March 3, 2023
Stroock Client Alert
By: Allen H. Denson, Stephen J. Newman, Kingsley Nwamah
In a recent decision, the Ninth Circuit addressed an issue that has confounded courts in the circuit and in other circuits: whether an aggregated statutory damages award could violate due process. In Wakefield v. ViSalus, Inc., 51 F.4th 1109 (9th Cir. 2022), the Court held that aggregated statutory damages awards are subject to constitutional due process limitations in certain extreme circumstances, including in class actions brought under the Telephone Consumer Protection Act (the “TCPA”). Following the Wakefield decision, it appears litigants have honed in on the Court’s other holding in the opinion, finding that receipt of unwanted robocalls is, without more, a concrete injury sufficient to confer Article III standing. The Ninth Circuit’s standing analysis is significant as litigants seek to navigate this issue following the Supreme Court’s ruling in TransUnion LLC v. Ramirez, 594 U.S. ___, 141 S. Ct. 2190, 210 L. Ed. 2d 568 (2021), which placed significant limits on federal court standing to pursue statutory damages remedies. Notably, defendant ViSalus has filed notice with the Supreme Court of its intent to submit a petition for certiorari seeking review of the Ninth Circuit’s decision. If such a petition is filed, it may open the door for the plaintiff to file a cross-petition seeking Supreme Court review of the Ninth Circuit’s ruling imposing due process limits on statutory damages.
The case was one of the rare class action cases that went to verdict. Plaintiff Lori Wakefield filed a class action lawsuit, on behalf of herself and a now certified class of similarly situated individuals, against ViSalus, Inc. for violation of the TCPA for targeted robocalls featuring an artificial or prerecorded voice message without prior express consent. Plaintiff alleged that she and other class members had signed up with ViSalus to purchase or sell purported weight-loss products but when they became disinterested, ViSalus started reaching out with targeted robocalls. After a three-day trial, a jury returned a verdict for Plaintiff and the class and found that ViSalus placed 1,850,440 prerecorded calls in violation of the TCPA. Given that the TCPA sets the minimum statutory damages at $500 per call, the total damage award against ViSalus was $925,220,000. ViSalus filed a post-trial motion challenging the $925,220,000 statutory damages award as being unconstitutionally excessive, which was denied by the district court. ViSalus appealed the district court’s ruling on its post-trial motion.
Since its decision in United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir. 1992), courts in the Ninth Circuit and elsewhere have wrestled with the constitutionality of statutory damages awards where the award is unusually high because of either a significant number of violations at issue in a single dispute or the aggregation of damages in class action litigation. In Citrin, the Ninth Circuit applied a century-old test from the Supreme Court’s decision in St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919). In Williams, the Supreme Court held that damages awarded pursuant to a statute violate due process only if the award is “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” The Ninth Circuit applied the Williams standard to statutory awards on a per-violation basis in Citrin, but reserved the question as to whether aggregate statutory damages awards could violate due process. In Wakefield, the Ninth Circuit found that “aggregated statutory damages awards are, in certain extreme circumstances, subject to constitutional due process limitations.”
The Ninth Circuit factored in several considerations in arriving at its decision. First, the Ninth Circuit noted that the logic of the Supreme Court’s decision in Williams turns on the generable reasonableness and proportionality limit on damages awarded pursuant to statutes and not on the amount of the per-violation penalty. Thus, the Court interpreted Williams as imposing a constitutional limit on damages that are “so severe and oppressive” as to no longer bear any reasonable or proportioned relationship to the “offense.” To that end, the Court concluded that damages awards must be evaluated in relation to the “offense” for the purpose of considering the statute’s importance and deterrence goals. Second, the Ninth Circuit recognized that the statutory objections in imposing a per-violation award may become unduly prejudicial when aggregated.
Prior to the Court’s decision in Wakefield, courts in the Ninth Circuit (including the district court in Wakefield) relied on the Ninth Circuit’s decision in Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990), to assess the issue of proportionality and reasonableness in determining whether a damages award is extremely disproportionate to the office and obviously unreasonable. The Ninth Circuit made clear that its decision in Wakefield is meant to serve as additional guidance to the factors set forth in the Six Mexican Workers case when determining whether a particular statutory damages award is disproportionately punitive in the aggregate. Moreover, the Court noted that a distinguishable factor between the Six Mexican Workers case and the Wakefield case is that the statute at issue in that case—the Farm Labor Contractor Registration Act—did not consider punitive penalties in its calculation of liquidated damages. On the contrary, the TCPA’s text sets forth a fixed damages amount of $500 per call, rather than a range of damages. Thus, the Court noted that the TCPA reflects punitive and compensatory and deterrence goals. The Court also recognized that the TCPA does not set a ceiling for cumulative damages, in a class action or otherwise, but modern technology permits hundreds of thousands of automated calls and triggers minimum statutory damages with ease. On the aforementioned grounds—and due to the district court’s failure to apply the Williams test and the factors in the Six Mexican Workers case to determine the constitutionality of the damages award—the Ninth Circuit vacated and remanded the district court’s denial of the post-trial motion challenging the constitutionality of the statutory damages award.
