Court Opinion

ID: 4189623
Source: CourtListenerOpinion
Date Created: 2017-07-26 19:01:18.026693+00
Date Added: 2024-06-11T14:40:34.311559
License: Public Domain

UNPUBLISHED

                      UNITED STATES COURT OF APPEALS
                          FOR THE FOURTH CIRCUIT

                                      No. 16-2243

DAVID M. DAUGHERTY,

                    Plaintiff - Appellee,

             v.

OCWEN LOAN SERVICING, LLC,

                    Defendant - Appellant,

             and

EQUIFAX INFORMATION SERVICES, LLC,

                    Defendant.

Appeal from the United States District Court for the Southern District of West Virginia,
at Beckley. Irene C. Berger, District Judge. (5:14−cv−24506)

Argued: May 11, 2017                                            Decided: July 26, 2017

Before AGEE, KEENAN, and HARRIS, Circuit Judges.

Affirmed in part, vacated in part and remanded by unpublished per curiam opinion.

ARGUED: John Curtis Lynch, TROUTMAN SANDERS, LLP, Virginia Beach,
Virginia, for Appellant. Rachel Sarah Bloomekatz, GUPTA WESSLER PLLC,
Washington, D.C., for Appellee. ON BRIEF: Megan Burns, Jonathan M. Kenney, Jason
E. Manning, TROUTMAN SANDERS, LLP, Virginia Beach, Virginia, for Appellant.
Deepak Gupta, Matthew W.H. Wessler, GUPTA WESSLER PLLC, Washington, D.C.;
Jed R. Nolan, Ralph C. Young, HAMILTON, BURGESS, YOUNG & POLLARD,
PLLC, Fayetteville, West Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                            2
PER CURIAM:

       Plaintiff David Daugherty filed a complaint under the Fair Credit Reporting Act

(FCRA), 15 U.S.C. § 1681 et seq., alleging that defendant Ocwen Loan Servicing, LLC

(Ocwen) failed to investigate and to correct certain erroneous information on Daugherty’s

credit report as required under the FCRA. The case proceeded to a jury trial, in which the

jury found that Ocwen willfully had failed to perform a reasonable investigation

regarding the true status of Daugherty’s account with Ocwen. After the jury awarded

Daugherty $6,128.39 in compensatory damages and $2.5 million in punitive damages, the

district court entered judgment in accordance with the jury verdict. Ocwen appeals,

arguing that: (1) the district court committed various evidentiary errors at trial; (2) the

evidence failed to support a finding of willfulness; and (3) the punitive damages award is

unconstitutionally excessive.

       Upon our review, we hold that the district court did not err in its evidentiary

rulings or in submitting the question of Ocwen’s willfulness to the jury. However, we

conclude that the jury’s award of $2.5 million in punitive damages is unconstitutionally

excessive when considered in relation to Ocwen’s conduct in this case. Accordingly, we

affirm the award of compensatory damages and determination of willfulness, but reduce

the award of punitive damages and grant a new trial nisi remittitur. We remand the case

to the district court to provide Daugherty the option of accepting a punitive damages

award in the reduced amount of $600,000 or proceeding to a new trial on punitive

damages.

                                            3
                                            I.

                                            A.

       In July 1999, David Daugherty and his wife purchased a home in Vienna, West

Virginia, which was financed through a note secured by a mortgage on the property. The

terms of the note required that the Daughertys make monthly payments for 15 years,

followed by a $82,666.36 “balloon payment” due on July 26, 2014. Ocwen acquired the

Daughertys’ note in November 2011.

       When Ocwen acquired the note, the Daughertys were delinquent in making their

monthly payments.      By February 2012, the total delinquency on the account was

$6,128.39, and Ocwen initiated foreclosure proceedings on the Daugherty property in

April 2012. Ocwen accurately reported to certain consumer reporting agencies (reporting

agencies), including Equifax Information Services, LLC (Equifax), that Mr. Daugherty’s

account was past due and in foreclosure proceedings. Within one month following

Ocwen’s report, the Daughertys used Mrs. Daugherty’s retirement savings to pay the past

due balance and had their payment plan reinstated.

       The inaccuracies in the credit reports that form the basis of this lawsuit dealt with

the status of Mr. Daugherty’s credit, and did not involve his wife’s credit status. At some

time during the Daughertys’ period of arrearages, Ocwen discovered that its predecessor

in interest had conveyed to the reporting agencies an incorrect loan origination date of

August 1999 for the Daughertys’ loan. To correct this error, starting in April 2012,

Ocwen submitted information to the reporting agencies that correctly reflected the

accurate loan origination date of July 1999. However, Equifax misinterpreted Ocwen’s

                                             4
corrected reports as referencing a separate account, and created a new entry or “tradeline”

in Mr. Daugherty’s credit report. As a result, Equifax began reporting two separate

tradelines for the same loan account.

