Well it has been quite the day around these parts.
First, the CFPB was struck down. And now the TCPA’s famed statutory damages may be out the window thanks to something called the Six Mexican Workers test.
I mean, how much fun is this?
TCPAWorld denizens know well the story of multi-level marketer Visalus.
The company was CRUSHED by a $925MM judgment following a jury trial on TCPA claims back in 2019. The jury had returned a finding off 1,850,436 unlawful automated calls resulting in an award of $925,218,000.00, or so it seemed.
Remarkably, just a month after the verdict the FCC came out with a retroactive waiver that essentially elevated Visalus’ insufficient consent to sufficient consent. Visalus had seemingly been saved!
But the district court found that Visalus had somehow managed to waive its consent defense by never raising it until after the trial was already over. By failing to preserve the argument Visalus could not take advantage of the miracle the FCC had seemingly delivered.
Biggest ouch of all time.
So then the case was off to appeal. And Visalus seemed to be a recipient of yet another miracle when the Supreme Court handed down Ramirez–a case seemingly tailor made to thwart the massive jury award on standing grounds.
So today, after a years long battle, the Ninth Circuit Court of Appeals has had its say and its a real mixed bag for Visalus–but fantastic news for TCPAWorld as a whole. So stay tuned here.
First, Visalus lost its standing argument. Despite the Supreme Court’s ruling in Ramirez–which holds that each and every class member must have suffered some damage in order to recover at trial–the Visalus panel held that the Ninth Circuit’s earlier decision in Van Patten required a finding that all class members had suffered harm. This is true although the Plaintiff, herself, had actually provided consent to be called–just not the required level of WRITTEN consent.
The panel dodged this issue with a REMARKABLE footnote, holding in essence that consent is a merits defense so whether or not a Plaintiff consented cannot possibly impact her standing to sue. (Wow, and what?)
With standing established the Court went on to consider the impact of the FCC’s miracle retroactive waiver of Visalus’ failure to obtain proper consent. Despite the FCC seemingly blessing the very conduct Visalus was sued for, the Appellate Court upheld the lower court’s ruling that Visalus had waived the consent defense!
My goodness. What a flub. One for the ages.
But just when it seemed it might be lights out for Visalus, the Ninth Circuit panel offers it a lifeline: the due process clause prevents such massive aggregated damage awards.
Specifically the Ninth Circuit held:
aggregated statutory damages awards are, in certain extreme circumstances, subject to constitutional due process limitations.
Boom goes the dynamite.
This is the first time the Ninth Circuit has ever so held. And many district courts have held otherwise–although the Eighth Circuit has held in accord.
The Visalus panel goes on imposes a constitutional limit on aggregated damages that are “so severe and oppressive” as to no longer bear any reasonable or proportioned relationship to the “offense.”
The TCPA, of course, is famous for its uncapped statutory damages that REQUIRE a $500.00 per call penalty. In large volume call cases those penalties can easily exceed a billion dollars–resulting in TCPA class actions being properly viewed as bet the company cases (which is why the Troutman Firm exists to protect folks in these extremely complex and high-stakes cases.)
The Visalus court holds, however, that in at least some extreme cases the aggregated awards are impermissible–even if a basic per call penalty of $500.00 is permissible.
To assess when an aggregated award might be too high the Court looks at a colorfully-named seven part test: the so-called Six Mexican Workers test.
That test requires a court to consider:
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.
Like beauty, the vastness of an appropriate TCPA award under these 7 factors is going to be in the eye of the beholder. Unfortunately for Visalus that beholder is going to be the same district court that has hammered it repeatedly in this case–the Ninth Circuit remanded the decision to the district court for further proceedings consistent with the appellate court ruling. In other words, Visalus’ fate rests with the district court’s application of the Six Mexican Workers test… and we’ll wait to see how that goes.
Besides Visalus–which is skating by via the hair of its chinny chin chin–the Visalus ruling is actually enormous news for TCPAWorld. TCPA defendants now have a sturdy basis to argue that aggregated damages in these suits are unconstitutional, and that has a host o useful applications–perhaps even making certification of large-volume TCPA class cases impossible from a “superiority” perspective.
On the other hand, it is important to keep in mind that TCPA defendants probably don’t want to take the risk of having a huge judgment entered against them hoping that the due process clause might yet save them from extinction. Plus the level of culpability and intent are clear factors a court may consider in assessing the enormity of damages. So DEFINITELY don’t throw your compliance regime out the window here.
Still for TCPA class action defense attorneys–like me–this is a bit of a watershed moment. Arguments about the unconstitutional nature of aggregated damages have long been part of my briefing and I already have a carefully-crafted affirmative defense directly on point (I can see the future). But until the Visalus ruling, these arguments never had much traction. Now, in the Ninth Circuit at least, they are the law of the land.
So handshakes and high fives all around. I love being right, even if it takes a decade or so for everyone else to catch up. 🙂
Chat soon TCPAWorld.