CAFA’s $5 Million Amount-in-Controversy Requirement Can Be Met Where Plaintiff Seeks Only Declaratory Relief, Eleventh Circuit Rules

The U.S. Court of Appeals for the Eleventh Circuit, reversing a district court’s decision, has determined that the $5 million amount-in-controversy requirement under the federal Class Action Fairness Act (“CAFA”) for federal subject matter jurisdiction can be satisfied where a plaintiff seeks only declaratory relief.

The Case

After Florencio Sanchez was injured in an automobile accident and received medical treatment at South Florida Wellness, Inc., a Florida-based health care provider, Sanchez assigned to Wellness her right to benefits under her insurance policy from Allstate Insurance Company. Wellness sought payment of 80 percent of the amount it had billed Sanchez, but Allstate paid a lower amount based on its interpretation of Sanchez’s policy. Instead of paying 80 percent of the total amount billed, Allstate paid Wellness only 80 percent of certain amounts set out in the statutory fee schedule contained in a Florida law.

Wellness filed a putative class action against Allstate in a Florida state court. Its complaint sought no monetary damages but only a declaration that the form language Allstate used in the class members’ insurance policies did not clearly and unambiguously indicate that payments would be limited to the levels provided for in the Florida law.

Allstate removed the case to federal court, asserting that CAFA provided for federal subject matter jurisdiction over the lawsuit. Federal district courts have subject matter jurisdiction under CAFA where, among other things, the aggregate amount in controversy exceeds $5 million.

In support of its claim of federal jurisdiction, Allstate submitted an affidavit from an Allstate employee who attested that the putative class included over 100 health care providers and insureds who had submitted “1,655,733 bills for payment or reimbursement” of medical expenses during the relevant time period. She calculated that Allstate had paid out $126,474,216.25 in benefits for those claims based on the statutory fee schedule and that if Allstate had not limited payment based on the statute, then the putative class members would have been entitled to $194,651,033.94 in benefits (80 percent of the billed amounts), a difference of $68,176,817.69. Allstate contended that that difference was the amount in controversy.

Wellness moved to remand the case to state court, contending that its complaint did not seek damages but only a declaration that the language of the Allstate insurance policies did not clearly and unambiguously adopt the coverage caps of the Florida law and that, therefore, Allstate had not met the $5 million amount-in-controversy requirement. Wellness recognized that a declaration in its favor would entitle the class members to seek additional payment from Allstate, but argued that the financial effects of the declaratory judgment could not be considered for purposes of determining the amount in controversy because those effects were too speculative.

The district court granted the motion to remand, and Allstate appealed.

The Circuit Court’s Decision

The circuit court reversed, finding that Allstate had carried its burden of establishing an amount in controversy that exceeded $5 million.

The circuit court found that the Allstate employee’s affidavit established that the declaratory judgment Wellness sought would determine whether Allstate had made insufficient payments on more than 1.6 million “bills for payment or reimbursement,” with the amount of the insufficiency exceeding $68 million, which it would owe the putative class members. The Eleventh Circuit added that estimating the amount in controversy was “not nuclear science” and that it did “not demand decimal-point precision.” It decided that “the amount in controversy” in this case was “far above the $5 million threshold set by CAFA.”

Moreover, the circuit court reasoned, the possibility that members of the putative class ultimately would not recover the full $68,176,817.69 did not shut the door on federal jurisdiction. It concluded by observing that the “pertinent question” at the jurisdictional stage was what was in controversy in the case, not how much the plaintiffs ultimately were likely to recover.

The case is South Florida Wellness, Inc. v. Allstate Ins. Co., No. 14-10001 (11th Cir. Feb. 14, 2014).