CAFA provides for federal jurisdiction over class actions if the amount “in controversy” exceeds $5 million. This is not always a complicated exercise, with the calculation often resting on the total potential number of class members multiplied by the amount of individual damages. But what about when the class definition requires an additional, fact-intensive inquiry, thus realistically reducing the actual number of class members—and, as a result, the total amount of damages truly “in controversy”? The Tenth Circuit faced this question in Hammond v. Stamps.com, 844 F.3d 909 (10th Cir. 2016), concluding in a published opinion that the total “conceivab[le]” damages are what matters, not what the plaintiff will likely be able to prove.
For a $15.99 monthly fee, Stamps.com allows subscribers to print postage from home. According to Ms. Hammond, the site fails to adequately disclose the subscription charges, leading her to erroneously believe that she would only be charged for the months that she used the site, rather than every month. Alleging violations of New Mexico law, she brought a putative class action in state court on behalf of “all residents of the United States of America who were required to telephone Defendant to cancel their account after discovering Defendant was taking money from them.” She alleged damages of between $31.98 (two months’ worth of fees) and $300 (statutory damages under the state’s Unfair Practices Act) per class member.
In support of removal, Stamps.com provided undisputed evidence that it received 312,000 telephone cancellations during the class period. That number, multiplied by even the lowest individual damage figure proposed by Ms. Hammond ($31.98), generated more than $9 million in potential damages—well over CAFA’s $5 million minimum. But the district court emphasized that the class definition did not include people who had cancelled their subscription for reasons unrelated to the fee disclosure, and that the failure of Stamps.com—the bearer of proof on removal—to provide evidence of the percentage of the 312,000 people who actually fell within the class definition was fatal to their removal bid.
On appeal, however, the Tenth Circuit took a different tack. Although the court agreed that it was unlikely that all 312,000 customers cancelled their accounts because of the fee disclosure issue, the court emphasized that “the question at this stage in the proceedings isn’t what damages the plaintiff will likely prove but what a factfinder might conceivably lawfully award.” Requiring the jurisdictional proponent to demonstrate any more would be inconsistent with the meaning of “in controversy,” which the court reasoned had been historically interpreted “modestly.” And given that the parties had not provided “any legal impediment” that would preclude a jury from finding for all 312,000 potential class members, the court determined that the jurisdictional threshold was satisfied.
Takeaways from Hammond? The court was sensitive to concerns of the removing defendant, reasoning that “the proponent of jurisdiction [should not be forced] to argue against himself, tasking him with the job of proving his own likely liability in a sufficient number of individual cases simply to get a foot in the door of the federal courthouse.” At the jurisdictional stage, an “aggressive inquiry” replete with “mini-trials” is inappropriate; those are better reserved for the merits.