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103 Year-Old Supreme Court Precedent Cited to Reduce Damages in Class Action from $91.4 Million to $12.8 Million

* Taylor Lodise is a law clerk in the Litigation practice group.

In one of several related class-action lawsuits against the maker of a drink marketed under the brand name Joint Juice, Chief Judge Richard Seeborg of the United States District Court, Northern District of California, applied case law from 103 years ago to reduce statutory damages in a consumer class action from the $91.4 million seemingly required by a New York statute to just $8.3 million plus pre-judgment interest of $4.5 million. The August ruling was based on Fourteenth Amendment due process protections as interpreted by the Supreme Court in the 1919 case St. Louis, Iron Mountain & Southern Railway Co. v. Williams (“St. Louis”).

As discussed in our June 2022 blog post, this class action alleged the advertising for Premier Nutrition Corp.’s Joint Juice product overstated the drink’s health benefits. A jury in Montera v. Premier Nutrition Corp.— the first of the related class actions against Premier Nutrition Corp. to go to trial— found that purchasers in New York  sustained approximately $1.5 million in actual damages (product overpayments) in violation of New York’s false advertising statutes, GBL §§ 349 and 350.

It is the judge’s, not the jury’s, role to determine the amount of statutory damages, and the two New York statutes permit a plaintiff to recover $50 per violation of GBL § 349 and $500 per violation of GBL § 350. In Montera, the total units of Joint Juice sold, 166,249 within the class, would have resulted in statutory damages of $8.3 million under § 349 and $83.1 million under § 350, for a total of about $91.4 million—over sixty times greater than the actual damages found by the jury.

However, in considering the New York statutes, Judge Seeborg stated that aggregated statutory damages in class actions pose constitutional due process concerns to the defendant. The court determined that a catastrophic amount of statutory damages would not be appropriate under the 103 year-old standard set forth by the Supreme Court in St. Louis. Judge Seeborg quoted the St. Louis language in reducing statutory damages that were “so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.” The underlying basis for the reduction was the Due Process Clause of the Fourteenth Amendment that has been interpreted to prohibit grossly excessive or arbitrary punishments.

Judge Seeborg then considered the degree of reprehensibility of Premier’s conduct as well as the disparity between the actual damages suffered and the statutory damages—which, in the instant matter, “veer[ed] away from serving a compensatory purpose and towards a punitive purpose”—to conclude that $91.4 million indeed was “grossly excessive” and unreasonable. Under Judge Seeborg’s reasoning, a district court may evaluate whether the statutory damages in a case are disproportionate to the offense and obviously unreasonable. That inquiry, according to this recent ruling, is the crux for whether a reduction of statutory damages is appropriate.

Judge Seeborg reduced the amount of statutory damages to $8.3 million, effectively allowing the full amount of damages under GBL § 349. The full amount of the award was $12.8 million, which includes $4.5 million in pre-judgment interest under New York CPLR § 5001(a). Judge Seeborg awarded nothing under GBL § 350.

However, the final verdict may not be in. The Montera plaintiffs have filed an appeal, and Premier has filed motions for a new trial and for judgment as a matter of law.

TAKEAWAY: While it remains to be seen whether other courts will follow this ruling, defendants in class-action lawsuits that seek ruinous amounts of statutory damages now have a well-reasoned decision limiting such damages that can be added to their legal memoranda.

*Law Clerk, New York bar admission pending.

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