Federal Appellate Court Affirms Significant Reduction of Damages Claim in TCPA Class Action
The Situation: The United States Court of Appeals for the Eighth Circuit considered constitutional limits on statutory damages awarded under the Telephone Consumer Protection Act ("TCPA").
The Result: The court affirmed a lower court's ruling and held that the statutory damages award of more than $1.6 billion violated the Due Process Clause of the United States Constitution.
Looking Ahead: This ruling may help defendants confronted with TCPA class actions to dramatically reduce or limit damages awards.
Defendant Dr. James R. Leininger helped finance a movie called Last Ounce of Courage through his business that invests in family-friendly entertainment. According to the court, the movie had "religious and political themes." A firm in charge of marketing the film hired ccAdvertising to conduct a telephone market campaign. ccAdvertising, in turn, made more than three million calls in a week.
The calls were formatted as a poll. After two polling questions, the call recipients were then asked if they would like to hear more about the movie, which they could opt into with a "yes" response. The phone calls were sent to phone numbers ccAdvertising already possessed, with ccAdvertising apparently believing that the calls did not violate the TCPA because it had prior consent from those recipients to be contacted about topics including religious liberty. The plaintiffs in the litigation received two answering machine messages.
After a jury verdict for the plaintiffs, the district court found the statutory damages against ccAdvertising to be unconstitutional and reduced them from $500 per call (a total of more $1.6 billion) to $10 per call (or about $32 million), a reduction of 98%.
The Eighth Circuit reviewed that reduction in the damages award. The TCPA provides for a recovery of "actual money loss" or "$500 in damages" per violation, whichever is greater. 47 U.S.C. § 227(b)(3)(B). While the court agreed with the plaintiffs that nothing in that provision allows for the reduction of statutory damages, the court found that the $1.6 billion award for statutory damages nevertheless violated the Due Process Clause.
The court noted that "[t]he Supreme Court long ago held that a penalty assessed pursuant to a statute violates the Due Process Clause if it is 'so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,'" even though Congress and the states "'still possess a wide latitude of discretion in' setting statutory penalties and damages." (Citations omitted.)
The Eighth Circuit stated the "obvious" conclusion that "$1.6 billion is a shockingly large amount." The court compared that to ccAdvertising's conduct, including that it "plausibly believed that it was not violating the TCPA" where it had "prior consent to call the recipients about religious liberty," and a predominant theme of the move is religious liberty. The court also noted that only call recipients who voluntarily opted in "during" the call heard the message about the film, and the call campaign lasted only about a week.
The court also noted that "the harm to the [call] recipients was not severe," noting that only 7% of the calls made it to the third question. Based on those facts, the court found that it was proper to reduce the amount of the award. Finally, the court rejected the plaintiffs' argument that the court may not consider the "aggregate award" but only the amount per violation (which was reduced by the district court from $500 to $10). The court found that argument to be "plainly foreclosed" by prior decisions.
Two Key Takeaways
- This decision confirms the importance of constitutional limits on statutory damages awards.
- It also rejects the notion that courts are bound to award the full amount of such statutory damages in every instance.
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