Hammond v. Stamps.Com, Inc., 2016 WL 7367770 (10th Cir., Dec. 20, 2016)

Reversing a district court’s order remanding the action, the Tenth Circuit found that federal jurisdiction under the CAFA does not depend on how much the plaintiff is likely to recover, but on the amount the plaintiff’s allegations suggest she might lawfully recover.

In this case, the plaintiff was a consumer who brought a putative class action alleging that the defendant charged her monthly payments from its website without her consent. The plaintiff alleged claims of conversion, unjust enrichment, and violation of the New Mexico Unfair Practices Act (“UPA”).

The plaintiff specifically alleged that when she visited the defendant’s website to purchase stamps, she was tricked into joining a monthly fee program and was subsequently charged $15.99 per month without her consent. The plaintiff alleged that there were hundreds of thousands of similarly-situated consumers who were also misled by the defendant’s website and enrolled in the monthly fee program erroneously.

The plaintiff requested $100 in damages under the UPA, treble damages of up to three times the amount of the actual damages, and attorneys’ fees and costs. The defendant removed the case, arguing that the potential value of the case could exceed $93 million, which was well above the $5 million threshold established under the CAFA.  In support of its argument, the defendant submitted declarations illustrating that at least 312,680 customers called to cancel their subscriptions, and if each of those persons were entitled to damages between the potential minimum amount of $31.90 and maximum amount of $300 per person, the value of the case would be between $10 million and $93 million.

The District Court determined that the amount-in-controversy per class member would be at least $300. As to the class size, the District Court found that in its widest scope the class could include individuals who canceled their accounts over the applicable UPA four-year period preceding the filing of the plaintiff’s complaint, provided they were required to telephone the defendant to cancel their account after discovering that the defendant was taking money from them. Id. at *10.  The District Court found that it was impossible to say whether the class size was 1,000 or 100,000.  The District Court reasoned that, based on the evidence (or lack thereof), both seem equally likely, though the former would not be enough to meet the jurisdictional amount-in-controversy.  The District Court thus concluded that the defendant did not meet its burden to show by a preponderance of the evidence that the amount-in-controversy was satisfied.  The District Court also determined that it lacked subject-matter jurisdiction under CAFA, and granted the plaintiff’s motion to remand.

The defendant appealed the Tenth Circuit.

The Tenth Circuit noted that in reaching its decision to deny jurisdiction, the District Court emphasized that it was unlikely that the plaintiff would be able to show all 312,000 customers cancelled their accounts because of the defendant’s alleged misrepresentations. Rejecting this approach, the Tenth Circuit held that the proper question at this stage in the proceedings was not what damages the plaintiff would likely prove, but what a fact-finder might conceivably award.  The Tenth Circuit stated, “federal jurisdiction under the CAFA does not depend on how much the plaintiff is likely to recover but on the amount the plaintiff’s allegations suggest she might lawfully recover.”

Given that the plaintiff could potentially recover over $5 million, the Tenth Circuit ruled that federal jurisdiction was proper.

Accordingly, the Tenth Circuit reversed and remanded.

-Melissa M. Grand