Do Constitutional Protections Allow for the Reduction of TCPA Statutory Damage Awards? A Closer Look at Golan

by Dorsey & Whitney LLP

Sometimes the toughest job a court faces is finding a way to do the right thing.

When it comes to the crushing damages afforded by statute for violations of the TCPA, the “right” thing is often to reduce the award to something that loosely resembles the harm caused by the illegal conduct. But does the U.S. Constitution really afford an avenue to reduce damages to a prevailing plaintiff based upon due process or other concerns?

Before answering that specific question, it should be noted that the TCPA  is absolutely unconstitutional—not due to the massive damage award it allows per se—but rather due to its broad and amorphous restrictions on speech that threaten both to chill legal speech and to impose content-specific limitations on private callers that do not apply to the government. I have written on this topic many times and will not revisit it here.

But turning to the constitutionality of large damage awards, it does beg the question: what is the mechanism by which TCPA awards are properly reduced? Stated alternatively, exactly what constitutional protection is violated when a TCPA defendant faces business-ending—if not soul-crushing—liability for making illegal calls? That was the issue Judge E. Richard Webber recently struggled with in the case of Ron Golan v. Veritas Entertainment, LLC, No. 4:14CV000069, 2017 U.S. Dist. Lexis 144501 (E.D. Mo. Sept. 7, 2017), and while he certainly reached the right answer, the legal rationale supporting the conclusion is a bit mysterious.

Let’s see if we can demystify matters.

First, the rather interesting backstory on the case. A group of anti-Hollywood types made a movie that is about virtue or honor or something. I haven’t seen the movie and I don’t know much about it. What I do know, however, is that the producers hired right-wing stalwart Mike Huckabee to record a sales pitch encouraging people to stick it to Hollywood by going and watching their movie instead of the latest blockbuster. So far so good. The marketers hired by the producers of the movie, however, sent the pre-recorded sales pitch to cell phones owned by individuals who had opted-in to receive political texts related to freedom of religion, not movie advertisements. Earlier in the case, the Court had held that the consent provided by the tell-me-about-religious-freedom information seekers was not broad enough to apply to sales pitches for movies, even if loosely related to the subject matter of religious freedom. (Again, this is the unconstitutionally-vague TCPA we’re talking about here, so this sort of make-it-up-as-you-go-along determination regarding the reach of the statute is not even unusual, much less surprising.)   

Since it turned out that the marketers didn’t have anyone’s consent to send the pre-recorded message, and as they did send out millions of pre-recorded messages, the case was a slam dunk. It was tried over a week in August 2017 and the jury determined that 3,242,493 calls violating the TCPA were made by the Defendants. That means minimum statutory damages of $1.6 BILLION had to be assessed against the Defendants (that’s a mere $500.00 per call), unless the Court could find a basis—any basis—to reduce such a ridiculous award.

Judge Webber and his clerks approached the issue with intellectual honesty. They first acknowledged the pile of district court rulings that have held: i) the Eighth Amendment protection against excessive fines only applies to criminal actions (which really is odd since the TCPA is a “private attorney general” statute, which should trigger Eighth Amendment protections, but that’s neither here nor there); and ii) that the due process clause does not render the TCPA’s massive statutory damages unconstitutional. Still, however, the Court found that the baffling award mandated by the statute had to be unconstitutional as applied in this case. And on that basis—seemingly without any supporting case law—the Court struck down the $1.6B award as unconstitutional and reduced it to a “mere” $32MM.

But let’s back up. How did the Court get from point A to point B? To get there, Judge Webber examined a trio of cases, only one of which—the big Dish ruling from a few months back—had actually reduced an award of TCPA damages on constitutional grounds. But just like Judge Webber’s opinion in Golan, the Court in Dish did not provide a solid basis for its determination that TCPA damages could be reduced either. Nonetheless, Judge Webber determined that “the TCPA’s statutory damages clause is constitutional, but a specific damages award may be unconstitutional if it is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.’” See Golan at *10 (citing Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d. 899, 907 (8th Cir. 2012)).  

So what does Capitol Records say? Well, unfortunately, the Eighth Circuit there actually reversed a district court’s reduction of damages awarded in a copyright infringement case, finding that the statutory damages permitted under that statute were not “wholly disproportionated” to the offense or obviously unreasonable. That was so because the Court looked at the “public interest” infringed by a copyright violation as being the bulk of the harm—far more than the mere “private interest” of the producers seeking to prevent people from distributing their wares without license. But Capitol Records does recognize a Supreme Court case from 1919 as being “good law” on the issue of excessive damages—specifically, it cites with approval St. Louis, I. M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67, 40 S. Ct. 71, 64 L. Ed. 139 (1919) for the proposition that “damages awarded pursuant to a statute violate due process only if they are ‘so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.’” That sounds just like what Judge Webber was thinking in Golan.

So what does Williams say? In that case, the state of Arkansas imposed a huge penalty on folks who did not obey the state’s price-fixing of rail fare. In considering the legality of the penalties, the Supreme Court observed that “the due process of law clause of the Fourteenth Amendment” prevents the states from imposing “so severe and oppressive [a penalty] as to be wholly disproportionate to the offense and obviously unreasonable.” The Supreme Court went on to find that where the “penalty is contrasted with the overcharge possible in any instance it of course seems large, but, as we have said, its validity is not to be tested in that way. When it is considered with due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to established passenger rates, we think it properly cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.”

So pulling it all together, the Supreme Court in 1919 and the Eighth Circuit in 2012 observed that excessive statutory penalties can violate due process. Neither court, however, found that the specific application of the statute to the defendants before them violated the Constitution because of the prevailing “public interest” infringed upon by the statutory violators, even though the award in each instance was fully incompatible with the small private harm inflicted upon the individual plaintiffs bringing those suits. This last point, of course, is key to justifying the result in Golan—even if not explicitly mentioned by Judge Webber’s opinion. Specifically, the interests protected by the TCPA are solely those related to individual privacy. See L.A. Lakers, Inc. v. Fed. Ins. Co., No. 15-55777, 2017 U.S. App. LEXIS 16109 (9th Cir. Aug. 23, 2017) (“the purpose of the TCPA is to protect privacy rights and privacy rights alone.”) So there are no public interest considerations tipping the scale in favor of large awards; either the statutory damages awarded are proportionate to the privacy interests infringed upon or the award is unconstitutional.

Turning back to the text of Golan, we see that the remainder of Judge Webber’s analysis hits the nail on the head. He carefully considers the impact of the illegal calls on the privacy interests of the individuals and, finding that impact to be relatively “severe,” he awards $10.00 per call for a total award of $32MM. Notice that he does not consider the Defendant’s ability to pay, or the interest of the public not to have Mike Huckabee be employed. Seems to me, therefore, that the Court gets it just right. And that’s tough to do indeed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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