       After the Daughertys cured the loan delinquency and had their payment plan

reinstated, Ocwen informed the reporting agencies that the loan account was no longer

past due or in foreclosure. Equifax, however, updated only one of the two tradelines, and

the uncorrected tradeline continued to reflect that an account in Mr. Daugherty’s name

was in foreclosure. Therefore, from April 2012 through July 2014, Equifax incorrectly

reported an account opened in August 1999 that was over 120 days past due and in

foreclosure, and at the same time correctly reported an account opened in July 1999 that

was current and in good standing.

       In March 2013, when the Daughertys prepared to refinance their mortgage, they

discovered that Equifax had been incorrectly reporting that Mr. Daugherty’s account with

Ocwen was delinquent in the amount of $6,128.39, over 120 days past due, and in

foreclosure. Mr. Daugherty wrote a letter to Ocwen, explaining that his credit report

erroneously indicated that he was “currently behind $6,128.00” and in foreclosure, and

requested that Ocwen “correct those records as soon as possible.”          Mr. Daugherty

attached to the letter a portion of his credit report showing his payment history through

February 2012, which also erroneously showed that his account was “closed,” that the

account was “[a]t least 120 days or more than four payments past due,” and that

“FORECLOSURE PROCESS STARTED.”                   Ocwen responded in a letter to Mr.

Daugherty dated March 18, 2013, stating that the past due amount was accurate “as of

                                            5
March 2012,” and that the foreclosure reporting was “valid and cannot be altered.”

Despite acknowledging that Mr. Daugherty’s account was currently in good standing and

not in foreclosure, Ocwen did not resolve the conflicting information in Mr. Daugherty’s

credit report.

       Also in March 2013, Mr. Daugherty hired a company known as Aggressive Credit

Repair (Aggressive) to help correct the errors in his credit report. From March 2013

through July 2014, Aggressive wrote numerous letters to Equifax concerning Mr.

Daugherty’s account with Ocwen.

       Upon receipt of these letters, Equifax transmitted to Ocwen separate requests for

“automated credit dispute verifications” (dispute verification requests) for each tradeline,

seeking verification of the information disputed by Mr. Daugherty. Because Equifax did

not notice the inaccurate, duplicate tradeline showing on Mr. Daugherty’s account,

Equifax transmitted the dispute verification requests in pairs, one with correct account

information and one with erroneous account information.          Each dispute verification

request referenced at least one “dispute code,” either a “001” dispute code indicating that

the consumer disputed ownership of the account, or a “007” dispute code indicating that

the consumer disputed the listed current account status, previous account status, payment

history, or payment rating. 1

       In March 2013, Ocwen received the first two dispute verification requests, which

each contained both “001” and “007” codes, only one day after replying to Mr.

       1
         Some of the testimony and documents in the record refer to the “007” dispute
code as “106.” We refer to this code as “007” throughout this opinion.

                                             6
Daugherty’s direct correspondence concerning the same disputed information.            Both

dispute verification requests referenced the same account number. However, one of those

requests referenced an incorrect current balance, past due amount, last payment date, and

actual payment amount.       This incorrect information was accompanied by additional

incorrect notations: “Foreclosure proceedings started” and “Account 120 days past the

due date.” Ocwen did not notice the errors or the inconsistencies between the two dispute

verification requests, and responded to Equifax that the information submitted was

“Verified As Reported.”

       From March 2013 through July 2014, 2 Ocwen received from Equifax a total of 23

dispute verification requests, 11 of which had included erroneous information about Mr.

Daugherty’s account. As reflected in the chart below, Ocwen continued to report to

Equifax as correct the erroneous information concerning Mr. Daugherty’s loan account.

Date               Dispute        Account Status                Response
                                  Information
March 2013         001 & 007      Current                       Verified As Reported
March 2013         001 & 007      120 days past due             Verified As Reported
                                  In foreclosure
May 2013           001            Current                       Verified As Reported
May 2013           001            120 days past due             Verified As Reported
                                  In foreclosure
July 2013          001            Current                       Verified As Reported

       2
         In June 2014, the Consumer Finance Protection Bureau (CFPB) sent Ocwen an
inquiry regarding other errors on Mr. Daugherty’s credit report not at issue in this appeal.
That dispute related to other errors on Mr. Daugherty’s credit report appearing in 2013.
Ocwen’s initial response failed to address the CFPB’s questions about 2013 records and
provided irrelevant information based on Ocwen’s 2012 records. Although the
information disputed in the matter addressed by the CFPB is not at issue in this appeal,
Ocwen’s careless handling of the government inquiry was part of the evidentiary record
considered by the jury.

