Whether courts can reduce statutory damages awards under the Telephone Consumer Protection Act (TCPA) is an ongoing issue because potential liability can be strikingly disproportionate given the lack of actual harm to class members. The TCPA provides for statutory damages of $500 per violation, and courts have discretion to award treble damages ($1,500) for willing or knowing violations, with no maximum cap on recovery. Modern telecommunications equipment (an automated dialer, a text platform or a fax server) can be used to send thousands of messages, or even tens of thousands or more, with the push of a button. As a result, potential liability in these cases can easily run into the millions, and multi-million-dollar settlements are not uncommon in class actions. The trend of high-dollar class action settlements has spurred a large increase in TCPA filings over the past few years.
In two recent cases, however, courts have eschewed the formulaic calculation of $500 per violation, instead awarding less than the statutory amount. In these cases, a full award of potential statutory damages would have been in excess of $1 billion. These courts found such damages to be unreasonable and disproportionate. Although these cases were on the high end of the spectrum in terms of potential exposure, TCPA damages in class actions are nearly always disproportionate to the actual harm to class members. Indeed, recovery of as much as $1,500 for receiving an unwanted text message, call or fax has been recognized by some courts as “punitive.”
In one recent case, a federal court in Missouri reduced an award on due process grounds, finding that “damages prescribed by the statute are so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.”1 The case involved a six-day telemarketing campaign which placed 3.2 million calls to promote a movie on behalf of former presidential candidate Mike Huckabee. The court awarded judgment to the plaintiffs, and at $500 per call the statutory damages would have been $1.6 billion. In considering damages, the court reviewed prior case law supporting the constitutionality of TCPA damages in the abstract, but found that a specific award may be unconstitutional if it is disproportionate and unreasonable to the harm suffered by the plaintiffs. On that basis, the court awarded damages of $10 per call, for a total award of $32 million. The court noted that the revised damage award reflected the nature of the offense, the need for a deterrent, and unquantifiable losses such as invasion of privacy.
In another case earlier this year, a federal court in Illinois also declined to award statutory damages based on a mathematical formula that would have resulted in billions of dollars of damages.2 In a case brought against Dish Network by the federal government and several states, the court found that a mathematical calculation of statutory damages would be disproportionate and unreasonable, and therefore did not award $500 per violation or consider treble damages. The court did find, however, that a large civil penalty was appropriate and awarded $280 million (approximately $17 per violation), citing Dish’s culpability, its history of prior conduct, its ability to pay and other circumstances. The court found that culpability was “significant” because the programs were run in a “reckless” manner. According to the court, “Dish [Network] had on-going problems complying with Do-Not-Call Laws…and understood the potential penalties for Do-Not-Call Law violations could be substantial,” and yet the problems persisted over many years.
Although the awards in both of these cases were still very high, TCPA cases involving large numbers of calls, texts, or faxes are not uncommon. And although a number of courts have upheld statutory damages of $500 per violation, these two cases signal that there should be some due process or reasonableness limitation on the strict adherence to a mathematical application of statutory damages in a class action, especially when the statutory damages would be disproportionate and unreasonable. Future decisions are likely to develop this standard further.
In addition to reductions in damages awards to class members, courts are also scrutinizing incentive awards to the named plaintiffs in TCPA class action settlements. In a recent New York case, for example, the court reduced the incentive awards to the four named plaintiffs from $10,000 to $2,500 after finding that $10,000 would be “excessive” in the absence of documentation of their time expended or indication of any personal risks or burdens.3 In another recent case, a California federal court reduced the incentive award from $15,000 to $1,000, stating that a larger award would be a windfall to the class representative.4
All of these cases show that courts are beginning to scrutinize awards in TCPA class actions given the large potential exposure and the lack of actual injury to the named plaintiffs and class members.