CORTEZ v. TRANS UNION, LLC

ceedingly narrow. We agree with the district court that there is sufficient evidence in the record to support the jury's compensatory award.

Trans Union cites to Cousin v. Trans Union Corp., 246 F.3d 359 (5th Cir. 2001) and Casella v. Equifax Credit Info. Servs., 56 F.3d 469 (2d Cir. 1995) to argue that evidence similar to that proffered, by Cortez was rejected by the Courts of Appeals for the Fifth and Second Circuits, respectively, as insufficient to support compensatory damage awards. Trans Union Br. at 36, 38-39. We are not persuaded.

First, Trans Union neglects the fact that in both of those cases, the plaintiffs failed to show that the defendants' credit reports were the cause of the plaintiffs' emotional distress. See Cousin, 246 F.3d at 370 (holding that the plaintiff failed to show that Trans Union's credit report was the cause of emotional distress where there were reports from multiple agencies at play); Casella, 56 F.3d at 474-75 (holding that the plaintiff failed to show that the defendants' credit reports as opposed to the city of San Diego, which was wrongly reporting that defendant owed child support, were the cause of the plaintiffs emotional distress). That is not the situation here.

Second, we have not adopted, and now refuse to adopt, the Fifth Circuit's standard requiring "a degree of specificity which may include corroborating testimony or medical or psychological evidence in support of the damage award." Cousin, 246 F.3d at 371 (quotation omitted). Such corroboration goes only to the weight of evidence of injury, not the existence of it. If a jury accepts testimony of a plaintiff that establishes an injury without corroboration, the plaintiff should be allowed to recover under the FCRA. The fact that the plaintiffs injuries relate to the stress and anxiety caused by the defendant's conduct does not change that. This is precisely the kind of injury that Congress must have known would result from violations of the FCRA.

Furthermore, our review of other awards reinforces our belief that the award here was not excessive, and that the district court did not abuse its discretion in deciding not to reduce the compensatory award. See Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 243 (4th Cir. 2009) (affirming jury award of $200,000 for economic and emotional damages based on loss of economic opportunity in the home mortgage market, emotional distress, and loss of income for approximately 300 hours spent addressing errors in the plaintiffs credit report); Shane v. Equifax Info. Servs., LLC, 510 F.3d 495, 505 (4th Cir. 2007) ("A survey of the other, more recent FCRA cases that involve requests for remittitur of emotional distress awards suggests that approved awards more typically range between $20,000 and $75,000."); Stevenson, 987 F.2d at 298 (affirming "award of $30,000 in actual damages based upon the finding of mental anguish," which is the equivalent of over $45,000 in 2010).

Equivalent value calculated using the Inflation Calculator of the Department of Labor's Bureau of Statistics. See http://data.bls.gov/cgi-bin/cpicalc.pl (visited on May 3, 2010).

The jury obviously found the testimony of Cortez and her daughter credible and accepted' their evidence that Cortez suffered considerable anxiety, emotional distress, and humiliation as a result of being associated with a government list that includes people who are identified as terrorists. Indeed, in the post-9/11 world, neither that conclusion nor the emotional impact of being associated with a list that may well contain terrorists should come as any surprise. Viewing the facts in the light most favorable to Cortez, as we must, we conclude that the jury could reasonably have attributed significant emotional distress to the Kafkaesque world in which Cortez found herself when she tried to dispute the OFAC alert and Trans Union refused to acknowledge that the information even existed. Accordingly, we affirm the district court's decision denying Trans Union's motion to remit the $50,000 compensatory damage award.

C. Trans Union's Challenge to the Punitive Damages

We have already explained why Cortez's appeal of the reduction of the punitive damages is meritless. Trans Union appeals the award of any punitive damages. Its challenge is also meritless.

Trans Union argues that is was entitled to judgment as a matter of law on Cortez's willfulness claims because Trans Union's determination that the OFAC information was not governed by the FCRA, even if it were erroneous, was neither objectively unreasonable nor reckless. Trans Union also argues that the punitive damages award, even as remitted, is unconstitutional. As previously noted, we review the decision by district courts to remit damage awards for abuse of discretion. Evans, 273 F.3d at 354. We review de novo a trial court's determination regarding the constitutionality of a punitive damages award. Campbell 538 U.S. at 418, 123 S.Ct. 1513.