ViSalus has obtained an extension of time from the Supreme Court to file a petition for certiorari. In the application, ViSalus states that it will seek review of the Ninth Circuit’s holding regarding Article III standing: that every call constitutes a concrete injury, regardless of the class member’s particular circumstances and regardless of whether any particular class member might not have been bothered by receiving the call. A recent district court decision indicates that Wakefield is already being relied on in support of broadly pro-plaintiff standing findings. In Rendon v. Cherry Creek Mortgage, LLC, No. 22-CV-01194-DMS-MSB, 2022 WL 17824003, at *3 (S.D. Cal. Dec. 20, 2022), the court denied a defendant’s motion to dismiss and found that plaintiff adequately alleged an injury-in-fact and cited to the Ninth Circuit’s language in Wakefield providing that the Ramirez decision “strengthens the principle that an intangible injury is sufficiently ‘concrete’ when (1) Congress created a statutory cause of action for the injury, and (2) the injury has a close historical or common law analog.”
ViSalus’s forthcoming petition may result in Plaintiff’s filing a cross-petition challenging the Ninth Circuit’s order that the trial court must examine whether due process requires a reduction of the punitive damages award. Notably, this is another area where specific Supreme Court guidance is lacking. In Ramirez, TransUnion’s petition for certiorari requested that the Supreme Court examine both standing and whether due process limits apply to aggregated punitive damages awards, but the Supreme Court limited review to just the standing question.
To a large degree, Wakefield has already given defendants solace by providing additional arguments against exceptionally large aggregated statutory damages awards. Over the long run, however, the pro-plaintiff ruling on standing may as a practical matter undermine the benefit of any due process analysis. Moreover, if the Supreme Court were to examine both the standing and due process issues in the same context, the resulting guidance could be extremely helpful to all litigants in determining appropriate case values.
We will continue to monitor developments in this important area of the law.
March 3, 2023
Stroock Client Alert
By: Allen H. Denson, Stephen J. Newman, Kingsley Nwamah
In a recent decision, the Ninth Circuit addressed an issue that has confounded courts in the circuit and in other circuits: whether an aggregated statutory damages award could violate due process. In Wakefield v. ViSalus, Inc., 51 F.4th 1109 (9th Cir. 2022), the Court held that aggregated statutory damages awards are subject to constitutional due process limitations in certain extreme circumstances, including in class actions brought under the Telephone Consumer Protection Act (the “TCPA”). Following the Wakefield decision, it appears litigants have honed in on the Court’s other holding in the opinion, finding that receipt of unwanted robocalls is, without more, a concrete injury sufficient to confer Article III standing. The Ninth Circuit’s standing analysis is significant as litigants seek to navigate this issue following the Supreme Court’s ruling in TransUnion LLC v. Ramirez, 594 U.S. ___, 141 S. Ct. 2190, 210 L. Ed. 2d 568 (2021), which placed significant limits on federal court standing to pursue statutory damages remedies. Notably, defendant ViSalus has filed notice with the Supreme Court of its intent to submit a petition for certiorari seeking review of the Ninth Circuit’s decision. If such a petition is filed, it may open the door for the plaintiff to file a cross-petition seeking Supreme Court review of the Ninth Circuit’s ruling imposing due process limits on statutory damages.
The case was one of the rare class action cases that went to verdict. Plaintiff Lori Wakefield filed a class action lawsuit, on behalf of herself and a now certified class of similarly situated individuals, against ViSalus, Inc. for violation of the TCPA for targeted robocalls featuring an artificial or prerecorded voice message without prior express consent. Plaintiff alleged that she and other class members had signed up with ViSalus to purchase or sell purported weight-loss products but when they became disinterested, ViSalus started reaching out with targeted robocalls. After a three-day trial, a jury returned a verdict for Plaintiff and the class and found that ViSalus placed 1,850,440 prerecorded calls in violation of the TCPA. Given that the TCPA sets the minimum statutory damages at $500 per call, the total damage award against ViSalus was $925,220,000. ViSalus filed a post-trial motion challenging the $925,220,000 statutory damages award as being unconstitutionally excessive, which was denied by the district court. ViSalus appealed the district court’s ruling on its post-trial motion.
