A three-judge Eighth Circuit panel in Golan v. FreeEats.com, Inc., 2019 U.S. App. LEXIS 21015 (8th Cir. July 16, 2019) affirmed a District Court decision that $1.6 billion in statutory damages for violating the Telephone Consumer Protection Act (“TCPA”) was “shockingly large” and “oppressive” such that it violated the Due Process Clause of the Constitution. The Court affirmed the TCPA statutory damages reduction from $500 per call ($1.6 billion total) to $10 per call ($32 million total). The Eighth Circuit also addressed the issues of standing and whether the District Court erred in its jury instruction on direct liability.
By way of background, the dispute arose from a telephone marketing campaign intended to promote Last Ounce of Courage, a film with various religious and political themes. Courage 2012, LLC was formed to manage the ownership rights to the film and Enthuse Entertainment, owned by Dr. James Leininger, invested around $10 million to become 2/3 owner of Courage. Courage hired Veritas Marketing Group which hired ccAdvertising to promote the movie through the use of a telemarketing campaign. The campaign was structured as a pool of questions on topics involving American freedoms and liberty. After two polling questions, recipients were asked if they wanted to hear more about Last Ounce of Courage. At that point, the recipients had to opt into the information about the film by responding “yes.”
The phone calls were made to numbers that ccAdvertising already possessed, and ccAdvertising had prior consent from the recipients to contact them about topics such as religious liberty. During the week-long telemarketing campaign 3,242,493 calls were made. In October 2012 Ron and Dorit Golan filed a class action in Missouri state Court for violations of the TCPA resulting from two messages left on their answering machine.
The case went to trial in August 2017 and the jury returned a verdict in favor of Dr. Leininger and other defendants and the Court entered judgment against ccAdvertising pursuant to its prior granting of a Motion for Judgment as a Matter of Law at the conclusion of evidence. ccAdvertising filed a post-trial motion for reduction of damages, arguing that $500 per call for 3,242,493 calls totaling $1,621,246,500 was so excessive it violated the due process clause. The District Court agreed that the $1.6 billion award (e.g., $500 per call) was clearly unreasonable and reduced the award to $32 million (e.g., $10 per call). The Golans appealed the District Court’s judgment, citing the District Court’s refusal to give its instruction on direct liability as well as the reduction of damages.
The Eighth Circuit readdressed its previous decision on standing in light of the Supreme Court decision in Spokeo, Inc. v. Robbins which held that Article III standing requires a concrete injury even in the context of a statutory violation. The Eighth Circuit concluded that even under Spokeo, the Golans had standing because they suffered a concrete injury. The Court analogized the harm remedied by the TCPA to nuisance claims remedied by traditional tort law in deciding the Golans’ intangible injury – receipt of two answering machine messages – constituted an injury-in-fact and thus a concrete injury sufficient to satisfy standing.
The Eighth Circuit determined the District Court did not abuse its discretion in declining to instruct the jury pursuant to the Golans’ proposed instruction regarding Dr. Leininger’s direct liability. The Court explained the instruction did not correctly state the applicable law and instead “blurred the line between direct and agency liability.” The scope of direct liability is dictated by the statutory text and the TCPA makes it unlawful for any person to initiate any telephone call that violates its relevant prohibitions. The Court emphasized that the text of the statute compels the interpretation that in order to be directly liable under the TCPA the defendant must be the one to initiate the call. The Eight Circuit agreed with the FCC’s interpretation that direct TCPA liability generally does not extend to sellers who do not personally make the phone calls at issue, but only includes the telemarketers acting on behalf of those sellers. The Golans’ instruction would have allowed for direct liability to be imposed even where a defendant did not actually initiate the phone calls.
The Eighth Circuit acknowledged that nothing in the relevant provision of the TCPA allows for the reduction of statutory damages and the award may only be reduced if it is unconstitutional. The Court explained that a statutory damages award of $1.6 billion violates due process because it is a “shockingly large amount” and is disproportionate to the conduct of ccAdvertising. The Court found it was plausible that ccAdvertising did not believe it was violating the TCPA because it had prior consent to call the recipients about religious liberty. Further, only the recipients who opted in heard the message about the film, the campaign was only conducted for about a week, and only about 7 percent of calls made it to the question about the film. Under these facts, the Court found that $1.6 billion was so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.
The decision underscores the fact that while the TCPA allows for uncapped statutory damages of $500 per negligent violation (and $1,500 per willful or knowing violation), the amount can (and should) be reduced upon a finding that the award is unconstitutional. The Eighth Circuit provides a framework for assessing the constitutionality of a statutory damage award under the TCPA, noting that relevant inquires include whether the amount is proportionate to the defendant’s conduct and the severity of harm to the recipients. Defendants and defense attorneys should continue to aggressively attack the grossly disproportionate claims and damage awards in TCPA cases.
The authors of this legal update are Thomas C. Blatchley and Juliana Houldcroft.