Ninth Circuit's Due Process Limit On Statutory Damages Not Likely To Significantly Impact PAGA Cases

• Jurisdiction: United States,Federal
• Law Firm: Akin Gump Strauss Hauer & Feld LLP
• Subject Matter: Consumer Protection, Government, Public Sector, Litigation, Mediation & Arbitration, Constitutional & Administrative Law, Trials & Appeals & Compensation, Dodd-Frank, Consumer Protection Act
• Author: Mr Jonathan Slowik and Gregory Knopp
• Published date: 24 November 2022

In last month's decision in Wakefield v. Visalus, Inc., 51 F.4th 1109 (9th Cir. 2022), the 9th Circuit adopted a standard endorsed by other circuits for evaluating whether a statutory damages award comports with the Due Process Clause. Because Private Attorney Generals Act (PAGA) claims often expose defendants to large statutory damages awards, at first blush, the 9th Circuit's decision may appear to be welcome relief to employers. However, Wakefield is unlikely to have any meaningful impact in PAGA cases, because PAGA already imposes stricter limits on penalty awards than the Constitution.

In Wakefield, a case involving a $925 million award of statutory damages under the Telephone Consumer Protection Act (TCPA), the Court explained that "[t]he due process clauses of the Constitution ... set outer limits on the magnitude of damages awards." Wakefield, 51 F.4th at 1120. While the constitutional limits on punitive damages awards are well defined, "how the Constitution limits the award of statutory damages is less developed." In St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67 (1919), the U.S. Supreme Court held that statutory damages that are "wholly disproportioned" or "obviously unreasonable" violate due process. Extending this principle, the 9th Circuit held that "in extreme situations" aggregated statutory penalties (such as in a class or representative action) may violate due process "even where the per-violation penalty is constitutional[.]" Wakefield, 51 F.4th at 1123.

Wakefield will likely have the greatest impact in claims brought under statutes like the TCPA that provide large, flat-sum penalties. PAGA, conversely, permits judges to award less than the maximum penalty, and not only "in extreme cases." Rather, trial courts have wide latitude to award less than the maximum penalty if, "based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory." Cal. Lab. Code...