Opinion ID: 2975453
Heading Depth: 2
Heading Rank: 3

Heading: Amount of Statutory-Damage Award

Text: Panorama next challenges the district court’s $806,000 statutory-damage award. First, it argues that the district court abused its discretion in calculating the award. Next, it argues that the awards are disproportionate and unreasonable under the Eighth Amendment and the Fifth Amendment’s Due Process Clause.
Panorama contends that the district court believed that, after making a finding of willfulness, it lacked discretion to award statutory damages of less than $30,000 per infringement. On this basis, Panorama maintains that the district court abused its discretion. The record does not support this argument. In its conclusions of law, the district court recognized that it had “wide discretion in determining the amount of statutory damages to be awarded, constrained only by the maximum and minimum amounts.” J.A. at 164 (12/5/05 Dist. Ct. Op. at 7). It found “that the maximum statutory amount of $30,000 per work for ‘innocent’ infringement is not sufficient in this case because of the clearly willful nature of Defendant’s conduct,” but that the maximum award of $150,000 per infringement was excessive, given the dollar amounts involved in the case. J.A. at 164-65 (id. at 7- 8). Nowhere did the district court indicate that it believed that it lacked discretion to award statutory damages of less than $30,000 per infringement. To the contrary, Panorama’s willfulness prompted the district court to conclude that the maximum penalty for nonwillful infringement was not sufficient given Panorama’s conduct. We therefore conclude that Panorama has not shown that the district court abused its discretion by setting the statutory damage award at $31,000 per infringement. Nos. 06-5013/5266 Zomba Enterprises, Inc., et al. v. Panorama Records, Inc. Page 10
Panorama next argues that such a high award of statutory damages, in light of the relatively low actual damages,10 renders the district court’s award an “excessive fine” under the Eighth Amendment. However, the Supreme Court has explained that the word “fine” in this context means a payment to the government. United States v. Bajakajian, 524 U.S. 321, 327 (1998). Consequently, the Court has held that the Excessive Fines Clause “does not constrain an award of money damages in a civil suit when the government neither has prosecuted the action nor has any right to receive a share of the damages awarded.” Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 264 (1989). Panorama’s Eighth Amendment argument thus fails.
Panorama argues, based upon BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), that an award of statutory damages that (it alleges) is thirty-seven times the actual damages violates its right to due process. Again, we disagree. We note at the outset that both Gore and Campbell addressed due-process challenges to punitive-damages awards. In both cases, the award was greater than one hundred times the amount of compensatory damages awarded. In Gore, the Court concluded that the award in question (which amounted to 500 times the compensatory-damages award) was “grossly excessive,” 517 U.S. at 574, after considering three “guideposts”: (1) “the degree of reprehensibility of the” defendant’s conduct; (2) “the disparity between the harm or potential harm suffered by [the plaintiff] and [the] punitive damages award”; and (3) “the difference between this remedy and the civil penalties authorized or imposed in comparable cases,” id. at 575. In Campbell, the Court considered the same three guidepost factors and concluded that the punitive-damages award (which amounted to 145 times the compensatory-damages award) “was an irrational and arbitrary deprivation of the property of the defendant.” 538 U.S. at 429. Regarding the second guidepost, neither case created a “concrete constitutional limit[]” to the punitive-to-compensatory damages ratio. Id. at 424. Instead, the Campbell Court explicitly “decline[d] . . . to impose a bright-line ratio which a punitive damages award cannot exceed,” although it expressed a general preference for single-digit ratios. Id. at 425. The Supreme Court has not indicated whether Gore and Campbell apply to awards of statutory damages. We know of no case invalidating such an award of statutory damages under Gore or Campbell, although we note that some courts have suggested in dicta that these precedents may apply to statutory-damage awards. See, e.g., Parker v. Time Warner Entm’t Co., 331 F.3d 13, 22 (2d Cir. 2003) (suggesting that “in a sufficiently serious case,” due process may require courts to reduce a statutory-damage award in a class action, and citing both Campbell and Gore); Leiber v. Bertelsmann AG (In re Napster, Inc. Copyright Litig.), Nos. C MDL-00-1369 MHP & C 04-1671 MHP, 2005 WL 1287611, at  (N.D. Cal. June 1, 2005) (unpublished) (citing Gore and Campbell); DIRECTV v. Gonzalez, No. Civ.A.SA-03-1170 SR, 2004 WL 1875046, at  4 (W.D. Tex. Aug. 23, 2004) (unpublished) (citing Campbell); but see Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455, 459-60 (D. Md. 2004) (concluding that Gore and Campbell do not limit statutory damages in copyright cases). 10 The district court concluded that it was unable to calculate the actual damages based on the record before it. Panorama asserted that it sold a total of 74,734 copies of the twenty-six infringed compositions. Based upon this figure, Zomba lost approximately $11,957.92 in royalties, plus an additional $6500 in fixing fees, for a total of $18,457.92. Additionally, Panorama asserted that its net profit attributable to the twenty-six compositions at issue was $9693.86, although Panorama never substantiated its expenses to the district court. Assuming arguendo that this profit figure is accurate, Zomba would have been entitled to $28,151.78 if it had not elected to pursue statutory damages. See 17 U.S.C. § 504(b). Nos. 06-5013/5266 Zomba Enterprises, Inc., et al. v. Panorama Records, Inc. Page 11 Regardless of the uncertainty regarding the application of Gore and Campbell to statutorydamage awards, we may review such awards under St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919), to ensure they comport with due process. In such cases, we inquire whether the awards are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” Id. at 67. This review, however, is extraordinarily deferential—even more so than in cases applying abuse-of-discretion review. Douglas v. Cunningham, 294 U.S. 207, 210 (1935) (Congress’s purpose in enacting the statutory-damage provision of the 1909 Copyright Act and its delineation of specified limits for statutory damages “take[] the matter out of the ordinary rule with respect to abuse of discretion”); Broad. Music, Inc. v. Star Amusements, Inc., 44 F.3d 485, 487 (7th Cir. 1995) (interpreting the modern Copyright Act and noting “that the standard for reviewing an award of statutory damages within the allowed range is even more deferential than abuse of discretion”). Williams is instructive, and leads us to conclude that the statutory-damage award against Panorama was not sufficiently oppressive to constitute a deprivation of due process. In that case, a railroad charged two sisters sixty-six cents apiece more than the maximum rate permissible by regulation. 251 U.S. at 64. A state statute sought to deter such overcharges by providing for statutory damages of between $50 and $350 when a railroad charged more than the permissible rate. Id. The sisters sued separately, and received statutory damage awards of $75 apiece—over 113 times the amount they were overcharged. Id. Before the Supreme Court, the railroad argued that the penalty was so disproportionate to the harm sustained that it violated due process. Rejecting this argument, the Court concluded that the award “properly cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” Id. at 67. If the Supreme Court countenanced a 113:1 ratio in Williams, we cannot conclude that a 44:1 ratio11 is unacceptable here. We acknowledge the Supreme Court’s preference for a lower punitiveto-compensatory ratio, as stated in Campbell, but emphasize that this case does not involve a punitive-damages award. Until the Supreme Court applies Campbell to an award of statutory damages, we conclude that Williams controls, not Campbell, and accordingly reject Panorama’s dueprocess argument.12