Eleventh Circuit Holds Declaratory Judgment Action Satisfies CAFA | Practical Law

Eleventh Circuit Holds Declaratory Judgment Action Satisfies CAFA | Practical Law

The US Court of Appeals for the Eleventh Circuit in S. Florida Wellness, Inc. v. Allstate Ins. Co. held that the Class Action Fairness Act of 2005's (CAFA) $5 million amount in controversy requirement can be satisfied if the plaintiff seeks only declaratory relief.

Eleventh Circuit Holds Declaratory Judgment Action Satisfies CAFA

Practical Law Legal Update 1-558-1210 (Approx. 3 pages)

Eleventh Circuit Holds Declaratory Judgment Action Satisfies CAFA

by Practical Law Litigation
Published on 18 Feb 2014 • USA (National/Federal)
The US Court of Appeals for the Eleventh Circuit in S. Florida Wellness, Inc. v. Allstate Ins. Co. held that the Class Action Fairness Act of 2005's (CAFA) $5 million amount in controversy requirement can be satisfied if the plaintiff seeks only declaratory relief.
On February 14, 2014, the US Court of Appeals for the Eleventh Circuit in S. Florida Wellness, Inc. v. Allstate Ins. Co. held that the Class Action Fairness Act of 2005's (CAFA) $5 million amount in controversy requirement can be satisfied if the plaintiff seeks only declaratory relief (No. 14-10001, (11th Cir. Feb. 14, 2014)).
In July 2013, South Florida Wellness, Inc. (Wellness) filed this putative class action in Florida state court contending that Allstate Insurance Company (Allstate) failed to clearly and unambiguously indicate in its automobile policies for its personal injury protection (PIP) coverage that it would limit payments to Florida's statutory fee schedule. The general rule for PIP coverage in Florida is that an insurance policy must cover 80% of all reasonable costs for medically necessary treatment for automobile accidents, but an insurer may opt out of the general payment rule and instead limit payment to 80% of the statutory fee schedule. The complaint did not seek monetary damages. It sought only a declaration that the form language Allstate used in the class members' PIP insurance policies did not clearly and unambiguously indicate that payments would be limited by the statutory fee schedule.
Allstate removed the case to the US District Court for the Southern District of Florida. Allstate asserted that the CAFA provided for federal subject matter over the lawsuit because the proposed class included at least 100 members, there was minimal diversity of citizenship and the aggregate amount in controversy exceeded $5 million.
In support of its claim of federal jurisdiction, Allstate submitted an affidavit by an employee that calculated the amount of benefits that Allstate paid out based on the statutory fee schedule and the amount that the putative class members would have been entitled to in benefits had Allstate paid 80% of the billed amounts. Allstate concluded that the amount in controversy was the difference between the two figures, or over $68 million, because that was the additional amount in benefits the putative class members would be eligible to recover if they received the declaratory judgment.
Wellness moved to remand the case to state court. It argued that because it sought only declaratory relief, the amount in controversy was too speculative to satisfy the CAFA's amount in controversy requirement. The district court agreed and granted the motion. Allstate appealed.
The Eleventh Circuit reversed, holding that a declaratory judgment action may satisfy the amount in controversy requirement.
In determining the amount in controversy in a declaratory judgment case, the court found that:
  • The amount in controversy is the amount at issue in the litigation, not the amount that the plaintiffs are ultimately likely to recover.
  • The value of the declaratory relief is the monetary value of the benefit that would flow to the plaintiff if the relief was granted.
  • For CAFA purposes, the court aggregates the claims of individual members and considers the monetary value of the entire class if declaratory relief were granted.
  • The value of the declaratory relief must be "sufficiently measurable and certain" to satisfy the amount in controversy requirement, but absolute certainty is not required.
The Eleventh Circuit concluded that Allstate established that the amount in controversy exceeded $5 million because:
  • Wellness did not provide any evidence to rebut Allstate's affidavit or to controvert its calculations.
  • Allstate's valuation of the declaratory judgment was not speculative. Allstate identified the specific number of bills and the concrete monetary value that the plaintiffs may be eligible to recover.
  • The large value of the declaratory judgment in this case, which is in excess of $68 million, suggests that the $5 million requirement would likely be satisfied.