A three-judge panel in the Seventh Circuit largely affirmed an Illinois federal court’s judgment finding Dish Network liable for forcing retailers to make 66 million unlawful telemarking calls to consumers. While the Seventh Circuit affirmed liability, it also found that the court undercalculated appropriate penalties when it required Dish to pay a $280 million penalty to the federal government, North Carolina, California, Ohio, and Illinois for violating the Telephone Consumer Protection Act (TCPA) and the Telemarketing Sales Rule (TSR).

Writing on behalf of the three-judge panel, U.S. Circuit Judge Frank Easterbrook stated that the district court judge calculated the amount “entirely on Dish’s ability to pay, setting it at 20% of a year’s profits.” He then explained that the laws Dish allegedly violated provide for $10,000 per violation—or $660 billion. However, when assessing penalties, the district court did not award close to that amount. Judge Easterbrook stated, “the award is $280 million, closer to $4 than to $10,000 per improper call.”

Judge Easterbrook wrote that the district court should have based penalties on the harm done, rather than Dish’s ability to pay or the “depth of the wrongdoer’s pocket,” and that the issue is that the statutes do not include ability to pay as a permissible factor when determining penalties. According to the Circuit court, the district court should “start from harm rather than wealth, then add an appropriate multiplier, after the fashion of the antitrust laws (treble damages) or admiralty (double damages), to reflect the fact that many violations are not caught and penalized.”

The $280 million fine against Dish was a wake-up call to sellers and telemarketers about the importance of telemarketing compliance and third-party due diligence programs. The Seventh Circuit’s opinion reinforces the importance of these programs, particularly now that the maximum penalty under the TSR ballooned to over $43,000 per violation. It is critical for businesses making calls to have robust compliance policies and procedures in place. Similarly, businesses should conduct adequate due diligence on the vendors, dealers, retailers, marketers, or other third parties they use to make calls, generate leads, or make sales on their behalf.