The U.S. Court of Appeals for the Third Circuit recently affirmed a district court's order that: (1) remitted a jury's punitive damages award of $750,000 to $100,000 on claims brought under the Fair Credit Reporting Act ("FCRA"); (2) denied the defendant credit reporting agency's motion for judgment as a matter of law; and (3) rejected the defendant credit reporting agency's challenge to the jury's compensatory damages award.
A copy of the opinion is available at: http://www.ca3.uscourts.gov/opinarch/082465p.pdf
This matter arose from a credit report prepared by defendant Trans Union for a car dealership, which report confused plaintiff's identity with the identity of someone with a similar name. The report contained an alert which identified plaintiff as being on a list of Specially Designated Nationals & Blocked Persons List ("SDN List"), compiled by the Office of Foreign Assets Control ("OFAC"). Conducting business with or extending credit to anyone named on the SDN List may result in civil as well as criminal penalties. Recognizing the need to ensure that innocent persons are not associated with the SDN List, OFAC regulations state that "organizations involved in the credit reporting process should strive to protect consumers from erroneous or misleading information appearing on credit reports."
Trans Union offers its "OFAC Advisor" to creditors who purchase others of its product. The information included in the OFAC Advisor is not included in credit reports that Trans Union sends to consumers on request. When plaintiff learned of the error on report from the car dealership, she contacted Trans Union four times in an effort to correct her credit report. The information was not corrected and this lawsuit followed. A jury awarded plaintiff both actual and punitive damages, finding in part that Trans Union had breached the standard of care required by Section 1681e(b) of the FCRA, which requires a consumer reporting agency to "follow reasonable procedures to assure maximum possible accuracy of the information" when preparing a "consumer report" and that Trans Union willfully violated Sections 1681g and 1681i of the FCRA. Plaintiff appealed the district court's remittitur of the jury's award of punitive damages and Trans Union appealed the district court's denial of its motion for judgment as a matter of law, as well as the damages award that the court did approve.
In affirming the district court's orders, the Third Circuit disagreed with Trans Union's argument that the OFAC alert is not covered by the FCRA, because, according to Trans Union the OFAC alert is not part of a "consumer report." Rather, the Court held that "Trans Union's argument that the OFAC alert somehow manages to avoid the reach of the FCRA ignores the breadth of the language that Congress used in drafting that statute." The Court noted that the term "consumer report" is defined in the FCRA as "any . . . communication of any information by a consumer reporting agency" and "[t]he applicability of the FCRA is not negated merely because the creditor/dealership could have used the OFAC Screen to comply with the USA PATRIOT Act."
The Court also held that the jury was correct in concluding that Trans Union was negligent in dealing with plaintiff, as required for liability under FCRA Section 1681e(b). The Court pointed out that the standard under Section 1681e(b) is for a credit reporting agency to use reasonable procedures to assure "maximum possible accuracy," not just reasonable accuracy, and held that "[t]he jury could reasonably conclude that Trans Union could have taken steps to minimize the possibility that it would erroneously place an OFAC alert on a credit report," such as checking the birth date of the consumer against that of the person on the SDN List.
The Court also affirmed the district court's denial of Trans Union's motion for judgment as a matter of law on plaintiff's claim under Section 1681g of the FCRA, which requires that a credit reporting agency furnish to a consumer all information in the consumer's file at the time a consumer makes a request for such information. In so doing, the Court rejected Trans Union's reasoning that because the SDN list is not part of its own database, it is not part of the "consumer's file," ultimately holding that "information relating to the OFAC alert is part of the consumer's 'file' as defined in the FCRA."
Furthermore, the Third Circuit agreed that Trans Union violated Section 1681i of the FCRA by failing to "promptly reinvestigate any information in a consumer's file that is disputed by a consumer," because "the jury could reasonably have concluded that Trans Union would have discovered the inaccuracy in [plaintiff's] report if it had reasonably investigated the matter," as required. Moreover, the Court held that it was "reasonable for the jury to conclude that [plaintiff] had adequately informed Trans Union that its reinvestigation did not resolve her dispute and that Trans Union failed to note that on her credit report, as required by the FCRA [Section 1681i(c)]," even though plaintiff "never explicitly filed a statement of dispute," as required under Section 1681i(b) of the FCRA.
Finally, as to the plaintiff's attempt to challenge the jury's punitive damages award of $750,000, the Court applied the Supreme Court's holding in Donovan v. Penn Shipping that a "plaintiff in federal court . . . may not appeal from a remittitur order he has accepted," even if such acceptance is under protest. Here, the district court had granted the defendant's motion for a retrial on damages, unless the plaintiff accepted a remittitur, given the district court's finding that the punitive damages awarded by the jury "exceeded permissible limits." Plaintiff accepted the remittitur under protest. Based on the Donovan ruling, the Court rejected plaintiff's challenge to the remittitur.
As to the jury's actual damages award, the Court held that the award of $50,000 was not excessive given plaintiff's psychological and stress-related suffering. The Court also upheld the district court's award of $100,000 in punitive damages given the jury's findings that "Trans Union willfully violated §§ 1681g and 1681i" was supported by the record.
Ralph T. Wutscher
Kahrl Wutscher LLP
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