                                             7
July 2013         001            120 days past due            Verified As Reported
                                 In foreclosure
October 2013      001            Current                      Verified As Reported
October 2013      001            120 days past due            Verified As Reported
                                 In foreclosure
November 2013     001            Current                      Verified As Reported
November 2013     001            120 days past due            Verified As Reported
                                 In foreclosure
January 2014      001            Current                      Verified As Reported
January 2014      001            120 days past due            Verified As Reported
                                 In foreclosure
March 2014        001            Current                      Verified As Reported
March 2014        001            120 days past due            Verified As Reported
                                 In foreclosure
April 2014        007            Current                      Modify As Shown
April 2014        007            120 days past due            Modify As Shown
                                 In foreclosure
April 2014        001            Current                      Verified As Reported
May 2014          001            Current                      Verified As Reported
May 2014          001            120 days past due            Verified As Reported
                                 In foreclosure
June 2014         007            Current                      Modify As Shown
June 2014         007            120 days past due            Modify As Shown
July 2014         001 & 007      Current                      Verified As Reported
July 2014         001 & 007      120 days past due            Verified As Reported
                                 In foreclosure

      In nine of the dispute verification requests submitted by Equifax, Ocwen

ultimately “verified” as correct information that was incorrect. In the remaining two

dispute verification requests listing erroneous information, Ocwen updated the account

status from “Account 120 days past the due date” to “Current account” but did not correct

erroneous entries in the same account stating “5 or more payments past due” and

“Foreclosure proceedings started.”

                                           8
                                           B.

      Mr. Daugherty (Daugherty) initiated this action against Ocwen under the FCRA, 3

alleging that Ocwen failed to comply with its statutory duties. After discovery, Ocwen

filed a motion for summary judgment.        The district court denied Ocwen’s motion,

concluding that a genuine issue of material fact remained with respect to the issue

whether Ocwen conducted a reasonable investigation regarding the disputed information.

      The district court conducted a bifurcated trial. The first phase of the trial dealt

with issues of liability, compensatory damages, and whether any violation of the FCRA

by Ocwen was willful. The second phase of trial resolved the question of punitive

damages. When Daugherty rested his case during the first phase of the trial, Ocwen

moved for judgment as a matter of law. Ocwen argued that there was no evidence either

that Daugherty had suffered economic damages caused by the credit reporting errors or

that Ocwen had acted unreasonably in its investigation.       The district court granted

Ocwen’s motion with respect to economic damages, but denied the rest of the motion and

submitted Daugherty’s remaining claim to the jury. The jury found that Ocwen had

violated the FCRA, that the violation was willful, and that the violation caused Daugherty

$6,128.39 in non-economic damages.

      3
        Daugherty also brought claims under West Virginia law, and the district court
entered summary judgment for Ocwen on the state law claims. In addition, Daugherty
sued Equifax for its role in reporting erroneous credit information, but Daugherty and
Equifax settled the claims against Equifax after discovery concluded. Thus, only the
FCRA claim against Ocwen remains at issue in this appeal.

                                            9
       During the punitive damages phase of trial, as evidence of Ocwen’s wealth, the

district court admitted evidence of a public filing by Ocwen Financial Corporation

(OFC), Ocwen’s parent company. The jury returned a punitive damages award of $2.5

million.

       Ocwen filed a renewed motion for judgment as a matter of law, a motion for a new

trial, a motion to vacate punitive damages, and a motion for remittitur (the post-trial

motions). The district court denied Ocwen’s post-trial motions, and Ocwen now appeals.

                                           II.

       We first consider Ocwen’s argument that the district court erred in the first phase

of the trial by permitting the presentation of certain evidence to the jury. Ocwen raises

three distinct evidentiary issues: (1) the admission of previously undisclosed records

produced by Equifax; (2) the admission of certain expert testimony regarding Ocwen’s

duties under the FCRA; and (3) the exclusion of correspondence between Aggressive and

Equifax. We review these evidentiary rulings for abuse of discretion. Lord & Taylor,

LLC v. White Flint, L.P., 849 F.3d 567, 572 (4th Cir. 2017) (collecting cases).

                                           A.

       We consider Ocwen’s three evidentiary arguments in the context of the

substantive law governing Daugherty’s claim and, thus, begin with an overview of the

FCRA. The statute requires that furnishers of credit information, such as mortgage

servicers like Ocwen, investigate disputes involving information that they furnish to the

credit reporting agencies. The FCRA provides, in relevant part:

                                            10
      After receiving notice pursuant to section 1681i(a)(2) of this title of a
      dispute with regard to the completeness or accuracy of any information
      provided by a person to a consumer reporting agency, the person shall—

             (A) conduct an investigation with respect to the disputed
             information;

             (B) review all relevant information provided by the consumer
             reporting agency pursuant to section 1681i(a)(2) of this title;

             (C) report the results of the investigation to the consumer reporting
             agency;

             (D) if the investigation finds that the information is incomplete or
             inaccurate, report those results to all other consumer reporting
             agencies to which the person furnished the information and that
             compile and maintain files on consumers on a nationwide basis; and

             (E) if an item of information disputed by a consumer is found to be
             inaccurate or incomplete or cannot be verified after any
             reinvestigation under paragraph (1), for purposes of reporting to a
             consumer reporting agency only, as appropriate, based on the results
             of the reinvestigation promptly--

                    (i) modify that item of information;

                    (ii) delete that item of information; or

                    (iii) permanently block the reporting of that item of
                    information.