In Safeco Insurance Co. of America v. Burr, the Supreme Court held that willful violations of the FCRA are assessed for "reckless disregard." 551 U.S. 47, 60, 69, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007); see Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 192 n. 8 (3d Cir. 2009). According to the Court:

The Supreme Court's decision in Safeco defined the standard for all willful violations of the FCRA. Levine v. World Fin. Network Nat'l Bank, 554 F.3d 1314, 1318 (11th Cir. 2009) ("To prove a willful violation, a consumer must prove that a consumer reporting agency either knowingly or recklessly violated the requirements of the [Fair Credit Reporting] Act.") (citing Safeco, 127 S.Ct. at 2208); Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th Cir. 2008) (applying Safeco willful standard to violations of the FCRA by creditors); Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719, 725-26 (7th Cir. 2008) ("[S]tatutory damages are available only for willful violations of the Act, and the Supreme Court held in Safeco Insurance Co. v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), that this means recklessness — something more than negligence but less than knowledge of the law's requirements."). In Perez v. Trans Union, LLC, 526 F.Supp.2d 504 (E.D.Pa. 2007), the district court wrongly applied our prior standard, under which a plaintiff alleging a willful violation of § 1681e(b) was required to show that defendant "knowingly and intentionally committed an act in conscious disregard for the rights of others." Id. at 510 (quoting Philbin, 101 F.3d at 970). The district court applied that standard holding that the Supreme Court's decision in Safeco was limited to the section of the FCRA at issue in that case. We clarify here that Safeco's standard defining willful applies to all violations of the FCRA.

[A] company subject to FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute's terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.

Safeco, 551 U.S. at 69, 127 S.Ct. 2201. The fact that Trans Union's actions rest upon a legal conclusion does not immunize it from liability for reckless conduct under the FCRA. A credit reporting agency may act in reckless disregard of a statute's requirements by adopting an objectively unreasonable interpretation of the law. Id. Although the Supreme Court has suggested that a dearth of authoritative guidance may hinder a party's efforts to interpret the law reasonably, id. at 70, 127 S.Ct. 2201, Cortez correctly notes that the lack of definitive authority does not, as a matter of law, immunize Trans Union from potential liability.

A credit reporting agency may also willfully violate the FCRA by adopting a policy with reckless disregard of whether it contravenes a plaintiffs rights under the FCRA. Here, notwithstanding the conclusion of Trans Union's lawyers, the breadth and scope of the FCRA is both evident and extraordinary. As we explained at the outset, it refers to "all" information, wherever it may be stored, that is intended to be used or that may be used in extending credit. Moreover, it is undeniably a remedial statute that must be read in a liberal manner in order to effectuate the congressional intent underlying it. See Sullivan, 520 F.3d at 73; see also Cushman, 115 F.3d at 223. We have no trouble concluding that, given the totality of circumstances surrounding the OFAC alert, Trans Union "ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless." Safeco, 551 U.S. at 69, 127 S.Ct. 2201.

Trans Union correctly reminds us that we are the first court of appeals to address whether the FCRA applies to information from OFAC's SDN List in the form of an alert reported by a credit reporting agency. This does not, however, result in a borderline case of liability as Trans Union suggests. It merely establishes that the issue has not been presented to a court of appeals before. The credit agency whose conduct is first examined under that section of the Act should not receive a pass because the issue has never been decided. The statute is far too clear to support any such license.

Furthermore, the verdict of this lay jury reveals an understanding of the distinction between negligent and willful. The jury found Trans Union negligent in its violation of § 1681e(b) for failing to have reasonable procedures to assure maximum accuracy of the information in Cortez's report. In other words, in its initial preparation of the credit report with the OFAC alert, where Trans Union relied on Accuity's matching technology, the jury found that Trans Union did not act with reckless disregard to Cortez's rights. See, e.g., Casella, 56 F.3d at 475 (holding that where San Diego re-reported false child support liability, credit reporting agencies did not willfully violate § 1681e(b) when they reported that liability on the plaintiffs credit report). However, the jury found that Trans Union willfully violated §§ 1681g and 1681i in its responses to Cortez's request for a copy of her complete credit report and her request for reinvestigation. Trans Union categorically denied that the OFAC alert information was on Cortez's report, even though it continued to report that information to potential creditors and failed to include any statement in the report that Cortez disputed the OFAC information. The record clearly supports the jury's reasoned determination that Trans Union was not "merely careless" in failing to recognize that the FCRA governed the OFAC information it was reporting.

