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High court weighs class-action dispute

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Posted: Tuesday, January 8, 2013 12:00 am

WASHINGTON -- The Supreme Court on Monday questioned efforts by consumers' lawyers to limit the amount of money sought in class-action lawsuits so they are heard in state courts rather than more business-friendly federal court.

The justices appeared receptive to an insurance company's argument that lawyers artificially lower the amount of money at stake to keep the lawsuits in state courts, which often favor plaintiffs. The Standard Fire Insurance Co. of Hartford, Conn., says the tactic drags out lawsuits and makes fighting them so expensive that companies would rather settle.

The case involves a 2005 federal law that allows

defendants to transfer class actions involving more than $5 million to federal court.

Standard Fire is being sued by an Arkansas homeowner over the cost of

repairing hail damage.

A federal appeals court ruled that the suit could

remain in state court

because the homeowner has promised in writing to seek less than $5 million for himself and other Arkansas homeowners insured by Standard Fire.

The issue for the justices is whether the promise made by homeowner Greg Knowles, who lives in Miller County in southwestern Arkansas, is binding on others who eventually might be part of the lawsuit.

The Supreme Court has in recent years backed limits on class actions, most notably in the 2011 decision that stopped a suit against Wal-Mart involving up to 1.6 million of its female

employees who complained of sex discrimination.

In Monday's argument, Standard Fire seemed to draw support from liberal and conservative justices. Questioning Frederick, Justice Stephen Breyer said he worries that the promise of a $5 million limit "is just a loophole because it swallows up all of Congress's statute."

Justice Elena Kagan was the strongest voice in support of the homeowner, and she repeatedly challenged Theodore Boutrous Jr., the lawyer for the company. Kagan told Boutrous he should be asking Congress for help, not the court. "This is a kind of a jerry-rigged solution to get at a problem that Congress, in fact, did not address," Kagan said.

A decision is expected by late June.

The case is Standard Fire Insurance Co. v. Knowles, 11-1450.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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