Statutes defining minimum damages per violation, such as many consumer protection laws, often inspire class actions. Plaintiffs argue that certification of such classes is easier because they avoid issues of individualized damages. But in the aggregate, these damages can become immense. As a recent case from the Ninth Circuit shows, however, the Constitution places outer limits on the damages available in these class actions.

Due Process Limits on Aggregate Statutory Damages

Wakefield v. ViSalus, Inc., 51 F.4th 1109 (9th Cir. 2022) involved a class action under the Telephone Consumer Protection Act (“TCPA”). After the class was certified, the jury found the defendant had made over 1.8 million calls that violated the statute. Because the minimum statutory damages were $500 per call, total minimum damages under the statute were $925 million.

The Ninth Circuit held that these damages potentially violated due process. The court noted that the Supreme Court first subjected statutory damages to due process scrutiny over a century ago, in St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63 (1919). Williams, in the context of an individual case, held that a statutory penalty could be unconstitutional where “the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” In another, more recent line of cases, the Supreme Court has imposed limitations on punitive damages awards under the due process clause, in cases such as State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003).

Several courts have held that, in an individual case, the $500 per-call minimum in the TCPA does not violate the Williams standard. The Ninth Circuit nevertheless held that such damages, when accumulated in the aggregate, can pose constitutional concerns. “An aggregated award could, like a per-violation award, be wholly disproportioned to the prohibited conduct (and its public importance) and greatly exceed any reasonable deterrence value.” Statutory damages also often have a punitive component that can, in the aggregate, become excessive, much like an unconstitutional punitive damages award.

As a result, the court concluded that aggregate statutory damages are unconstitutional when they are “wholly disproportioned and obviously unreasonable in relation to the goals of the statute and the conduct the statute prohibits.” “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.”

The court emphasized that “only very rarely will an aggregated statutory damages award meet” this standard, and even awards that are “predominantly punitive” may pass constitutional muster. Where the legislature declines to adopt an aggregate cap on statutory damages, courts ordinarily must defer and apply the statutory damages as written. Courts should impose a limit only when the aggregate becomes “gravely disproportionate to and unreasonably related to the legal violation committed.”

In Wakefield, the Ninth Circuit became the second United States Court of Appeals to hold that due process limits aggregate statutory damages in class actions, joining the Eighth Circuit’s decision in Golan v. FreeEats.com, Inc., 930 F.3d 950 (8th Cir. 2019). The Second Circuit had previously implied that such a limitation exists in Parker v. Time Warner Entertainment Co., L.P., 331 F.3d 13 (2003).

How Should the Constitutionality of Aggregate Statutory Damages Be Measured?

Unlike Golan and Parker, Wakefield went on to analyze how to measure the constitutionality of aggregate statutory damages. The Ninth Circuit declined to apply the due process analysis found in State Farm and other punitive damages cases. Instead, it instructed district courts to apply factors the Ninth Circuit had previously adopted for deciding how to award statutory damages within a legislatively defined range, in Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990). Those factors are “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.” The court remanded to the district court to analyze the $925 million award under these factors.

The State Farm analysis is a potential alternative test for the constitutionality of aggregate statutory damages. A California district court applied that test in a decision shortly before Wakefield, analyzing “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” Montera v. Premier Nutrition Corp., 2022 WL 3348573, at *5 (N.D. Cal. Aug. 12, 2022). These factors overlap with the Six Mexican Workers factors, but focus more explicitly on the difference between actual damages and the aggregate statutory damages.

Impact on Superiority Analysis?

There is a longstanding divide in the case law concerning whether a court may consider the possibility of disproportionate and potentially unconstitutional statutory damages when deciding whether a class action is “superior to other available methods” of adjudication under Rule 23(b)(3). Compare, e.g., Stillmock v. Weis Markets, Inc., 385 Fed. Appx. 267, 278 (4th Cir. 2010) (Wilkinson, J., specially concurring) (potential size of aggregate statutory damages should enter into superiority inquiry) with Murray v. GMAC Mortg. Corp., 434 F.3d 948 (7th Cir. 2006) (prohibiting such consideration).

The growing acceptance of constitutional limitations on aggregate statutory damages could have an impact on this debate. In his Stillmock concurrence, Judge Wilkinson argued “it is preferable” to consider the possibility of “annihilative damages” at the outset, in the superiority inquiry, because it “gives the district court discretion to avoid a serious constitutional problem.” By contrast, in Murray, Judge Easterbrook argued that “constitutional limits are best applied after a class has been certified,” because then “a judge may evaluate the defendant’s overall conduct and control its total exposure.” One can expect these superiority issues to be raised anew in the wake of Wakefield.