Opinion ID: 2972717
Heading Depth: 4
Heading Rank: 1

Heading: Reprehensibility of Defendant’s Conduct

Text: The Court stated that the degree of reprehensibility of the defendant’s conduct is the most important factor in determining the constitutionality of the punitive award. Id. at 419. In considering this first guidepost, the Court stated that the following factors are important: (1) whether the harm caused was physical or economic; (2) whether the conduct showed an indifference or reckless disregard for the health or safety of others; (3) whether the target of the conduct was financially vulnerable; (4) whether the conduct involved repeated actions or was merely the result of an isolated instance; and (5) whether the harm was caused by intentional malice, trickery or deceit or was rather accidental. Id. “The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect.” Id. First, we consider whether the harm caused was physical or economic. Contrary to Bach’s assertions in her appellate brief, FUNB’s violation in this case was purely economic rather than physical. Similar to the situation in State Farm, the harm was a result of “a transaction in the economic realm, not from some physical assault or trauma[, and] there were no physical injuries.” Id. at 426. Although Bach attempts to argue that the harm caused in this case was both physical and economic because of the resulting emotional distress, this is not the sort of physical injury the State Farm case contemplates, and thus, the first factor is not present. See id. (noting that plaintiffs were - 17 - No. 04-3899 Bach v. First Union National Bank awarded $1 million for emotional distress, and later noting that no physical injuries were present in the case). Similarly, because FUNB’s actions occurred in the “economic realm,” it cannot be said that the tortious conduct displayed an indifference or reckless disregard for the health and safety of others. Therefore, the second indicator of reprehensibility is not met. Regarding the third factor, it does appear that Bach was a financially vulnerable victim, a contention that FUNB concedes in its brief. FUNB urges this court to find that despite Bach’s financial vulnerability, this factor was not met because FUNB did not specifically target Bach because of her vulnerability. However, the factor, as laid out in State Farm, does not require that the defendant target the victim specifically because of her vulnerability, but rather requires only that the target be financially vulnerable. Because FUNB does not argue otherwise, this factor of the analysis is met. Fourth, we consider whether FUNB’s conduct was the result of repeated actions or of an isolated incident. It appears that the Supreme Court has interpreted this factor to require that the similar reprehensible conduct be committed against various different parties rather than repeated reprehensible acts within the single transaction with the plaintiff. See BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 576-77 (1996) (in considering fourth factor, reviewing whether defendant’s actions in this instance “formed part of a nationwide pattern of tortious conduct”); see also State Farm, 538 U.S. at 423 (looking for indications that the “conduct in question replicates the prior transgressions” against other insureds in determining whether punitive damage award was justified); Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224, 232 (3d Cir. 2005) (noting that the district court - 18 - No. 04-3899 Bach v. First Union National Bank improperly interpreted the fourth factor to mean “a pattern of contemptible conduct within one extended transaction” rather than “specific instances of similar conduct by the defendant in relation to other parties”). Bach argues that this factor is met based on statements made by the VicePresident of FUNB, Fernando Durand, that discussed FUNB’s business policies and indicated that FUNB treated Bach’s situation in the same way it treated all of its clients. However, Bach did not show that FUNB had engaged in repeated conduct that would violate the FCRA in the past with respect to others, and Durand’s testimony cannot be read as an admission that FUNB did so. Therefore, we find that the fourth factor has not been met. Fifth, the court must consider whether FUNB’s actions were the product of intentional malice as opposed to mere accident. FUNB argues that the fact that its actions cannot be considered to rise to the level of intentional malice is evidenced in the district court’s grant of a judgment as a matter of law to FUNB on the intentional infliction of emotional distress, invasion of privacy, defamation, and negligence claims. The district court stated in granting FUNB’s motion on these claims that while FUNB’s actions might have been considered reckless, “no reasonable jury could find that the precondition [was met] that the defendant acted with malice or with willful intent and that there was a conscientious disregard for the rights and safety of others . . . .” In reviewing the punitive damage award, the district court attempted to distinguish these findings based on the fact that they were made with reference to the state law claims as opposed to the FCRA claim. However, regardless of the underlying claim, the district court’s finding with regard to whether FUNB acted with malice is pertinent to the examination here, as the inquiry is essentially the same. While the district court’s holdings do not support a finding that FUNB’s actions were a product of mere - 19 - No. 04-3899 Bach v. First Union National Bank accident, as the court stated that a reasonable juror might have found that the actions were reckless, the findings certainly do not support a finding of intentional malice, trickery, or deceit. Therefore, we find that the last factor is not met. As a result, only one of the five reprehensibility factors is present in this case. Such a finding does not support the large punitive damage award in this case. 2. Disparity Between Harm Suffered and Size of Punitive Award Second, State Farm directs this court to consider the ratio of actual harm suffered by the plaintiff to the punitive damage award. The Supreme Court has declined to create a bright-line rule regarding the permissible ratio, but has stated that awards exceeding a single-digit ratio will rarely be upheld against a constitutional challenge, and noted that in the past, the court considered a fourto-one ratio to be “close to the line of constitutional impropriety.” State Farm, 538 U.S. at 424-25. The Court noted that where the amount of compensatory damages is high, a lesser amount of punitive damages, perhaps only in an amount equal to the compensatory damages, may comport with due process. Id. at 425. The ratio of punitive to compensatory damages in this case is roughly 6.6:1. This ratio is alarming, especially considering the fact that much of the compensatory damage award must be attributable to Bach’s pain and