Keeping Tabs on the Ninth Circuit
October 21, 2022 - This Week at the Ninth

This Week At The Ninth: Robocalls and Retaliation

money blog

This week, the Court addresses the constitutionality of a nearly $1 billion statutory damages award under the Telephone Consumer Protection Act (TCPA) and revives a California state law whistleblower claim.

The Court holds a defendant waived reliance on the FCC’s retroactive exemption and remands for the district court to assess the constitutionality of a nearly $1 billion statutory damages award.

The panel:  Judges Berzon, Tallman, and Christen, with Judge Tallman writing the opinion.

Key highlight: “Constitutional limits on aggregate statutory damages awards therefore must be reserved for circumstances in which a largely punitive per-violation amount results in an aggregate that is gravely disproportionate to and unreasonably related to the legal violation committed. Were that not so, applying the Williams test to reduce aggregated statutory awards would overstep the role of the judiciary and usurp the power of the legislature.”

Background: The TCPA makes it unlawful to initiate robocalls using any “automatic telephone dialing system or an artificial or prerecorded voice” without the “prior express consent” of the recipient. It authorizes recipients of such calls to sue for either actual damages or $500 per violation. The FCC had previously issued a rule defining “prior express consent” to encompass any instance in which the recipients of a robocall had previously given the caller their phone numbers “for a purpose related to the subject of the calls.” But in 2012 the FCC revised its rule, now requiring that the caller have provided all recipients with a clear written disclosure that they were authorizing robocalls. 

Visalus, which sold weight-loss products, placed a number of robocalls in 2015 to customers who had previously provided their phone numbers, but had not been given the express written disclosure required by the 2012 FCC rules. Lori Wakefield, one recipient of those calls, brought suit under the TCPA on behalf of a nationwide class.  After the class was certified, Visalus petitioned the FCC for a retroactive waver of its 2012 written disclosure requirement. Visalus did not, however, pursue a consent defense. In the meantime, the case went to trial, and the jury found that Visalus had made 1,850,440 illegal robocalls. In accordance with that verdict, the district court ordered Visalus to pay $925,218,000 in statutory damages.

After the jury had issued its verdict, the FCC granted Visalus the retroactive waiver it had requested. But the district court denied Visalus’s motions to decertify the class and set aside the judgment, concluding that Visalus had waived any consent defense. It also rejected Visalus’s motion to reduce the statutory damages award as unconstitutionally excessive.

Result: The Ninth Circuit affirmed in part and reversed in part. First, the Court rejected Visalus’s argument that the plaintiffs lacked Article III standing. As the Court explained, it had previously held that “the receipt of ‘[u]nsolicited telemarketing phone calls’ is ‘a concrete injury in fact sufficient to confer Article III standing,’” and the Supreme Court’s subsequent decision in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021) provided no basis to overrule that precedent.

Next, the Court held that the district court had not erred in deeming Visalus’s consent argument waived. As the Court explained, consent is an affirmative defense to a TCPA claim, yet Visalus had failed to plead this defense in its answer. While there might be an exception for such a waiver for an “intervening change in the law,” the Ninth Circuit agreed with the district court that the FCC’s retroactive waiver did not satisfy that requirement. The Court reasoned that “the exception for an intervening change in law only ‘protect[s] those who, despite due diligence, fail to prophesy a reversal of established adverse precedent.’” And even assuming the FCC’s waiver was a change in the law, Visalus “reasonably knew, or should have known, that the FCC was quite likely to grant its petition” given other similar waivers the agency had granted.

Finally, the Court addressed Visalus’s contentions that the statutory damages award was “so severe and oppressive” that it violated Due Process. The Court noted that other courts had previously held that the TCPA’s $500 penalty was not unconstitutional for a single violation. But the Court held that “aggregated statutory damages awards are, in certain extreme circumstances, subject to constitutional due process limitations”—“even where the prescribed per-violation award is constitutionally sound.” As the Court explained, where “aggregation has resulted in extraordinarily large awards wholly disproportionate to the goals of the statute,” “a constitutional limit may require reduction.” Moreover, the Court continued, “a per-violation award may become unduly punitive when aggregated,” bearing little relationship to any purpose of deterrence or compensation. Thus, the Court held, “[a]s with punitive damages awarded by juries and per-violation statutory damages awards, a district court must consider the magnitude of the aggregated award in relation to the statute’s goals of compensation, deterrence, and punishment and to the proscribed conduct.” But the Court cautioned that “[b]ecause the appropriate penalty for statutory violations is a legislative decision best left to Congress, courts should disregard the plain statutory language directing damages and allowing class action and other aggregation only in the most egregious of circumstances.” The Court remanded so that the district court consider apply these principles in assessing the statutory damage award against Visalus.

The Court holds that a plaintiff raised a genuine dispute of fact over whether he was fired for disclosing what he believed to be information about a government environmental assessment project’s noncompliance with federal law.

The Panel: Judges Bennett, Sanchez, Foote (W.D. La.), with Judge Sanchez writing the opinion.

