Federal Courts Again Unwilling To Hear TCPA Disputes

Less than two weeks after the Sixth Circuit used the anti-aggregation rule to dismiss a TCPA coverage action on grounds that it failed to satisfy the amount in controversy requirement, for purposes of diversity jurisdiction, the First Circuit likewise dismissed a TCPA action on substantially similar grounds.  In CE Design, Ltd. v. American Economy Insurance  Co. (1st Cir. Jun. 19, 2010), the First Circuit Court of Appeals held that the claimant-initiated insurance coverage action did not satisfy the amount in controversy requirement.  Like the Sixth Circuit, the First Circuit concluded that because the class representative disclaimed any individual recovery in excess of $75,000, the anti-aggregation rule barred the exercise of subject matter jurisdiction.  The First Circuit also rejected CE Design’s arguments that the putative class members are seeking to enforce a single right in which they have a “common and undivided interest,” and that the amount in controversy may be viewed from the defendant-insurer’s perspective, i.e., that it could be on the hook to pay a six- or seven-figure judgment or settlement.  Notably, the First Circuit, like the Sixth Circuit, cited favorably to Travelers Property Casualty v. Good, 689 F.3d 714 (7th Cir. 2012). This case should have significant ramifications for insurers seeking to litigate coverage in federal court for class actions seeking statutory damages or minimal actual damages.  We continue to believe that under most circumstances, it would be in the best interests of insurers that wish to avoid litigating coverage for such claims in state court to consider initiating coverage litigation early in the claims process (so the insurer can use the cost of defense to meet the amount in controversy requirement) and not wait until after a settlement has been reached.

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