Washington, DC’s Consumer Protection Procedures Act allows plaintiffs to recover “treble damages, or $1,500 per violation, whichever is greater” for a broad range of trade related violations, including false advertising, breach of warranty, and false representations regarding repairs. Because CPPA cases involve consumer goods and services that are typically inexpensive, $1,500 is almost always the greater amount, meaning that costly penalties can be racked up for fairly cheap items.
But what does “per violation” mean? The statute does not define the term, producing uncertainty as to how much many CPPA cases are actually worth.
For example, if a person views ten misleading advertisements and then makes one purchase based on those advertisements, is that ten violations, or one? If a person makes one purchase of a product but claims that the product’s label is deceptive in six different ways, is that one violation, or six? When the multiple is $1,500, how a court counts “violations” makes a notable difference in the potential value of a claim.
A recent case out of a DC district court has held that “per violation” should mean “per purchase,” thus significantly lowering the valuation of a plaintiff’s potential damages recovery. In Sloan v. Soul Circus, Inc., plaintiff alleged she purchased four circus tickets in reliance on statements on the circus’s website convincing her the animals were well treated. Claiming the statements were deceptive, she filed suit, alleging violations of six CPPA subsections.
The calculation of the value of her claim became an issue when the parties quibbled over whether the $75,000 diversity jurisdiction minimum was met.
Arguing that the $75,000 minimum sufficient to confer federal jurisdiction was met, the circus advanced that (1) a “violation” occurred each time the plaintiff was exposed to the circus’s statements; and (2) six “violations” occurred with each ticket sale.
The Court rejected both of these arguments. Based on the statutory language—that plaintiffs may seek relief from a trade practice involving consumer goods “purchased or received”—the Court held that “statutory damages awards flow from a purchase or receipt of consumer goods or services—not the mere observation of a merchant’s unlawful communication.” The Court also noted that the circus had no supporting authority for its assumption that a consumer could receive multiple $1,500 statutory damage awards in connection with a single purchase.
If other courts follow suit and hold that the “$1,500 per violation” language means “$1,500 per purchase,” (and not per advertisement viewed or CPPA subsection implicated), this could have a dramatic impact on CPPA litigation.
First, the good news for potential defendants. Plaintiffs may be less enthusiastic about bringing claims in the first place if they know there is not a chance at an inflated damages recovery. For example, if a potential plaintiff viewed 50 allegedly deceptive advertisements and purchased one product in reliance on those statements, he may be less inclined to sue knowing that his damages are limited to $1,500 instead of $75,000.
This could also strengthen defendants’ positions when mediating or otherwise seeking settlement of CPPA cases. The ability to tie damages to total sales (as opposed to some nebulous number of advertising statements per purchase), allows defendants to more accurately pinpoint the maximum value of a case. This makes “overpayment” of the worth of a claim in settlement based on uncertainty of how a court will fix damages less likely.
The potential downside for defendants, as seen in Sloan, is that the diminished valuation of plaintiffs’ claims makes it more challenging to meet the $75,000 amount in controversy minimum to successfully remove a CPPA case to federal court. In concrete numbers, unless a single plaintiff purchased at least 50 of the deceptively advertised product (50 * $1,500 = $75,000), a defendant is unlikely to be able to base the amount in controversy solely on the statutory damages, and will have to look elsewhere, such as to attorneys’ fees and/or the value of the injunctive relief sought to satisfy the amount in controversy requirement.
Overall, however, having a reliable way to calculate “per violation” statutory damages, and limiting those to $1,500 per purchase, is likely to be a net positive for defendants.