Reprinted with permission from the August 7, 2023 edition of the National Law Journal. © 2023 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
Reduced to our most basic function, the role of the trial attorney representing consumers, small businesses, and public clients is twofold. First, we establish liability by showing that a defendant is engaged in unlawful, injurious conduct. After that, we demonstrate that the conduct has harmed an individual or a class of individuals, entitling them to some form of damages. Whether we’re talking about a bet-the-company, multidistrict products liability case, or a personal injury action stemming from a dog bite, the plaintiffs attorney’s job effectively remains the same.
In complex cases involving aggregated claims, the same tactics defendants have long used to attenuate the discovery process, stonewall legitimate inquiries into their alleged misconduct, and conceal smoking gun documents relevant to their liability, are also routinely deployed during the calculation of damages. This process, which almost inevitably becomes the “expert full employment program,” has become the new locus of protracted, expensive, scorched-earth battles that waste the time and money of everyone involved.
Like much of the litigation process, there is an element of kabuki theater involved in these damages battles. Each side will hire experts, typically economists, with serious credentials from serious institutions to present serious-looking models that purport to show an objective valuation of damages. Inevitably, however, even though each side’s experts testify ad nauseum about the unimpeachable integrity of their methodologies, they arrive at starkly different conclusions when it comes to a final dollar figure. The extent of these disparities often exemplifies the adage: “God invented economists to make weather forecasters look good.” We then furiously critique and try to disqualify the other side’s experts and they do the same for ours. Eventually, assuming that the experts survive this gauntlet, the factfinder, who is unlikely to have an econometric background, determines which side was more persuasive and comes up with a damages award.
While this costly, often inglorious, and wildly unpredictable process is unavoidable in many cases, it doesn’t make much sense for cases where the nature of the injury makes it difficult to assess actual losses (either because it’s too costly, or because the repercussions of a defendant’s actions will not be felt until years later). In such cases, statutory damages—where the amount awarded to a plaintiff based on a defendant’s wrongful act is set ex ante by statute rather than by a complicated analysis into the actual damages suffered—provide a more expedient alternative.
Many consumer protection laws fit into this category. The Telephone Consumer Protection Act (TCPA; 47 U.S.C. § 227), however, provides a particularly good example for this discussion. The TCPA’s current iteration was enacted in 1991 to combat the growing scourge of unsolicited telephone calls, a problem that has only become worse in the ensuing decades. In theory, the TCPA is designed to address the abuses of the pestilent telemarketing industry. Indeed, as Justice Brett Kavanaugh explained in Barr v. American Association of Political Consultants, 140 S.Ct. 2335, 2344 (2020), the TCPA was passed in response to “a torrent of vociferous consumer complaints about intrusive robocalls.” The leading sponsor of the law captured the zeitgeist in 1991, describing robocalls as “the scourge of modern civilization. They wake us up in the morning; they interrupt our dinner at night; they force the sick and elderly out of bed; they hound us until we want to rip the telephone right out of the wall.” To that end, a central component of the law is its private right of action, which allows people who receive unsolicited robocalls to sue the caller to recover “actual monetary loss” or $500 per violation (47 U.S.C. § 227 [3][B]).
Lest corporate America cry poverty, a recent case law provides that the ultimate jury verdicts for statutory damages may be reduced given due process concerns. Wakefield v. ViSalus, 51 F.4th 1109, 1123 (9th Cir. 2022), cert. denied, 143 S. Ct. 1756 (2023; “We thus conclude that the aggregated statutory damages here, even where the per-violation penalty is constitutional, are subject to constitutional limitation in extreme situations—that is, when they are ‘wholly disproportioned’ and ‘obviously unreasonable’ in relation to the goals of the statute and the conduct the statute prohibits.”).
The TCPA’s damages provision may allow for damages based upon “actual monetary loss,” but it is difficult to conceptualize how to arrive at such a figure for most individuals, as the injury that occurs when a telemarketer wastes your time, while certainly real, is not something that is particularly conducive to the traditional tools of economic analysis. But the fact that an injury is difficult to quantify in monetary terms is no reason not to punish the behavior that caused it and to compensate the individual who was injured by it. In situations like this, statutory damages complete the circle, allowing plaintiffs to enforce the law, be compensated for their injuries, and deter unlawful conduct that would otherwise be difficult to police. The battle of experts is, in theory (at least for damages) almost entirely circumvented. If you can show that the statute was violated, you are entitled to compensation.
Statutory damages may also make sense in situations where the scope of an injury is not yet fully understood. This is often the case in privacy cases involving data breaches. For example, in the In re Capital One Consumer Data Security Breach Litigation, 488 F. Supp. 3d 374, 389 (E.D. Va. 2020), a class of consumer credit card holders sued Capital One and Amazon for various torts and violations of state laws in the wake of a major security breach which caused their confidential personal information to be compromised.
Whether the plaintiffs in the case were injured by the defendants’ conduct was beyond dispute—the data breach’s occurrence was well-documented and even resulted in the criminal prosecution of the hacker responsible. Id. at 389. The issue of the actual damages related to Capital One’s negligence, however, proved to be extremely complicated, and the source of a tremendous amount of litigation (the case’s docket on Westlaw contains some 2,279 entries).
Part of the reason why damages proved so thorny in the case is because the harm caused when someone’s data is compromised is not always immediately discernible—especially when threat actors can hold onto and sell information for years to come. Statutory damages offer an alternative, more economical way forward in situations like the Capital One data breach, which have become increasingly common in the digital age. By way of further example, the state of California, for example, passed the California Consumer Privacy Act of 2018 (expanded by the California Privacy Rights Act of 2020), which provides for statutory damages in the event of certain data breaches.
While defendants may be slow to embrace statutory damages, when properly crafted, these remedial schemes have attributes that can appeal to both sides. For plaintiffs, statutory damages provide a powerful tool to vindicate their rights, enforce the law, and punish corporate misconduct that would otherwise be difficult to regulate. For defendants, they can make litigation more predictable and streamlined, and potentially save them from damage awards that are rooted more in emotion than economics. Adopting more laws nationwide that provide for statutory damages can refine the issues, eliminate a large portion of cost-prohibitive expert discovery, and provide for a mechanism that decides merits-based issues in a far more cost-effective way. Whether that’s something that defendants and their well-paid lobbying arms actually want, however, is a story for another column.
Thank you to DiCello Levitt associate Jeremy Levine-Drizin and Chicago managing partner Amy Keller for contributing to this column.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups. He can be reached at [email protected].