After prevailing in a class action trial regarding allegedly false advertising, plaintiffs sought $91 million in statutory damages under New York’s General Business Law (GBL), plus $49 million in prejudgment interest. In an opinion that will likely serve as an important precedent for future GBL cases – and could influence how aggressively plaintiffs pursue them – a court in the Northern District of California rejected plaintiffs’ request, and instead awarded $8.3 million in statutory damages, plus interest. Montera v. Premier Nutrition Corp., 2022 WL 3348573 (N.D. Cal. Aug. 12, 2022). The plaintiffs’ requested award, the court held, was “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”
The suit stems from defendant Joint Juice’s sale of beverages that promised to improve joint health and relieve pain. As we previously reported, a jury found these beverages were deceptively labeled, and awarded $1.49 million in actual damages to the class based on approximately 166,000 units sold. Soon after the trial, the plaintiffs moved for a statutory damages award of $140 million. This figure represented $550 in statutory damages per unit sold—$50 under GBL § 349 and $500 under GBL § 350—plus interest. GBL § 349 generally prohibits deceptive acts or business practices, and GBL § 350 prohibits false advertising.
In his decision, Judge Seeborg refused to award plaintiffs the full amount they requested. At the outset, the court observed that there was “no question” that the Supreme Court has authorized district courts to evaluate whether a statutory damages award is reasonable. But, it explained, “[l]ittle to no guidance exists within the realm of reducing statutory damages.” The court found it significant that New York does not permit class actions seeking statutory damages in state court, suggesting that the legislature “views the aggregation of [statutory] penalties across a class as a punitive measure.” In light of that, the court applied factors that courts use to assess the constitutionality of punitive damages awards: (1) degree of reprehensibility; (2) disparity between the harm and punitive damages; and (3) the difference between the punitive damages and civil penalties imposed in comparable cases.
The court found that these factors weighed in favor of reducing the award. Although Joint Juice knowingly continued to market the beverages despite being aware of the “changing tide in the science,” the court pointed out that “[t]here is no allegation that Joint Juice caused physical harm to any consumer; instead, the only harm is wasted money.” The court found the ratio between actual and statutory damages—“over sixty times greater”—to be “immense” and support a reduction. Although the court did not find the third factor particularly relevant, it pointed to the unavailability of classwide statutory damages in New York state court as further evidence that statutory damages should be reduced. Ultimately, it concluded, the appropriate statutory damages award was $8.3 million. This represents $50 per unit sold, which is the amount of statutory damages available under GBL § 349 alone. Because the court awarded an amount “equivalent to the statutory damages allowed under” GBL § 349, it declined to address whether a plaintiff can recover damages under both GBL § 349 and § 350 for the same violation. The court also awarded prejudgment interest to plaintiffs based on this amount.