15 U.S.C. § 1681s-2(b)(1).

      The FCRA accordingly requires that a furnisher of credit information “conduct a

reasonable investigation of [its] records to determine whether the disputed information

can be verified.” Johnson v. MBNA Am. Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004).

This determination whether a furnisher’s investigation was “reasonable” is based on an

evaluation of information within the furnisher’s possession, such as correspondence

between the consumer and the furnisher, the data identified by the reporting agency as

                                            11
disputed, and the furnisher’s other records relating to the disputed account. See Saunders

v. Branch Banking & Tr. Co., 526 F.3d 142, 151 (4th Cir. 2008) (holding that a bank’s

internal records of ongoing correspondence could support a conclusion that the bank

intended not to furnish accurate information to the reporting agencies).

       In addition to compensatory damages, the FCRA also permits an award of

statutory and punitive damages for willful violations of the FCRA, as well as an award of

attorneys’ fees in cases involving willful misconduct. 15 U.S.C. § 1681n(a). The term

“willfulness,” within the meaning of the FCRA, includes acting with “reckless disregard”

of one’s obligations under the statute. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57

(2007). A defendant may demonstrate reckless disregard of its statutory obligations by

repeatedly ignoring warning signs that it is violating the law and by failing to take

corrective action to prevent future violations. See Am. Arms Int’l v. Herbert, 563 F.3d

78, 85 (4th Cir. 2009) (applying the Safeco “willfulness” standard to the Gun Control Act

of 1968, 18 U.S.C. § 921 et seq., and concluding that “repeated failure to comply with

known regulations can move . . . conduct from inadvertent neglect into reckless or

deliberate disregard (and thus willfulness)”). However, as a matter of law, a party that

relies on a reasonable but erroneous interpretation of the FCRA cannot be found to have

acted recklessly or willfully. Safeco, 551 U.S. at 69–70.

                                           B.

       We first consider Ocwen’s argument that the district court abused its discretion in

admitting into evidence certain Equifax records of the relevant dispute verification

requests, because Daugherty failed to include such documents in disclosures required

                                            12
under Federal Rule of Civil Procedure 26(a)(3).           The district court admitted the

documents on the basis that because Ocwen already had its own copies of the same

documents, any untimely disclosure by Daugherty was harmless.

       We agree with the district court’s assessment of this issue. Rule 26(a) requires

that litigants disclose before trial the exhibits that they intend to use. See Fed. R. Civ. P.

26(a)(3). The district court should sanction failures to comply with the requirements of

Rule 26(a) by excluding the use of the undisclosed evidence, “unless the failure was

substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). We apply a five-factor

test in determining whether a failure to disclose trial exhibits was “substantially justified”

or “harmless,” and consider:

       (1) the surprise to the party against whom the evidence would be offered;
       (2) the ability of that party to cure the surprise; (3) the extent to which
       allowing the evidence would disrupt the trial; (4) the importance of the
       evidence; and (5) the nondisclosing party’s explanation for its failure to
       disclose the evidence.

S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir.

2003). The first four of these factors relate to the issue whether the nondisclosure was

“harmless,” and the fifth factor relates to the question whether the nondisclosure was

“substantially justified.” Id.

       Applying these factors, we conclude that the district court did not abuse its

discretion in determining that Daugherty’s late disclosure of Equifax’s records was

harmless.    Because Ocwen used copies of the same Equifax records in deposing

Daugherty, Ocwen was not unfairly surprised by the content of those documents. See id.

Moreover, the jury was required to decide whether Ocwen’s responses to the dispute

                                             13
verification requests were reasonable. Therefore, accurate copies of those requests were

important evidence that did not disrupt the trial in any manner. Accordingly, all four of

the Southern States factors relating to harmlessness weighed in favor of admission of the

Equifax documents. See Fed. R. Civ. P. 37(c); S. States, 318 F.3d at 597.

                                             C.

       Ocwen next argues that the district court should have excluded the testimony of

Daugherty’s expert witness, Evan Hendricks, on two bases.              Ocwen contends that

Hendricks’ expert witness report was too vague to provide the basis for, or the substance

of, his expert opinion. Additionally, Ocwen argues that the district court improperly

permitted Hendricks to testify about the legal standard to which furnishers of credit

information are held under the FCRA. We disagree with Ocwen’s arguments.

