9th Cir. Says Cumulative Aggregation of TCPA Penalties to $925 Million Raises Due Process Concerns

In Wakefield v. ViSalus, Inc., No. 21-35201, 2022 U.S. App. LEXIS 29228 (9th Cir. Oct. 20, 2022), the Court of Appeals held that aggregation of the TCPA’s penalties to $925 million raised due process concerns.

ViSalus last argues that the Due Process Clause of the Fifth Amendment requires a reduction of the $925,220,000 statutory damages award. HN8 Whether a damages award violates due process is a question of law that we review de novo. See Swinton v. Potomac Corp., 270 F.3d 794, 802 (9th Cir. 2001). ViSalus does not challenge the TCPA’s statutory framework as to the $500 amount for a single violation; several courts have held that the TCPA’s $500 civil remedy in isolation does not violate due process on a per violation basis.8 Instead, ViSalus argues that even if the TCPA’s statutory penalty of $500 per violation is constitutional, an aggregate award of $925,220,000 in this class action case is so “severe and oppressive” that it violates ViSalus’s due process rights. . .Where a statute’s compensation and deterrence goals are so greatly overshadowed by punitive elements, constitutional due process limitations are more likely to apply. Although we decline to apply the Supreme Court’s tests developed in the line of cases including BMW of North America, 517 U.S. 559, and State Farm, 538 U.S. 408, outside the context of a jury’s award of punitive damages, by analogy these cases teach that where statutory damages no longer serve purely compensatory or deterrence goals, consideration of an award’s reasonableness and proportionality to the violation and injury takes on heightened constitutional importance. See TXO Prod. Corp., 509 U.S. at 458 (noting that “reasonableness” is the focus of a due process inquiry regarding punitive damages); BMW of North America, 517 U.S. at 580-81 (discussing the “ratio” between  a punitive damages award and the “actual harm inflicted on the plaintiff” as measured through compensatory damages—one of three factors important to a due process evaluation of a punitive damages award issued by a jury). HN16 We thus conclude that the aggregated statutory damages here, even where the per-violation penalty is constitutional, are subject to constitutional limitation in extreme situations—that is, when they are “wholly disproportioned” and “obviously unreasonable” in relation to the goals of the statute and the conduct the statute prohibits. Williams, 251 U.S. at 67. As with punitive damages awarded by juries and per-violation statutory damages awards, a district court must consider the magnitude of the aggregated award in relation to the statute’s goals of compensation, deterrence, and punishment and to the proscribed conduct. Six Mexican Workers provides further guidance for determining whether a particular statutory damages award is disproportionately punitive in the aggregate. 904 F.2d at 1309. In that case, we adopted the factors the Fifth Circuit identified in Beliz v. W.H. McLeod & Sons Packing Co. to evaluate liquidated damages awards: 1) the amount of award to each plaintiff, 2) the total award, 3) the nature and persistence of the violations, 4) the extent of the defendant’s culpability, 5) damage awards in similar cases, 6) the substantive or technical nature of the violations, and 7) the circumstances of each case. Id. at 1309 (quoting Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d 1317, 1332 (5th Cir. 1985)). . .In the context of the TCPA, Congress permitted recipients of unsolicited telemarketing calls to “recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater.” 47 U.S.C. § 227(b)(3)(B). Congress thus set a floor of statutory damages at $500 for each violation of the TCPA but no ceiling for cumulative damages, in a class action or otherwise. Yet, in the mass communications class action context, vast cumulative damages can be easily incurred, because modern technology permits hundreds of thousands of automated calls and triggers minimum statutory damages with the push of a button. The district court here did not reduce the $925,220,000 statutory damages award in part because there was little Ninth Circuit authority directing a district court on how it should analyze damages that may be unconstitutionally excessive and appropriately reduce them. But Six Mexican Workers does provide some guidance, and we have endeavored in this opinion to provide more. Because the court did not apply the Williams test or Six Mexican Workers factors to determine the constitutionality of the damages award in this case, we remand so the court may assess in the first instance, guided by these factors and this opinion, whether the aggregate award of $925,220,000 in this class action case is so severe and oppressive that it violates ViSalus’s due process rights and, if so, by how much the cumulative award should be reduced.