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 §2699(e)(2). Under this standard, courts are instructed to consider factors such an whether the employer takes its "obligations ... seriously and attempt[s] to comply with the law" (Thurman v. Bayshore Transit Mgmt., Inc., 203 Cal. App. 4th 1112, 1136 (2012)) and whether the penalty is "proportional to [the] misconduct" (Amaral v. Cintas Corp., No.2, 163 Cal. App. 4th 1157, 1214 (2008)).
Properly applied, this standard therefore ensures that PAGA penalties properly calibrated to punish and deter the alleged conduct, and no more. E.g., Carrington v. Starbucks Corp., 30 Cal. App. 5th 504 (trial court awarded less than 1 percent of what the plaintiff requested, "emphasiz[ing] that [the] violations were minimal and [the employer] attempted full compliance" with the law). To read more about why the realistic recovery in a PAGA case is often far less than the theoretical maximum-let alone the outer limits of due process-click here.
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