       First, we conclude that Hendricks’ expert witness report provided adequate notice

to Ocwen concerning the substance of his anticipated testimony. His report disclosed that

he relied on “Bates-Stamped documents produced by Defendant Equifax” in forming his

expert opinion. His examination of these documents led him to conclude in his report

that “Ocwen did nothing more than engage in the superficial [exchange of dispute

verification requests], reflecting its disregard of the history and context that clearly put it

on notice” that its investigation was not reasonable for a dispute of this nature. Thus,

Hendricks’ expert report provided sufficient notice that he was prepared to testify about

Ocwen’s inadequate responses to particular dispute verification requests. Additionally,

Hendricks’ report placed Ocwen on notice that the content of the dispute verification

                                              14
requests would be central to Hendricks’ opinion that comprehensive investigation

procedures were required under the circumstances but were not undertaken by Ocwen.

       We also are not persuaded by Ocwen’s argument that Hendricks improperly

provided legal conclusions during his testimony. We recognize the general rule that

expert witnesses are not permitted to “state[] a legal standard or draw[] a legal

conclusion.” United States v. Offill, 666 F.3d 168, 175 (4th Cir. 2011) (quoting United

States v. McIver, 470 F.3d 550, 562 (4th Cir. 2006)). However, Hendricks’ testimony did

not violate this general rule. Reasonableness is a subject on which experts routinely

testify. See United States v. Barile, 286 F.3d 749, 761 (4th Cir. 2002) (holding that an

expert could properly give his opinion whether certain actions by the defendant were

“reasonable” in light of the defendant’s legal obligations under section 510(k) of the

Food, Drug, and Cosmetic Act, 21 U.S.C. § 360(k)).           Here, Hendricks’ testimony

addressed the reasonableness of Ocwen’s conduct in light of the regulatory framework of

the FCRA.     This testimony did not draw legal conclusions but was offered as an

explanation why Ocwen’s cursory investigation in response to the dispute verification

requests was deficient. Therefore, we conclude that the district court did not abuse its

discretion in permitting Hendricks to testify regarding the reasonableness of Ocwen’s

investigations.

                                           D.

       Finally, Ocwen argues that the district court abused its discretion by excluding the

letters sent by Aggressive to Equifax, on which the dispute verification requests were

based. We disagree. As discussed above, the reasonableness of Ocwen’s investigation

                                            15
rested on an evaluation whether Ocwen properly investigated the disputed information

using its own records, not records from a remote source. Thus, the district court did not

abuse its discretion in excluding the letters that Aggressive sent to Equifax, because such

extrinsic information was not known to Ocwen and, thus, was not relevant to the

reasonableness of Ocwen’s investigation under the facts presented.

                                            III.

       We next consider Ocwen’s argument that, as a matter of law, the evidence failed

to show that Ocwen “willfully” violated the FCRA. Ocwen argues that it reasonably

interpreted the FCRA as requiring furnishers of credit information to investigate only the

information identified by the credit reporting agency as “disputed,” and to consult only

records within its own possession. Thus, Ocwen argues, its conduct falls under the safe

harbor of Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 57 (2007), and does not

support the jury’s finding of a “willful” violation. We disagree. 4

       We review de novo the district court’s denial of Ocwen’s renewed motion for

judgment as a matter of law, and view the trial record in the light most favorable to

Daugherty, the prevailing party. See Bresler v. Wilmington Tr. Co., 855 F.3d 178, 196

       4
        In the district court, Ocwen initially raised this willfulness argument in a motion
for summary judgment. However, we do not review the denial of a motion for summary
judgment in a case that proceeded to a full trial and final judgment on the merits.
Chesapeake Paper Prods. Co. v. Stone & Webster Eng’g Corp., 51 F.3d 1229, 1237 (4th
Cir. 1995). Therefore, we analyze the issue of willfulness only in the context of
reviewing the district court’s denial of Ocwen’s renewed motion for judgment as a matter
of law. See Fed. R. Civ. P. 50(b).

                                             16
(4th Cir. 2017).     We must affirm the district court’s judgment regarding Ocwen’s

liability for willful misconduct if there was sufficient evidence to support the jury’s

verdict. Fed. R. Civ. P. 50(a)(1); Bresler, 855 F.3d at 196.

       The jury was presented evidence that eight separate dispute verification requests

were transmitted to Ocwen with the “007” dispute code. This dispute code signaled a

broad challenge to the accuracy of Ocwen’s report of account status, payment history

profile, and payment rating. Four of these eight dispute verification requests, transmitted

in March 2013, April 2014, June 2014, and July 2014, contained account information that

erroneously showed that Daugherty’s account was in foreclosure or that amounts owed

were past due more than 120 days. Ocwen’s responses to the erroneous information in

the dispute verification requests of March 2013 and July 2014 was “Verified As

Reported.” With regard to the dispute verification requests of April and June 2014,

Ocwen replied, “Modify As Shown,” but provided corrections to only some of the

erroneous information.