In attempting to overturn the punitive damages award, Trans Union repeats its argument that the OFAC information was not part of the consumer's "file." We have already disposed of that argument, and need not discuss it again. We do think it is worth reiterating that the OFAC regulations and the Treasury Department's website both indicate that OFAC information in a credit report is in fact governed by the FCRA. That website goes as far as to mention that the FCRA and the FTC provide consumers with a remedy when an invalid OFAC Alert is on their credit reports. See http://www.treas.gov/ offices/enforcement/ofac/faq/answer.shtml# consumed (visited June 17, 2010) ("How Can I Get The OFAC Alert Off My Credit Report? A consumer has the right under the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., to request the removal of incorrect information on his/her credit report. To accomplish this, consumers should contact the credit reporting agency or bureau that issued the credit report."). Even a cursory look at that website should have informed Trans Union of the perils of its approach to OFAC alerts.

Trans Union argues that because the FTC, and not the Treasury Department, is the agency authorized to enforce the FCRA, the Treasury Department's conclusions about the FCRA are not relevant. That argument only bolsters our belief that the jury acted reasonably in concluding that Trans Union's actions were not "merely careless" but were with reckless disregard to the law. The jury may well have concluded that Trans Union made a strategic decision to include OFAC information in the manner it did because the OFAC alert was a separate product that could be sold to customers at additional cost.

When considered together with our analysis in support of the jury's finding of liability, we easily conclude that Trans Union substantially risked acting in violation of the law when it made the policy decision to exclude OFAC information from its FCRA compliance. Although such a finding cannot be made lightly, especially in a case of first impression, it is imperative that we do not allow "a company that traffics in the reputations of ordinary people" a free pass to ignore the requirements of the FCRA each time it creatively incorporates a new piece of personal consumer information in its reports. Dennis v. BEH-1, LLC, 520 F.3d 1066, 1071 (9th Cir. 2008).

Finally, Trans Union argues that the remitted punitive damages award violates its due process rights under the 14th Amendment. We review the award de novo to determine whether the award of punitive damages is "grossly excessive or arbitrary." Campbell, 538 U.S. at 416, 123 S.Ct. 1513. In Campbell, the Supreme Court summarized the three guideposts a court reviewing punitive damages should consider: "(1) the degree of reprehensibility of the defendant's misconduct/, (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages award by the jury and the civil penalties authorized or imposed in comparable cases." Id. at 418, 123 S.Ct. 1513 (citing Gore, 517 U.S. at 575, 116 S.Ct. 1589).

The district court's remitted award of $100,000 does not even begin to approach the outer limit of punitive damages "aimed at deterrence and retribution" allowed by the Constitution. Id. at 416, 116 S.Ct. 1589.

In terms of reprehensibility, the first guidepost, Trans Union ignored "the overwhelming likelihood of liability" and contorted its policies to avoid its responsibilities under the FCRA. Id. at 419, 116 S.Ct. 1589. Trans Union also repeatedly failed to acknowledge to Cortez that the OFAC Alert was in her credit report when it knew that the information was being reported to its subscribers. Inter Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446, 467 (3d Cir. 1999) (the degree of reprehensibility of a defendant's conduct includes whether the conduct "involves deliberate false statements rather than omissions"). Moreover, although Cortez did not suffer severe physical harm, the gravity of harm that could result from Trans Union's "match" of Cortez with an individual on a "terrorist" list cannot be over stated. This is especially true because Trans Union's subscribers rely on the accuracy of the detailed personal information Trans Union provides. Given the severe potential consequences of such an association, Trans Union's failure to take the utmost care in ensuring the information's accuracy — at the very least, comparing birth dates when they are available — is reprehensible.

The damages award also survives scrutiny under the second guidepost. An award that is twice the compensatory damages award falls well within the Supreme Court's standard for ordinary cases of a single-digit ratio. Campbell, 538 U.S. at 425, 123 S.Ct. 1513.

Finally, we agree with the parties that the third guidepost is not useful in the analysis of punitive damages here as there is no "truly comparable" civil penalty to a FCRA punitive damages award. Cortez Reply Br. at 46; Trans Union Reply Br. at 23-26.

Accordingly, we affirm the district court's remitted punitive damages award of $100,000.

IV. CONCLUSION

In summary, we affirm the district court's orders denying Trans Union's motion for judgment as a matter of law and entering a remitted judgment, including $50,000 in compensatory damages and $100,000 in punitive damages, against Trans Union.