Key Highlight: “SpecPro’s reading of the statute would allow an employer to fire the potential whistleblower before completing the illegal act and thereby escape liability. California law does not limit whistleblower protections in such manner.”

Background: Defendant SpecPro is an environmental services firm that assists government agencies with the preparation of environmental assessments and other reports required under the National Environmental Policy Act and federal regulations. Plaintiff was hired by SpecPro to help prepare an environmental assessment for the United States Army Reserve Command regarding a site that the 63rd Regional Support Command proposed to use for Blackhawk helicopter assault training missions. During the assessment, Plaintiff pushed back on requests to omit information from the assessment about prior training activities at the site because he believed it would violate NEPA and federal regulations to do so. He also pushed back on requests to complete the assessment in three months because his team had not received the information needed to complete the assessment accurately. He alleged that he discussed with his supervisor the legality of the Army Reserve’s instructions to hide past operations, and that he expressed concern that there were multiple violations of NEPA because he was being directed to not be transparent about past operations and was not allowed to send people to the site to inspect parcels. When a draft report of the assessment included oblique references to prior helicopter operations, the Chief of the Command came to believe it was Plaintiff’s fault. The Chief complained to SpecPro about Plaintiff and Plaintiff was fired. 

Plaintiff filed an action in Santa Clara County Superior Court alleging state law claims of unlawful retaliation in violation of the California Whistleblower Protection Act, wrongful termination in violation of public policy, and failure to pay wages due upon termination. SpecPro removed the action to federal district court. The district court granted SpecPro’s partial motion for summary judgment as to retaliation and wrongful termination, and the parties resolved the wages claim by stipulation. Plaintiff appealed.

Result:  The Ninth Circuit reversed in part and affirmed in part. The district court concluded that Plaintiff’s whistleblower claim failed because the person he disclosed his concerns to, his supervisor at SpecPro, was not someone who had authority to investigate, discover, or correct the alleged violation. The Ninth Circuit concluded, however, that the district court had misconstrued the relevant statutory provision. Under California Labor Code section 1102.5(b), “[a]n employer . . . shall not retaliate against an employee for disclosing information . . . to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance.” Under the rule of the last antecedent, the Court reasoned, the qualifying words “who has the authority to investigate, discover, or correct the violation or noncompliance” modifies only the immediately preceding phrase—“another employee.” And so it sufficed that Plaintiff disclosed to a “person with authority over the employee,” his supervisor, even if his supervisor did not have authority to correct the alleged violation. This construction, the Court further reasoned, is consistent with the broad remedial purpose of the California Whistleblower Protection Act. The Court thus predicted that the California Supreme Court would hold that section 1102.5(b) prohibits employers from retaliating against employees who disclose potential wrongdoing to any one of several enumerated avenues: government or law enforcement agencies, a person with authority over the employee, other employees with authority to investigate, discover, or correct the violation or noncompliance, or any public body conducting an investigation, hearing, or inquiry. Considering the evidence Plaintiff presented, the Ninth Circuit found he had created a genuine dispute of material fact as to whether SpecPro retaliated against him for engaging in protected whistleblower activity. 

The Ninth Circuit also concluded that the district court erred in disregarding Plaintiff’s disclosures to the Chief of the Command. The district court reasoned that those disclosures were not protected activity because they were part of the normal duties of plaintiffs’ employment and because the Chief was assertedly a “wrongdoer” in the alleged noncompliance with NEPA. Both of these determinations, the Ninth Circuit held, rested on misapplications of California law. The statute expressly provides that a whistleblower’s disclosures are protected “regardless of whether disclosing the information is part of the employee’s job duties,” and the district court’s rationale about disclosures to a wrongdoer relied on an inapposite case that applied only to disclosures made to supervisors who are also wrongdoers under the federal Whistleblower Protection Act. 

The Ninth Circuit also concluded that Plaintiff presented triable evidence that he had reasonable cause to believe that he had disclosed a violation of federal statute or noncompliance with a federal rule or regulation as the California Labor Code requires. Although SpecPro argued that Plaintiff could not have reasonably believed there was a violation of NEPA because such a violation can only occur when the environmental assessment has been signed, and the assessment had not yet been signed when Plaintiff was fired, the Ninth Circuit rejected this argument. The Court explained that California’s Labor Law provides that an employer may not retaliate against an employee for disclosing wrongful conduct “or because the employer believes that the employee . . . may disclose information” about a violation of law. California law thus serves to protect against actual disclosures as well as retaliation for anticipated whistleblowing activity.

The Ninth Circuit affirmed, however, the district court’s dismissal of Plaintiffs’ claim that his employer retaliated against him for refusing to participate in illegal activity. This claim requires a plaintiff to identify both the specific activity and the specific statute, rule or regulation at issue. Plaintiff presented no evidence that he had refused to comply with the Chief’s directives, but instead argued that he did not get a chance to refuse to work on the project before he was fired.