       The evidence further showed that Ocwen possessed the information in its own

records necessary to correct the erroneous data identified by Equifax as “disputed” in its

“007” verification requests. Thus, the jury could have concluded that it was reckless for

Ocwen, after having received the “007” dispute verification requests, not to investigate

and correct the erroneous information regarding Daugherty’s current balance, past due

amounts, last payment date, actual payments, and foreclosure status. In addition, the fact

that Ocwen responded to all the dispute verification requests by confirming only

Daugherty’s ownership of the account, regardless whether those requests also contained a

                                            17
“007” dispute code, would support a conclusion that Ocwen systematically ignored the

“007” dispute code on any dispute verification request that contained more than one code.

      The evidence at trial also showed that Ocwen lacked any procedure for correcting

erroneous reports that an account is currently past due or in foreclosure, when that

account previously had been past due or in foreclosure but had been fully reinstated.

Indeed, Ocwen’s corporate representative testified that Ocwen had no obligation to

correct the foreclosure or past due codes appearing in the dispute verification requests,

because Daugherty’s account formerly had been in foreclosure and payments had been

120 days past due back in April 2012.

      A jury also could conclude from the evidence that Ocwen was reckless in

processing each dispute verification request independently, without consulting the

context of prior correspondence from Daugherty, the CFPB, or Equifax regarding the

same account.    For example, Ocwen received the March 2013 dispute verification

requests only five days after receiving a letter from Daugherty stating that his Equifax

credit report erroneously indicated that he is “currently behind $6,128.00 [in his

payments to Ocwen] . . . [and] in foreclosure.”       (emphasis added).     Despite this

information in its records, Ocwen responded to the dispute verification requests merely

by verifying Daugherty’s ownership of the account.          Thus, Ocwen’s procedures

completely failed to recognize that the “007” dispute code referred to the same issue

presented in Daugherty’s letters to Ocwen. In addition, Ocwen’s practice of assigning

each dispute verification request to a different investigator, without regard for another

dispute verification request filed at the same time about the same account, would support

                                           18
a conclusion that Ocwen recklessly disregarded its FCRA obligations. See Saunders, 526

F.3d at 151.

      Ocwen’s repeated failure to correct errors over a 17-month period also would

support a conclusion that Ocwen acted recklessly. By July 2014, Ocwen had received 23

dispute verification requests concerning Daugherty’s account, eight of which contained

“007” codes, and four of which contained “007” codes regarding erroneously reported

information. Nevertheless, in July 2014, despite receiving direct correspondence from

Daugherty and inquiries from the CFPB describing erroneous credit reporting related to

Daugherty’s account, Ocwen still transmitted “Verified As Reported” in responding to a

dispute verification request containing erroneous account information and a “007”

dispute code. Ocwen’s repeated noncompliance with its FCRA obligations over this

extended period of time therefore would support a finding that Ocwen acted recklessly

and was not merely negligent. See Am. Arms Int’l, 563 F.3d at 85.

      We are not persuaded by Ocwen’s argument that it relied on a reasonable

interpretation of the FCRA and, therefore, under the safe harbor of Safeco, could not have

acted “willfully.” Safeco, 551 U.S. at 69–70. The district court correctly instructed the

jury, consistent with Johnson v. MBNA America Bank, NA, that Ocwen had a duty to

“conduct a reasonable investigation into the information identified as disputed” on each

dispute verification request and to conduct a “careful inquiry” into its own records. See

Johnson, 357 F.3d at 431.       The court further instructed that this duty “does not

necessarily require Ocwen to consult external sources.” Nothing in the record suggests

                                           19
that Ocwen acted in reliance on any other interpretation of the statute. 5 In light of this

evidentiary record, we hold that there was abundant evidence from which the jury

reasonably could have concluded that Ocwen willfully violated the FCRA. Accordingly,

we affirm the district court’s denial of Ocwen’s renewed motion for judgment as a matter

of law.

                                           IV.

       We turn to consider Ocwen’s contention that the district court erred by denying

Ocwen’s motion to vacate the award of punitive damages and motion for remittitur.

Ocwen first argues that the punitive damages award must be vacated because Daugherty

improperly relied on an annual report (the 10-K), which Ocwen’s parent company, OFC,

had filed with the Securities and Exchange Commission, in order to prove Ocwen’s

financial worth. Ocwen observes that Daugherty had failed to disclose his intent to use

the 10-K, and maintains that OFC’s 10-K was “false” evidence of Ocwen’s financial

worth. Alternatively, Ocwen contends that the jury’s punitive damages award of $2.5

million was unconstitutionally excessive and should be remitted. We consider these

issues in turn.