suffering. This fact compels the conclusion that the punitive damage award is duplicative, and that either a new trial on punitive damages or a remittitur of the damages awarded is appropriate. The Supreme Court’s observations about the ratio of punitive to compensatory damages awarded in State Farm are equally applicable to this case: The compensatory damages for the injury suffered here . . . likely were based on a component which was duplicated in the punitive award. Much of the distress was - 20 - No. 04-3899 Bach v. First Union National Bank caused by the outrage and humiliation [the plaintiffs] suffered at the actions of [the defendant]; and it is a major role of punitive damages to condemn such conduct. Compensatory damages, however, already contain this punitive element. See Restatement (Second) of Torts, § 908, Comment c, p.466 (1977) (“In many cases in which compensatory damages include an amount for emotional distress, such as humiliation or indignation aroused by the defendant’s act, there is no clear line of demarcation between punishment and compensation and a verdict for a specified amount frequently includes elements of both.”). Id. at 426. See also Boerner v. Brown & Williamson Tobacco Co., 394 F.3d 594, 603 (8th Cir. 2005) (reducing punitive damages to equal to the amount of compensatory damages where ratio of punitive to compensatory damages was 4:1 because the compensatory damages awarded were substantial and no other factor justifying the high ratio, such as “the presence of an injury that is hard to detect or a particularly egregious act that has resulted in only a small amount of economic damages,” was present) (internal quotation marks, citation, and alteration omitted). As such, our evaluation of the ratio of punitive to compensatory damages awarded in this case supports FUNB’s argument that the punitive damage award is excessive. 3. Comparison of the Punitive Damage Award with Comparable Civil or Criminal Penalties State Farm next directs this court to consider the disparity between the punitive damage award and the civil or criminal penalties imposed or authorized in comparable cases. The maximum civil penalty that the Federal Trade Commission can seek for knowing violations of the FCRA is $2,500 per violation. 15 U.S.C. § 1681s(a)(2)(A). However, this limit is not applicable to actions - 21 - No. 04-3899 Bach v. First Union National Bank brought under the FCRA by private citizens. Thus, this guidepost is not particularly helpful in assessing the constitutionality of the punitive damage award.2 Our consideration of the three State Farm guideposts causes us to conclude that the punitive damage award in this case was unconstitutionally excessive. We therefore reverse the award of punitive damages and remand the case to the district court for either a new trial on the punitive damages issue or for a remittitur of the jury verdict. D. New Trial Based on Improper Passion and Prejudice of the Jury Where a defendant alleges that the result of a trial was the product of passion or prejudice and seeks a new trial, we review the district court’s determination on the issue for an abuse of discretion. Blasky v. Wheatley Trucking, Inc., 482 F.2d 497, 498 (6th Cir. 1973). FUNB argues that the district court abused its discretion in failing to grant a new trial pursuant to Rule 59(a) based on its assertion that the jury verdict was a result of improper passion and prejudice. FUNB argues that the fact that the jury was exposed to events occurring prior to FUNB’s violation of the FCRA, such 2 Both parties cite past punitive damage awards, some involving violations of the FCRA and others involving unrelated claims, in support of their respective arguments regarding the propriety of the amount of punitive damages awarded in this case under this guidepost. Because the Supreme Court directs the lower courts to compare the award with civil and criminal penalties authorized and imposed rather than with civil and criminal damage awards imposed in comparable cases, the amount of punitive damages awarded in past cases is irrelevant to our inquiry. See Gore, 517 U.S. at 583 (indicating that the purpose behind the comparison of the punitive damage award with comparable civil and criminal penalties is that the “reviewing court engaged in determining whether an award of punitive damages is excessive should accord substantial deference to legislative judgments concerning appropriate sanctions for the conduct at issue”) (internal quotation marks and citations omitted). Bach also argues that the criminal penalties imposed for extortion should be considered under this prong of the analysis. However, the crime of extortion is not sufficiently analogous to warrant consideration, and therefore, Bach’s arguments on this point are similarly irrelevant. - 22 - No. 04-3899 Bach v. First Union National Bank as its collection efforts against Bach before the credit reporting agency notified FUNB of the allegations of fraud, as well as the size of the compensatory and punitive damage award, support an inference the jury verdict was a product of passion and prejudice. The district court rejected these arguments, stating that FUNB’s actions prior to the FCRA violation were relevant to the question of whether the violation was willful, and the damage award was not excessive and therefore was not the result of passion or prejudice on the part of the jury. “There can be no justice in a trial by jurors inflamed by passion [or] warped by prejudice.” Groppi v. Wisconsin, 400 U.S. 505, 511 n.12 (1971) (quoting Crocker v. Justices of Superior Ct., 94 N.E. 369, 376-77 (Mass. 1911)). An excessive award of damages can support an inference of bias, passion and prejudice. Auster Oil & Gas, Inc. v. Stream, 835 F.2d 597, 603 (5th Cir. 1988). We can only reverse the district court’s decision that the jury verdict was not a product of passion and prejudice upon a “definite and firm conviction . . . that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.” Conte v. Gen. Housewares Corp., 215 F.3d 628, 637 (6th Cir. 2000) (internal quotation marks and citation omitted). Given this standard of review, it cannot be said that the district court abused its discretion in denying FUNB’s motion for a new trial. The district court’s finding that FUNB’s pre-violation conduct is relevant to the question of willfulness of the FCRA violation is reasonable and should not be disturbed. The compensatory damages awarded in this case were not excessive, so the district court’s ruling on this point should also not be disturbed. Although we do find that the punitive damage award is unconstitutionally excessive, we have chosen to use the less drastic measure of - 23 - No. 04-3899 Bach v. First Union National Bank remanding for either a new trial on only the punitive damage issue or a remittitur rather than granting a new trial on all of the issues. As a result, we affirm the district court’s decision to deny FUNB’s Rule 59(a) motion.