David Daugherty v. Ocwen Loan Servicing, LLC
701 F. App'x 246
| 4th Cir. | 2017Background
- Daugherty's mortgage servicer, Ocwen, reported accurate past-due/foreclosure information in 2012; the Daughertys later cured the arrearage and reinstated the loan.
- Ocwen corrected the loan origination date to July 1999, but Equifax created a duplicate tradeline (August 1999) and updated only one tradeline when the loan was reinstated, leaving an erroneous tradeline showing foreclosure and 120+ days past due from April 2012–July 2014.
- Daugherty notified Ocwen (March 2013) and hired a credit-repair firm; Equifax sent multiple dispute verification requests to Ocwen (23 total; eight with a broad “007” dispute code), some containing erroneous account data.
- Ocwen repeatedly responded “Verified As Reported” (and sometimes partially modified) to many dispute verification requests despite having internal records that could correct the errors and despite correspondence indicating the account was current.
- Jury found Ocwen willfully violated the FCRA, awarding $6,128.39 in compensatory damages and $2.5 million in punitive damages; the district court entered judgment. On appeal, the Fourth Circuit affirmed liability and compensatory damages, but held the punitive award excessive and remitted it to $600,000 as an alternative to a new punitive-damages trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of late-produced Equifax records | Records were necessary to show Ocwen’s responses to dispute verifications | Late disclosure violated Rule 26 and should be excluded | Admission not an abuse; untimely disclosure was harmless because Ocwen had same documents in discovery |
| Admissibility of expert testimony (E. Hendricks) | Expert could testify about reasonableness of Ocwen’s investigation based on documents | Report vague; expert improperly stated legal conclusions | Admissible: report gave adequate notice and testimony on "reasonableness" was permissible |
| Exclusion of Aggressive Credit Repair letters to Equifax | Letters showed the content of consumer disputes | Letters were extrinsic and not known to Ocwen; not relevant to reasonableness of Ocwen’s internal investigation | Exclusion not an abuse; Ocwen’s duty is judged by its own records and what it knew |
| Willfulness under the FCRA | Ocwen’s repeated failures and systemic practices showed reckless disregard/willfulness | Ocwen reasonably interpreted FCRA (safe harbor); acted without willfulness | Affirmed: sufficient evidence of willfulness; jury properly instructed and reasonable basis existed to find reckless disregard |
| Punitive damages amount | Needed significant punitive award to deter corporate misconduct; evidence of wealth admitted | $2.5M excessive given $6,128.39 compensatory damage; admission of parent company 10-K challenged | $2.5M vacated as excessive; appellate court reduced upper limit to $600,000 and ordered new-trial nisi remittitur (accept $600K or retry punitive damages) |
Key Cases Cited
- Lord & Taylor, LLC v. White Flint, L.P., 849 F.3d 567 (4th Cir.) (abuse-of-discretion review for evidentiary rulings)
- Johnson v. MBNA Am. Bank, NA, 357 F.3d 426 (4th Cir.) (furnisher must conduct reasonable investigation of disputed information)
- Saunders v. Branch Banking & Tr. Co., 526 F.3d 142 (4th Cir.) (willful FCRA violations can support substantial punitive damages; consider internal records)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (U.S.) (willfulness includes reckless disregard; reasonable but erroneous statutory interpretation negates willfulness)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S.) (constitutional guideposts for reviewing punitive damages)
- Cline v. Wal-Mart Stores, Inc., 144 F.3d 294 (4th Cir.) (remittitur/nisi remittitur procedure and appellate-setting of an upper punitive limit)
- TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443 (U.S.) (consideration of potential harm and deterrence in punitive awards)
- Mathias v. Accor Econ. Lodging, Inc., 347 F.3d 672 (7th Cir.) (punitive damages for concealed ongoing wrongdoing)
- Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424 (U.S.) (punitive damages serve deterrence and retribution)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (U.S.) (fair notice principle in punitive damages review)