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Ninth Circuit 2020

Ninth Circuit likely to decide $925 million damages verdict against ViSalus

ViSalus, a multi-level marketer of supplements, is likely eventually headed to the U.S. Court of Appeals over a case involving violations of the Telephone Consumer Protection Act.

The U.S. Court of Appeals for the Ninth Circuit is likely to ultimately decide whether an Oregon judge should have upheld $925.2 million in statutory damages against a multilevel marketer of weight loss products and other nutritional supplements.

In August, U.S. District Judge Michael H. Simon rejected arguments by ViSalus Inc. that the statutory award in a class action lawsuit was unconstitutionally excessive, violating due process. The case, however, is likely far from being resolved.

“In light of the many significant and serious legal issues in this case, there is still much to be determined in this case, including, for example, an actual judgment amount,” Benjamin Shatz, a Los Angeles-based attorney representing ViSalus, said in an email. “We look forward to pressing forward with our post-trial motions and appealing this case to the Ninth Circuit Court of Appeals.”

The class action lawsuit was brought against ViSalus by Oregon citizen Lori Wakefield. According to her lawsuit, she enrolled with Troy, Michigan-based ViSalus as an affiliate in February 2013 but cancelled within a month because she was not pleased with the company or its products.

“After she cancelled, ViSalus repeatedly called her to solicit her return, but she told it to never contact her again and to stop calling her number,” the complaint alleged. After receiving unwanted calls in April 2015, Wakefield sued the company—alleging she and others received phone calls promoting ViSalus’ products or services without their consent.

The massive award was calculated based on a jury verdict in 2019 finding ViSalus placed more than 1.8 million calls in violation of the Telephone Consumer Protection Act (TCPA). Each violation of the TCPA—which restricts the making of telemarketing calls and use of automatic telephone dialing systems and artificial or prerecorded voice messages—carries minimum statutory damages of $500.

ViSalus suggested Simon reduce damages from $500 per call to no more than $1 per call, which if granted, would have curtailed the total statutory award to less than $2 million. The judge rejected pleas to follow holdings outside the Ninth Circuit in which federal appeals courts—including the Eighth Circuit—reduced statutory damages under the TCPA.

“The Court declines to conclude that ViSalus’ aggregate damages award should be reduced simply because ViSalus committed almost two million violations of the TCPA,” Simon wrote in his 14-page order. “ViSalus’ understanding of the limitations on damages imposed by due process implies that a constitutional penalty for a single violation becomes unconstitutional if the defendant commits the violation enough times.”

The latter idea conflicts with a U.S. Supreme Court decision “and would effectively immunize illegal conduct if a defendant’s bad acts crossed a certain threshold,” Simon added.

The judge quoted a 2020 case involving Dish Network L.L.C. in which the Seventh Circuit declared, “Someone whose maximum penalty reaches the mesosphere only because the number of violations reaches the stratosphere can’t complain about the consequences of its own extensive misconduct.”

“Here, the jury found that ViSalus committed a stratospheric number of TCPA violations,” Simon wrote. “It is no surprise that TCPA’s constitutionally-valid minimum penalty of $500 for each violation has catapulted ViSalus’s penalty into the mesosphere.”

Jonas Jacobson, an attorney in Santa Monica, California representing the plaintiffs, said the TCPA verdict is the largest one ever upheld by a district court.

“It is an important decision for the class of over 800,000 people targeted by ViSalus’s robocalls, and it will hopefully make other robocallers think twice,” Jacobson said in an email. “The Court rejected the argument that companies that violate the law millions of times should get a volume discount on statutory damages.”

Commenting on ViSalus’ plans to challenge the decision in the Ninth Circuit, Jacobson said, “We believe that the District Court’s sound analysis will be affirmed on appeal.”

TAGS: Litigation
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