In Wakefield v. ViSalus, Inc., the Ninth Circuit considered whether a jury verdict of $925,200,000 for cumulative statutory damages under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”) was constitutional in light of its harsh severity.  After a three-day trial, the jury delivered a verdict against ViSalus, finding that it sent over 1.8 million prerecorded calls to class members without prior express consent, in violation of the TCPA.   As the TCPA sets the minimum statutory damages at $500 per call, the total damage award against ViSalus was a staggering $925,220,000.

On appeal, the Ninth Circuit vacated and remanded the district court’s denial of ViSalus’s post-trial motion challenging the constitutionality of the statutory damages award under the Due Process Clause of the Fifth Amendment to permit reassessment of that question.  Turning to Supreme Court precedent from over a century ago, the Ninth Circuit reasoned that in certain extreme circumstances, a statutory damages award violates due process if it is so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.  The Court of Appeals held that this constitutional due process test should apply to aggregated statutory damages awards even where the statutory per-violation award is constitutional, which has been the case in individual TCPA actions. 

Providing a roadmap for district courts, the Ninth Circuit cited the factors it considered over three decades ago in Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990), to determine whether an aggregated statutory damages award is disproportionately punitive:

  • The amount of award to each plaintiff,
  • The total award,
  • The nature and persistence of the violations,
  • The extent of the defendant’s culpability,
  • Damage awards in similar cases,
  • The substantive or technical nature of the violations, and
  • The circumstances of each case.

Wakefield demonstrates that due process considerations are increasingly receiving traction from the Courts of Appeals.  In Parker v. Time Warner Entm’t Co., 331 F.3d 13, 22 (2nd Cir. 2003), the Second Circuit addressed this issue but only as a hypothetical in the context of a prospective aggregate statutory damages award under the Cable Communications Policy Act.  More recently, the Eighth Circuit, in Golan v., Inc., 930 F.3d 950 (8th Cir. 2009), affirmed a district court’s reduction of a $1.6 billion aggregate statutory damages award under the Due Process Clause. 

In light of this increasing trend, Wakefield may have powerful implications for putative class actions based on statutes, which permit large aggregate awards, in particular the TCPA.  A few of those implications are set forth below. 

New Challenge to Class Certification

If aggregate statutory damages have a potential to become unconstitutional, a class action cannot be viewed as a superior vehicle to litigating individual claims if the class members cannot get the full amount of statutory damages. 

Restructuring Settlement Leverage

Hypothetical aggregated jury statutory damage awards often drive outrageous settlement demands and results in less room for negotiation post class certification.  The risk of a challenge to an unfairly punitive damages award provides new settlement leverage. 

Traction for Constitutionality Defenses

Companies have been raising affirmative defenses that damages on a class wide basis are unconstitutional for years.  However, those companies have found little success until the Wakefield ruling.  This case may signal that affirmative defenses contesting constitutionality have some teeth.

Reconsideration of Statutory Damages By Congress

The TCPA, which provides statutory damages of $500 to $1,500 per call was enacted in 1991—a much less automated time.  In Wakefield, the Ninth Circuit recognized that “modern technology permits hundreds of thousands of automated calls and triggers minimum statutory damages with the push of a button.”  Wakefield at 34.  The Ninth Circuit implicitly suggests that Congress may want to revisit the damages it assigned to more antique statutes. 

Next Article: Collections Industry Sees Significant Split Between Large ...