Hammond v. Stamps.com, Inc.
2016 U.S. App. LEXIS 22600
10th Cir.2016Background
- Plaintiff Brenda Hammond subscribed to Stamps.com and alleges the website misleadingly failed to disclose that monthly subscription fees would be charged every month; she claims many customers were similarly deceived.
- Hammond sought to bring a nationwide class action in New Mexico state court for customers who called to cancel after discovering recurring charges; she alleged statutory damages of $300 for herself and estimated other class members would likely recover $31.98 (two months at $15.99), and sought punitive damages.
- Stamps.com removed the case to federal court under the Class Action Fairness Act (CAFA), submitting declarations that at least 312,680 customers canceled during the relevant period. Using Hammond’s damage figures, the company calculated potential aggregate exposure between roughly $10 million and $93 million.
- The district court remanded, reasoning Stamps.com had not shown how many of the cancellations were caused by deception and thus failed to establish more than $5 million “in controversy.”
- The Tenth Circuit reviewed whether CAFA’s “in controversy” requirement permits removal when it is legally possible (even if unlikely) that aggregate damages exceed $5 million, and whether the district court erred by demanding proof that damages were likely to exceed the threshold.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA’s “amount in controversy” requires proof that damages are likely to exceed $5 million | Hammond: must show fewer class members relied on misrepresentations; Stamps.com failed to prove number deceived, so amount in controversy not met | Stamps.com: aggregated plausible maximum recoveries based on number of cancellations and plaintiff’s own damage figures; this creates a legal possibility exceeding $5 million | Held: Proponent need only show a legal possibility a factfinder might award more than $5 million; removal proper given undisputed facts |
| Proper legal standard for “in controversy” under CAFA | Hammond: district court correctly questioned probability of recovery when applying the amount-in-controversy inquiry | Stamps.com: historical meaning governs — threshold satisfied if a jury might legally conclude damages exceed statutory amount | Held: Traditional “legal possibility” standard applies (St. Paul Mercury rule); district court erred by focusing on factual probability |
| Whether courts may require proof tied to actual reliance or individualized mini-trials at removal | Hammond: remand favored until class certification or more concrete proof of class members who relied | Stamps.com: CAFA and removal procedures are designed to resolve forum early; requiring mini-trials defeats that scheme | Held: CAFA contemplates early forum determination; courts should not force proponent to litigate merits or concede liability to establish jurisdiction |
| Whether denying removal here was consistent with other circuits | Hammond: district court’s approach justified | Stamps.com: multiple circuits adopt legal-possibility standard and permit such removals | Held: Tenth Circuit aligns with other circuits that permit removal when stakes are plausibly over $5 million unless recovery is legally impossible |
Key Cases Cited
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (holding that dismissal is proper only when it appears to a legal certainty that the claim is for less than the jurisdictional amount)
- Hartis v. Chi. Title Ins. Co., 694 F.3d 935 (8th Cir.) (explaining amount-in-controversy requires only that a factfinder might legally conclude damages exceed the statutory amount)
- Raskas v. Johnson & Johnson, 719 F.3d 884 (8th Cir.) (holding improbability of recovery does not defeat jurisdiction where legal possibility exists)
- Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242 (10th Cir.) (cautioning against requiring proof that damages are likely rather than legally possible)
- McPhail v. Deere & Co., 529 F.3d 947 (10th Cir.) (discussing amount-in-controversy standards)
- Gibson v. Jeffers, 478 F.2d 216 (10th Cir.) (addressing traditional jurisdictional amount principles)
- Spivey v. Vertrue, Inc., 528 F.3d 982 (7th Cir.) (holding CAFA jurisdiction depends on plausible stakes, not likelihood of recovery)
- Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395 (9th Cir.) (same conclusion regarding CAFA amount-in-controversy)