In a recent Telephone Consumer Protection Act (TCPA) case (Golan v. FreeEats.com, Inc. (d/b/a/ ccAdvertsing et al.)), the U.S. Court of Appeals for the Eighth Circuit affirmed a lower court’s massive cut in post-trial damages. This ruling may open additional doors to defendants in TCPA claims in attempts to lessen damages based on the reasonableness (or lack thereof) of the award and successfully argue that there is basis to set aside the statutory minimum award and justify a discount.
The TCPA is a federal statute that restricts telemarketing communications to safeguard consumer privacy. Without explicit customer consent, companies must adhere to strict solicitation rules, including honoring the National Do Not Call Registry. Subscribers may sue a company that does not follow the TCPA guidelines. Unsurprisingly, the large increase in marketing to mobile devices (aka “robocalls”), has contributed to an increase in TCPA class action matters. To prevail on a TCPA claim, plaintiffs need only show that they received unsolicited communications; they do not need to show that they were damaged.
According to the statute:
- A subscriber may (i) sue for up to $500 for each violation or recover actual monetary losses, whichever is greater, and/or (ii) seek an injunction;
- A subscriber may sue for up to three time the damages, ($1,500 for each violation) if defendant is found to have willfully or knowingly violated TCPA.
In the aforementioned case, Defendant was accused of making approximately 3.2 million marketing calls to promote a movie. Defendant maintained that it had prior consent from individuals on an existing call list that allowed Defendant to contact them and that such calls therefore did not violate the TCPA. A jury verdict for the Plaintiffs awarded the statutory $500 per call. However, the district court found that these statutory damages totaling over $1.6 billion were unconstitutional when presented with a post-trial motion and reduced the award to $10 per call, as follows:
“ccAdvertising filed a post-trial motion for reduction of damages, arguing the statutory damages of $500 per call for 3,242,493 calls — totaling $1,621,246,500 — was so excessive it violated the Due Process Clause of the Fifth Amendment. The district court concluded that the $1.6 billion award was “obviously unreasonable and wholly disproportionate to the offense” and reduced the damages to $10 per call for a total of $32,424,930.”
The Eighth Circuit affirmed this 98% reduction, noting:
“The 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.””
In making its assessment, the Eighth Circuit considered that Defendant “plausibly believed it was not violating the TCPA” because it “had prior consent to call the recipients about religious liberty, …a predominant theme” of the movie. The Eighth Circuit also considered that the marketing campaign was only one week long and that “only the recipients who voluntarily opted in during the call”, about 7% of recipients, “heard the message about the film.”
The damages in this recent case were significantly discounted because the aggregate award was found disproportionate to the offense. However, one might similarly argue other basis to justify a settlement discount in TCPA cases, including the financial condition of the defendant and whether it is appropriate that a judgement significantly alters or eliminates defendant’s ability to continue operations in a similar situation where a defendant might have reasonably believed it was not in violation. Some items to consider in assessing the defendant’s ability to pay the award (and whether such payment would cause the company significant financial harm or failure) include the following:
- The value of various items on the company’s balance sheet (e.g., assets and liabilities, debt, etc.)
- Whether the company has an available credit line to fund the payment amount
- The company’s future prospects and plans, including whether or to what degree such a payment would impede the company’s ability to accomplish them and affect the company’s overall value
- Whether the company’s current value (or market capitalization) is in excess of the payment