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Ninth Circuit Holds That Rule 23 Does Not Require an “Administratively Feasible” Method of Determining Class Membership

Tenth Circuit Holds That Stamps.com Class Action Satisfies CAFA Amount In Controversy

Mailbox-595854_1920By Alexander M. Smith

The Tenth Circuit recently reaffirmed that the Class Action Fairness Act (“CAFA”), which authorizes federal jurisdiction over certain class actions where the amount in controversy exceeds $5 million, does not require a showing that class members are likely to recover that amount. 

In Hammond v. Stamps.com, Inc., a putative class of plaintiffs sued Stamps.com, which allows users to print their own postage from home without going to a post office, in New Mexico state court for allegedly failing to disclose that a monthly fee applies even in months where users did not print any postage.   Stamps.com removed to federal court and offered undisputed evidence that there were over 300,000 customers who called to cancel their subscriptions.  Although Stamps.com argued that the amount in controversy was between $10 and $93 million using the plaintiffs’ proposed measure of damages, the district court concluded that Stamps.com failed to show that there was over $5 million in controversy because it had not provided any evidence of the number of customers who cancelled their accounts because they discovered that they had been deceived by the recurring charges. 

The Tenth Circuit reversed.  Because there was a “legal possibility” that the putative class could recover over $5 million, the court held, CAFA authorized federal jurisdiction even if it was “unlikely” that the class would recover that amount.  By using the term “in controversy,” the court explained, Congress incorporated the standard for assessing jurisdiction under the umbrella diversity jurisdiction statute:  that the amount in controversy is satisfied unless it “appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.”   In reaching that conclusion, the court specifically rejected the plaintiffs’ suggestion that removal would be appropriate only after the parties had determined how many putative class members had actually been deceived.  “[I]n adopting CAFA,” the court held, “Congress didn’t say that a federal forum should await class certification or trial or some mini-trial concerning likely success on the merits.”  Instead, the court emphasized, “Congress expressly provided that it’s enough to establish that over $5 million is ‘in controversy.’” 

Hammond v. Stamps.com, Inc., --- F.3d ---, 2016 WL 7367770 (10th Cir. 2016).