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Could Supreme Court Gut Damages in Consumer Cases?


With a new Supreme Court justice in the process of being nominated, there are new concerns about rulings that may affect consumers. One concern is how the court may in the future deal with what is known as a Spokeo issue, which could gut many important consumer protections.

Spokeo and Statutory Damages

Spokeo comes from the name of one of the parties in a case that went to the Supreme Court in 2015-2016. The Spokeo case challenged the constitutionality of statutory damages.

Statutory damages are damages that you don’t have to prove in court, but which are already assessed by a statute. That is, the law will say that a violation of a particular consumer statute, if proven, is a penalty of $X.

Statutory damages can be steep—for example, a violation of the Telephone Consumer Protection Act can be as much as $1,500 per violation.

Statutory damages were put into consumer statutes because many violations of these statutes don’t have readily ascertainable measures of damages.

For example, the Fair Debt Protection Act makes it illegal for a debt collector to speak with anyone else about your debts.

So let’s assume Midland Credit calls your mom and tells her about the money you owe. It may cause you some embarrassment, but maybe not total humiliation. You did not lose any money over what Midland did. So how do you assess or value your damages for Midland’s breach of your privacy? Even though you sustained no significant damage, there needs to be some penalty, otherwise there’s no point in having the law. That’s where statutory damages come in.

Statutory damages make companies think twice before they violate consumer statutes, knowing that they could owe real money. They allow consumers to hire attorneys, and make it worth it to consumers to pursue consumer claims. The more consumers that pursue claims under consumer statutes, the fewer companies that will violate the law.

The Spokeo Challenge

But the defendant in the Spokeo case challenged statutory damages, saying that they were unconstitutional. There must be some real, actual, countable damage, the defendant argued, otherwise a federal court has no jurisdiction. That jurisdiction can’t be created by slapping on an arbitrary damage figure by statute, they argued.

The case went to the Supreme Court about a year and a half ago, and the Supreme Court kind of punted. The court provided some instructive language about what kind of damages need to be shown for a court to have jurisdiction, and then kicked the case back down to the lower court for more findings. It is likely though that the question will be back in front of the Supreme Court, whether in the Spokeo case or a different one.

When it does come back, if statutory damages are deemed unconstitutional, it could provide free reign for collectors, and advertisers to blow up phone messages, fax machines, text messages, and generally do whatever they like in the collection of a debt, without the threat of statutory damages.

Some consumers who have real damages from violations can still sue, but others, with no real damages, could be powerless to enforce their rights.

To hear more about your rights as a consumer, contact Jacobs Legal in Miami today to discuss any unwanted calls, or text messages you may be receiving from advertisers or debt collectors.


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