US-Strafschadensersatz soll grundsätzlich den nachgewiesen Schaden um nicht mehr als das Neunfache überschreiten dürfen.; Punitives Can Only Exceed Compensatories by 9-1 Ratio, Court Says.  Slashing a jury’s punitive award of $500,000 down to $270,000, a federal judge has ruled that the constitutional maximum for punitive awards is ordinarily no more than nine times the compensatory award — even in cases where the defendant is a repeat violator. In his 22-page opinion in Dixon-Rollins v. TransUnion , U.S. District Judge Timothy J. Savage was harshly critical of the credit reporting agency, noting that it has repeatedly violated the Fair Credit Reporting Act by failing to investigate complaints of wrong information on credit reports.

As a result, Savage said the evidence supported a punitive award at the highest level allowed under recent rulings by the U.S. Supreme Court. But since the jury’s compensatory award was just $30,000, Savage said, the maximum punitive award would be $270,000.

„TransUnion had been warned repeatedly that its reinvestigation obligation in verifying a disputed account requires more than parroting the original source’s response. Nevertheless, it continues to ignore these judicial edicts and refuses to change the way it does business,“ Savage wrote.

„This refusal to follow judicial direction convinces us that ’strong medicine is required to cure the defendant’s disrespect for the law,'“ Savage wrote, quoting from the U.S. Supreme Court’s 1996 ruling in BMW of North America Inc. v. Gore .

In a separate, 17-page opinion, Savage awarded the plaintiff more than $110,000 in attorney fees and costs.

In the suit, plaintiff Carmen Dixon-Rollins claimed that TransUnion ignored her repeated complaints about an error on her credit report stemming from a dispute with a landlord.

TransUnion argued that it investigated the complaint and that the landlord confirmed that the debt remained unpaid.

But Dixon-Rollins said she had come forward with proof — including a canceled check and a lawyer’s letter that showed the debt had been settled — and that TransUnion continued to refuse to correct the error, causing her to suffer a lower credit rating.

At trial, plaintiffs attorneys John Soumilas, Geoffrey H. Baskerville and Mark D. Mailman of Francis & Mailman argued that TransUnion has a duty under the law to reinvestigate claims of errors, and cannot rely on a creditor’s first response that confirms a debt.

Savage, in the portion of the ruling that upheld the jury’s verdict, agreed with the plaintiff and found that TransUnion was asking the court to ignore both statutory mandates and the binding rulings of the 3rd U.S. Circuit Court of Appeals.

TransUnion’s lawyers — Bruce S. Luckman, Christopher N. Jones and Timothy P. Creech of Kogan Trichon & Wertheimer — argued that amendments to the FCRA had shifted the burden to investigate onto the original creditor that had supplied the allegedly incorrect data.

But Savage disagreed, saying, „The fact that Congress chose to impose a higher duty to investigate on original sources does not mean that it intended to diminish the reinvestigation obligations of consumer reporting agencies.“

Savage also emphasized that the 3rd Circuit’s 1997 decision in Cushman v. TransUnion Corp. remains good law.

„There is nothing in the statute or legislative history that supports a conclusion that the 1996 amendments to the FCRA diminished the credit reporting agencies‘ reinvestigation duties. Courts in this district have consistently applied Cushman ’s requirement that consumer reporting agencies may be required to go beyond the original source of credit information,“ Savage wrote.

For lawyers, Savage’s ruling may prove to be more interesting for its discussion of the punitive damages.

Under the recent decisions from the U.S. Supreme Court, Savage said, trial judges must consider several „guideposts“ when deciding whether an award of punitive damages is „grossly excessive.“

The most important, he said, is the „degree of reprehensibility of the defendant’s misconduct,“ but judges must also weigh any disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, as well as the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

In analyzing the question of reprehensibility, Savage focused on evidence that TransUnion is a repeat violator of the FCRA.

„TransUnion’s failure to properly reinvestigate Dixon-Rollins‘ dispute was not an isolated incident. Indeed, it has repeatedly failed to carry out its statutory duty despite the rejection of the same argument it now repeats and admonishments that its reinvestigations were deficient,“ Savage said.

In the 1997 Cushman decision, Savage noted, the 3rd Circuit „instructed TransUnion that it may not just repeat information it receives from the original source, but must do more to verify the credit information.“

But Savage found that „since Cushman was decided, TransUnion has been repeatedly warned of its statutorily required obligation in conducting a reinvestigation.“

Nonetheless, Savage found that the jury’s $500,000 punitive award was excessive in light of the $30,000 compensatory award.

„The ratio of punitive to compensatory damages awarded to Dixon-Rollins is 16.67-to-1,“ Savage wrote. „Because this exceeds the single-digit ratio appropriate for most punitive awards, we must carefully evaluate the facts of the case to assure that due process concerns are addressed.“

Savage focused on TransUnion’s repeat violations and found that the punitive award should be adjusted to the upper end of the constitutional limit.

„Based on its repeated conduct, it appears that TransUnion has made a risk-benefit analysis, concluding that it is worth the risk to continue doing business as usual and to ignore its obligations under the FCRA,“ Savage said.

Any punitive award, Savage said, „must be of sufficient size to deter TransUnion from disregarding its legal obligations.“

Weighing all the factors, including the jury’s „modest compensatory award,“ TransUnion’s relative size and wealth and its repeated FCRA violations, Savage concluded that „a more appropriate ratio of punitive to compensatory damages should be 9-1.“

Luckman, the lead defense lawyer for TransUnion, did not return a call seeking comment.

Soumilas, in a brief interview, said the plaintiffs team has not yet decided whether to appeal the reduction of the punitive award, but that he was pleased by Savage’s analysis of the legal duty of credit reporting agencies to reinvestigate any claim of error by consumers.

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