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District Court lowers punitive damages award in FCRA dispute

On April 8, the U.S. District Court for the Southern District of Florida denied in part and granted in part a defendant’s motion for judgment as a matter of law and alternative motion for a new trial, after concluding that the debt collector violated the FCRA by incorrectly reporting medical debts on the plaintiff’s credit reports despite allegedly receiving 31 separate disputes challenging the validity of the debt. The plaintiff contended that the medical debts in question belonged to his father, and that due to the inaccurate reporting, he was denied credit by two lenders. At trial, after finding that the defendant failed to conduct a reasonable investigation into the plaintiff’s FCRA disputes as required by the statute, a jury awarded the plaintiff $80,000 in actual damages and $700,000 in punitive damages for willful violations. The defendant challenged the award and requested a new trial, arguing that the court improperly admitted hearsay testimony, that the plaintiff failed to prove he suffered emotional damage, and that the jury’s punitive damages award was too high.

The court denied defendant’s request for a new trial, finding that the plaintiff suffered emotional damages and that the “verdict could be supported ‘without considering the challenged testimony.’” With respect to the amount of punitive damages awarded, the court concluded that the defendant’s actions were “highly reprehensible” and “callous” in the way it processed consumers’ disputes. However, in comparing the ratio of punitive damages to compensatory damages in other cases, the court determined that $700,000 was too high based on the actual damages award and lowered the punitive damages to $475,000 to be consistent with Eleventh Circuit law. The court concluded, “to be sure, the high punitive damages award likely reflects the jury’s assessment of Defendant’s callous behavior throughout the eighteen months of processing Plaintiff’s approximately thirty disputes, and Defendant’s employees’ testimony which confirmed that such treatment would likely repeatedly occur with countless other consumers,” adding that “given the size of [the defendant], and the number of disputes handled annually, it is not surprising that the jury deemed a high punitive damages award necessary to send the Defendant a deterrence message.”

Courts FCRA Damages Punitive Damages Consumer Finance Debt Collection Credit Report

9th Circuit reduces punitive damages in FCRA class action

On February 27, the U.S. Court of Appeals for the Ninth Circuit reduced punitive damages in a class action against a credit reporting agency (CRA) for allegedly violating the Fair Credit Reporting Act (FCRA) by erroneously linking class members to criminals and terrorists with similar names in a database maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). At trial, the jury found that the CRA violated the FCRA by willfully failing to (i) “follow reasonable procedures to assure accuracy of the terrorist alerts”; (ii) “disclose to the class members their entire credit reports by excluding the alerts from the reports”; and (iii) “provide a summary of rights” to class members with each disclosure. Subsequently, the jury awarded $8 million in statutory damages and $52 million in punitive damages to the class.

Upon appeal, the 9th Circuit affirmed the lower court’s determinations that all class members—not just the class representative—must have “standing at the final stage of a money damages suit when class members are to be awarded individual monetary damages.” But the appellate court found that all class members did have standing due to, among other things, the CRA’s “reckless handling of information from OFAC,” which subjected class members to “a real risk of harm,” and because “the violation of a statutory right constituted a concrete injury.” In addition, the appellate court rejected the CRA’s request for judgment as a matter of law or a new trial on the basis that the class had failed to provide sufficient evidence of injuries or to support the damages award. Moreover, the appellate court held that the district court did not abuse its discretion in finding that the class representative’s claims were typical of the class’s claims, nor in certifying the class or denying the CRA’s motion to decertify the class. The appellate court also agreed with the lower court on statutory damages, but it held that the $52 million punitive damages award was “unconstitutionally excessive.” The appellate court explained that although the CRA’s “conduct was reprehensible, it was not so egregious as to justify a punitive award of more than six times an already substantial compensatory award.” Accordingly, the appellate court vacated the jury’s award of punitive damages and remanded, directing that the punitive damages be reduced to four times the statutory damages award.

Courts FCRA Credit Reporting Agency Credit Report Class Action Punitive Damages OFAC Appellate Ninth Circuit

District Court reduces jury’s $3 million award in FCRA action to $490,000

On March 21, the U.S. District Court for the Northern District of Alabama reduced a consumer’s punitive damages award from $3 million to $490,000 in an action against a credit reporting agency for the alleged misreporting of credit information. According to the opinion, after the consumer had a debt dismissed by small claims court, he requested that the credit reporting agencies remove the trade line from his credit report. When one credit reporting agency refused to initiate a dispute investigation because it suspected fraud, the consumer filed a complaint alleging violations of the FCRA. In May 2018, a jury awarded the consumer $5,000 in compensatory damages and $3 million in punitive damages. The credit reporting agency moved to have the court enter judgment as a matter of law and/or have the judgment amended or altered. The court reviewed the award, noting that the punitive to compensatory damages ratio of 600 to 1 “suspiciously cocked” the “court’s eyebrows.” The court emphasized that a single-digit multiplier would not be sufficient to deter the credit reporting agency from future wrongdoing and instead, applied the 98 to 1 ratio used by the U.S. Court of Appeals for the 4th Circuit, bringing the punitive damages down to $490,000. In addition, the court applied the “one satisfaction” rule, concluding the credit reporting agency did not have to pay the compensatory damages, as the consumer already received settlement proceeds that exceed the jury award from other defendants, and “the injuries the [consumer] described are indivisible between [the credit reporting agency] and the settling defendants.”

Courts Credit Reporting Agency FCRA Damages Punitive Damages Fourth Circuit Appellate