SW Legal studies in Business

Potential Huge Liability for Party Inflicting Small Damage on Multiple Parties Does Not Violate Due Process
Description An appeals court held that a class action case, with possible damages of $135 million, for the sending of an unwanted fax to 90,000 parties, of which only one complained, was not unreasonable given that Congress established a way for small damages per party to be aggregated into a case worth bringing.
Topic Consumer Protection
Key Words Class Action; Telephone Consumer Protection Act; Faxed Ads; Damages
C A S E   S U M M A R Y
Facts United Artists (UA) contracted with ABF, a company that distributed ads by fax machines, to send a one-page ad for discount movie tickets. ABF sent ads to 90,000 fax machines in the Phoenix area. Twenty-nine people purchased tickets as a result of the ad. ESI was the only recipient of the ad who complained about it to UA. ESI sued UA and ABF, claiming that the Telephone Consumer Protection Act, which makes it illegal to send unsolicited ads to fax machines, was violated. It requested statutory damages of $500 per violation with possible trebling of damages for all members of the affected class. The trial court refused to certify the class, noting that no other person complained of the ad and that damages of $500 for 90,000 parties, trebled, would be $135 million, an amount not related to the actual damages inflicted. ESI appealed.

Reversed. The possible penalty in this case was set by Congress in the Telephone Consumer Protection Act. The penalty is not so disproportionate as to violate due process. Class action is available in such instances unless Congress specifically prohibits it. In general, class actions provide a way by which those with claims involving small recoveries may aggregate their claims into an action worth taking. The fact that the penalty may ruin the defendants is a matter they should have considered before sending 90,000 unsolicited ads in violation of the statute.

Citation ESI Ergonomic Solutions v. United Artists Theatre Circuit, 50 P.3d 844 (Ct. App., Ariz., 2002)

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