Statutory schemes that create per-violation damage minimums can lead to devastating consequences when assessed in the aggregate. Where evidence of actual damages is lacking, judgments may be disproportionate to the harm and can create oppressive results. As gatekeepers, courts can protect defendants’ Constitutional rights from being violated by extraordinary damage awards.  

Recently, the Ninth Circuit Court of Appeals remanded a $925,000,000 jury verdict and judgment to the district court with instructions to consider whether the damages awarded are unconstitutionally excessive¹. The large verdict followed from the plaintiff’s claims that ViSalus, a health supplement maker, violated the federal Telephone Consumer Protection Act (“TCPA”) when it placed millions of unwanted robocalls to her and the certified class. The appeals court left intact most of the district court’s findings and judgment, including the lower court’s decision certifying the class, but it found that the district court had not considered whether the substantial damages award might violate the defendant’s Constitutional due process rights. ViSalus is the second recent appellate opinion to address the Constitutional limits of extraordinary statutory damage verdicts.

Plaintiff sued ViSalus asserting that the defendant placed unwanted telephone calls featuring a prerecorded or artificial voice in violation of the TCPA. At the conclusion of the three-day trial, the jury found that the defendant was responsible for roughly 1.8 million calls that violated the TCPA. Although the TCPA allows actual damages or minimum statutory damages of $500 per call, whichever is greater, the court ordered ViSalus to pay aggregated damages based on the $500 statutory minimum. The district court concluded that it was bound by the TCPA’s statutory damage requirements and, as a result, entered a judgment for $925,000,000.  

On appeal, the Ninth Circuit turned away all of ViSalus’ challenges except one: It remanded the case to the district court to make findings whether the amount of the verdict could violate the defendant’s due process rights. The court ruled that, in rare instances where statutory damages could result in extremely substantial verdicts, the amount awarded could be so oppressive as to be unconstitutional. The court observed that the concerns are heightened where the statutory damages are awarded in a strict liability fashion when the plaintiffs have not quantified any actual damages suffered as a result of the violative conduct. 

In reaching its decision, the appeals court discussed precedent from the United States Supreme Court involving statutory damages. It also looked to precedent discussing the constitutional limits of punitive damages. The court did not hold or suggest that statutory damage awards on a per violation basis would necessarily require a constitutional analysis, but it considered the analysis required where the penalty prescribed is so disproportionate to the offense as to be unreasonable. And, where aggregation of awards, e.g., through a certified class, results in an extraordinarily large amount, then constitutional limits may require a reduction in the award.  The court remarked that, while Congress in the TCPA set a statutory minimum amount of $500 for each violation of the act, it did not place any ceiling in the statute whether an individual or class action was brought. The court in ViSalus, thus, determined that the cumulative nature of the TCPA damages amount could trigger such substantial minimum statutory damages that the defendant’s Constitutional rights were at risk. The court stressed that Constitutional limits on statutory damages awards should be reserved for those rare circumstances in which the largely punitive aspect of the per violation amount results in an aggregate gravely disproportionate to the related legal violation or harm. 

The Ninth Circuit Court of Appeals decision follows a similar result in the Eighth Circuit Court of Appeals in Golan v. FreeEats.com, Inc., 930 F.3d. 950 (8th Circuit 2019). Golan also was a TCPA case, where the jury found that the defendant had violated statute and the court entered judgment in the amount of more than 1.6 billion dollars (based upon the minimum statutory amount of $500 per call for 3,242,493 calls). Unlike in the ViSalus case, the district court found that the 1.6 billion dollar award was so unreasonable and disproportionate to the offense that it reduced the damages to $10 per call for a total of $32,424,930. On appeal by the plaintiffs, the Eighth Circuit affirmed the district court’s judgment finding that the statutory award of more than 1.6 billion dollars violated the defendant’s Constitutional rights. The court agreed that the statutory damage calculation violated the Constitution’s due process clause because it was a shockingly large amount compared to the conduct at issue. The harm to the call recipients was not severe.  Accordingly, given the disproportionate nature of the damages to harm, the court held that the award was unconstitutional.  

Defendants faced with class actions asserting statutory damages should pay close attention to these cases. Particularly when damages may be aggregated, statutory awards can reach such significant amounts so as to be wholly oppressive and unreasonable. Where there is little or no harm to the individual or class members involved, and the alleged statutory damages are disproportionate to the conduct, due process challenges to the aggregate amount of damages should be made. Based upon the decisions in Golan and ViSalus, defenses should be asserted to argue that potential statutory damage awards may be unconstitutional.  

1. Wakefield v. ViSalus, Inc., 2022 WL 11530386 (9th Cir. Oct. 20, 2022)