Since its decision in United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir. 1992), courts in the Ninth Circuit and elsewhere have wrestled with the constitutionality of statutory damages awards where the award is unusually high because of either a significant number of violations at issue in a single dispute or the aggregation of damages in class action litigation. In Citrin, the Ninth Circuit applied a century-old test from the Supreme Court’s decision in St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919). In Williams, the Supreme Court held that damages awarded pursuant to a statute violate due process only if the award is “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” The Ninth Circuit applied the Williams standard to statutory awards on a per-violation basis in Citrin, but reserved the question as to whether aggregate statutory damages awards could violate due process. In Wakefield, the Ninth Circuit found that “aggregated statutory damages awards are, in certain extreme circumstances, subject to constitutional due process limitations.”
The Ninth Circuit factored in several considerations in arriving at its decision. First, the Ninth Circuit noted that the logic of the Supreme Court’s decision in Williams turns on the generable reasonableness and proportionality limit on damages awarded pursuant to statutes and not on the amount of the per-violation penalty. Thus, the Court interpreted Williams as imposing a constitutional limit on damages that are “so severe and oppressive” as to no longer bear any reasonable or proportioned relationship to the “offense.” To that end, the Court concluded that damages awards must be evaluated in relation to the “offense” for the purpose of considering the statute’s importance and deterrence goals. Second, the Ninth Circuit recognized that the statutory objections in imposing a per-violation award may become unduly prejudicial when aggregated.
Prior to the Court’s decision in Wakefield, courts in the Ninth Circuit (including the district court in Wakefield) relied on the Ninth Circuit’s decision in Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990), to assess the issue of proportionality and reasonableness in determining whether a damages award is extremely disproportionate to the office and obviously unreasonable. The Ninth Circuit made clear that its decision in Wakefield is meant to serve as additional guidance to the factors set forth in the Six Mexican Workers case when determining whether a particular statutory damages award is disproportionately punitive in the aggregate. Moreover, the Court noted that a distinguishable factor between the Six Mexican Workers case and the Wakefield case is that the statute at issue in that case—the Farm Labor Contractor Registration Act—did not consider punitive penalties in its calculation of liquidated damages. On the contrary, the TCPA’s text sets forth a fixed damages amount of $500 per call, rather than a range of damages. Thus, the Court noted that the TCPA reflects punitive and compensatory and deterrence goals. The Court also recognized that the TCPA does not set a ceiling for cumulative damages, in a class action or otherwise, but modern technology permits hundreds of thousands of automated calls and triggers minimum statutory damages with ease. On the aforementioned grounds—and due to the district court’s failure to apply the Williams test and the factors in the Six Mexican Workers case to determine the constitutionality of the damages award—the Ninth Circuit vacated and remanded the district court’s denial of the post-trial motion challenging the constitutionality of the statutory damages award.
ViSalus has obtained an extension of time from the Supreme Court to file a petition for certiorari. In the application, ViSalus states that it will seek review of the Ninth Circuit’s holding regarding Article III standing: that every call constitutes a concrete injury, regardless of the class member’s particular circumstances and regardless of whether any particular class member might not have been bothered by receiving the call. A recent district court decision indicates that Wakefield is already being relied on in support of broadly pro-plaintiff standing findings. In Rendon v. Cherry Creek Mortgage, LLC, No. 22-CV-01194-DMS-MSB, 2022 WL 17824003, at *3 (S.D. Cal. Dec. 20, 2022), the court denied a defendant’s motion to dismiss and found that plaintiff adequately alleged an injury-in-fact and cited to the Ninth Circuit’s language in Wakefield providing that the Ramirez decision “strengthens the principle that an intangible injury is sufficiently ‘concrete’ when (1) Congress created a statutory cause of action for the injury, and (2) the injury has a close historical or common law analog.”
ViSalus’s forthcoming petition may result in Plaintiff’s filing a cross-petition challenging the Ninth Circuit’s order that the trial court must examine whether due process requires a reduction of the punitive damages award. Notably, this is another area where specific Supreme Court guidance is lacking. In Ramirez, TransUnion’s petition for certiorari requested that the Supreme Court examine both standing and whether due process limits apply to aggregated punitive damages awards, but the Supreme Court limited review to just the standing question.
To a large degree, Wakefield has already given defendants solace by providing additional arguments against exceptionally large aggregated statutory damages awards. Over the long run, however, the pro-plaintiff ruling on standing may as a practical matter undermine the benefit of any due process analysis. Moreover, if the Supreme Court were to examine both the standing and due process issues in the same context, the resulting guidance could be extremely helpful to all litigants in determining appropriate case values.
We will continue to monitor developments in this important area of the law.