       5
         For the same reason, we reject Ocwen’s argument that the district court was
required to make a preliminary determination about the reasonableness of Ocwen’s
interpretation of the FCRA before submitting questions of fact to the jury.

                                            20
                                            A.

         During the punitive damages phase of the bifurcated trial, Daugherty attempted to

recall Ocwen’s corporate representative, Sandra Lyew, to testify about Ocwen’s financial

worth. Although the district court had not excused Lyew as a witness, she already had

left West Virginia and was unavailable to provide further testimony. As a substitute for

Lyew’s testimony, Daugherty proffered the 10-K of Ocwen’s publicly traded parent

company, OFC, which contained a consolidated balance sheet of OFC and its

subsidiaries, including Ocwen. Although Ocwen objected that the documents had not

been previously disclosed by Daugherty, Ocwen did not object to the documents on the

ground that they reflected the financial status of OFC, rather than of Ocwen. The district

court permitted Daugherty to present the documents as a substitute for Lyew’s testimony.

         By summarily releasing its corporate representative while the trial was still in

progress, Ocwen was responsible in large part for the problem that the district court

faced.    Because Lyew no longer was available to testify, Daugherty was unable to

develop his case for punitive damages through her testimony. And, although OFC’s 10-

K was not perfect evidence of Ocwen’s financial worth, we agree with the district court

that OFC’s filings were sufficiently related to Ocwen’s finances to be relevant for

determining the appropriate amount of punitive damages.              The 10-K included

“consolidated balance sheets” of Ocwen, as well as of OFC. The 10-K also reported that

OFC’s “[s]ervicing business is primarily comprised of our core residential mortgage

servicing business and currently accounts for the majority of our total revenues.” In view

of the sudden departure of Ocwen’s corporate representative during the trial, and in the

                                            21
absence of an objection from Ocwen challenging the substance of the information in the

10-K, the district court was within its discretion to admit this alternative evidence of

Ocwen’s financial worth. 6

                                           B.

      We next consider Ocwen’s argument that the $2.5 million punitive damages award

violated the Due Process Clause. We review the constitutionality of a punitive damages

award de novo. Saunders, 526 F.3d at 152.

      Unlike compensatory damages, which compensate a plaintiff for harm suffered,

punitive damages serve the dual purposes of deterrence and retribution. Cooper Indus.,

Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 432 (2001). The purpose of retribution

is served by setting punitive damages proportionally to the outrageousness of the conduct

or the magnitude of the harm. See id. Deterrence principles support the imposition of

higher penalties for misconduct that is difficult to detect or injury that is difficult to

quantify. Mathias v. Accor Econ. Lodging, Inc., 347 F.3d 672, 676 (7th Cir. 2003).

Moreover, adequate deterrence may require consideration of a defendant’s financial

worth when determining the amount of a punitive award. Stamathis v. Flying J, Inc., 389

F.3d 429, 442 (4th Cir. 2004).

      6
        Ocwen filed a motion to vacate damages under Federal Rule of Civil Procedure
60(b)(3), arguing that the use of OFC’s 10-K was misrepresentation amounting to
misconduct. The district court appropriately exercised its discretion in denying this
motion, which appears to have been nothing more than an after-the-fact evidentiary
challenge that could have been raised at trial.

                                            22
      The Due Process Clause 7 nevertheless sets procedural and substantive limits on

the award of punitive damages. State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S.

408, 416–17 (2003). “Elementary notions of fairness” require that a person receive

advance notice of the penalties that the law might impose for certain conduct. BMW of N.

Am., Inc. v. Gore, 517 U.S. 559, 574 (1996).          Therefore, in our review of the

constitutionality of a punitive damages award, we consider the extent to which the award

achieves retribution and deterrence, while remaining mindful of the limits provided by

the principle of fair notice. To this end, the Supreme Court has instructed courts to

consider three “guideposts” when reviewing punitive damages awards for compliance

with the Due Process Clause:

      (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 awarded by the jury and
      the civil penalties authorized or imposed in comparable cases.

State Farm, 538 U.S. at 418. We have observed that the third State Farm guidepost, the

difference between the amount of a particular punitive damages award and comparable

civil penalties, “provides little assistance in FCRA suits.” Saunders, 526 F.3d at 152

      7
        The cases cited by the parties discuss the Due Process Clause of the Fourteenth
Amendment and punitive damages awarded under state law. See State Farm Mut. Auto
Ins. Co. v. Campbell, 538 U.S. 408, 416–17 (2003); Cooper Indus., 532 U.S. at 433;
BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574 (1996). The same rules apply with equal
force to punitive damages awarded under federal law, governed by the Due Process
Clause of the Fifth Amendment. E.E.O.C. v. Fed. Express Corp., 513 F.3d 360, 376 (4th
Cir. 2008).

