents an important determination that the analysis for the amount-in-controversy requirement under CAFA when a claim seeks only declaratory relief is the same as for non-class action cases, which promotes CAFA’s goal of making removal of class actions easier. It prevents plaintiffs from avoiding removal by filing a class action seeking only declaratory relief and then having class members file individual suits for damages. Armed with this precedent, defendants in putative class actions can confidently remove a putative class action seeking only declaratory relief.

McGuireWoods LLP’s lawyers understand the impact of this decision as part of the strategy for defending class actions before certification in the trial court and how this case fits into the broader class action landscape that is critical for handling any appeals.