                                           23
(internal quotation marks omitted).      We therefore focus our analysis of the present

punitive damages award on the first two State Farm guideposts.

                                             1.

       The first State Farm guidepost, the degree of reprehensibility, is the most

important. State Farm, 538 U.S. at 419 (citing BMW, 517 U.S. at 575). This first

“reprehensibility” guidepost is further defined by five factors, namely, whether:

       [1] the harm caused was physical as opposed to economic;

       [2] the tortious conduct evinced an indifference to or a reckless disregard of
       the health or safety of others;

       [3] the target of the conduct had financial vulnerability;

       [4] the conduct involved repeated actions or was an isolated incident; and

       [5] the harm was the result of intentional malice, trickery, or deceit, or mere
       accident.

Id. Any determination of reprehensibility requires a highly fact-dependent analysis that

necessarily varies from case to case. See TXO Prod. Corp. v. Alliance Res. Corp., 509

U.S. 443, 457 (1993) (plurality opinion); Bach v. First Union Nat’l Bank, 486 F.3d 150,

156 (6th Cir. 2007).

       In Saunders v. Branch Banking & Trust Co., 526 F.3d 142 (4th Cir. 2008), we

observed that Congress’ authorization of punitive damages in FCRA cases required us to

discount the importance of factors not typically present in such cases. Id. at 152–53.

Accordingly, we held that the absence of physical harm or danger to health or safety did

not weigh strongly against a finding of reprehensibility in FCRA cases. Id. at 153. We

                                             24
also held that willful violations of the FCRA can support substantial punitive damages

even though only one reprehensibility factor, financial vulnerability, is met. Id.

       In this case, the reprehensibility factors lead us to conclude that Ocwen’s conduct

was more reprehensible than the credit furnisher’s conduct in Saunders. As with most

FCRA cases, including Saunders, Ocwen’s conduct presented minimal risk of danger to

physical safety or health. See id. at 152–53. However, Daugherty, who faced potential

foreclosure of his home, was more financially vulnerable than the plaintiff in Saunders,

whose car was repossessed. See id. at 146, 153. With respect to the “repeated actions”

factor, not present in Saunders, Ocwen repeatedly failed to correct Daugherty’s erroneous

account information over a 17-month period, despite receiving multiple letters from

Daugherty, governmental inquiries, and multiple dispute verification requests bearing the

“007” dispute code. See State Farm, 538 U.S. at 419. Unlike in Saunders, however,

there is no evidence that Ocwen intentionally reported credit information it knew to be

misleading. See id.; Saunders, 526 F.3d at 153.

       Nevertheless, when we view the entirety of Ocwen’s conduct in this case, we

conclude that its conduct was more reprehensible than the actions at issue in Saunders.

Therefore, mindful of the seriousness of Ocwen’s conduct, we turn to consider the second

State Farm guidepost.

                                            2.

       That second guidepost, the disparity between actual or potential harm and the

punitive damages award, cannot be reduced to a simple mathematical ratio. See State

Farm, 538 U.S. at 424–25. Nevertheless, the Supreme Court has cautioned that “few

                                             25
awards exceeding a single-digit ratio between punitive and compensatory damages, to a

significant degree, will satisfy due process.” Id. at 425; see also Pac. Mut. Life Ins. Co.

v. Haslip, 499 U.S. 1, 23 (1991). Our application of the second State Farm factor

requires consideration of the total amount of actual or compensatory damages. Small

awards of actual damages may justify comparatively larger punitive damages, whereas

large awards of actual damages ordinarily will require application of a lesser ratio. State

Farm, 538 U.S. at 425.

       The reprehensibility of the conduct, determined in the first guidepost, may justify

a higher ratio of punitive damages to compensatory damages. The Due Process Clause

permits higher ratios for “particularly egregious” conduct or conduct with potential to

cause greater harm. Id. at 424–25 (emphasis added); see also TXO, 509 U.S. at 460–61

(endorsing the consideration of “the magnitude of the potential harm that the defendant’s

conduct would have caused . . . if the wrongful plan had succeeded”). In addition, courts

have upheld high punitive damages awards to deter misconduct undertaken for financial

gain. See TXO, 509 U.S. at 446, 453, 462 (concluding that a $10 million dollar punitive

damages award, 526 times larger than compensatory damages of $19,000, was

appropriate to punish and deter a thwarted attempt to defraud victims of millions of

dollars); Mathias, 347 F.3d at 677 (upholding a high punitive damages award against a

hotel for systematically concealing a bedbug infestation rather than paying for

extermination).

      These principles support the conclusion that large ratios between punitive damages

and compensatory damages are permissible when a defendant’s willful FCRA violation

                                            26
causes small amounts of compensable harm. Saunders, 526 F.3d at 154 (upholding

$80,000 punitive damages award in case involving $1,000 statutory damages). In such

FCRA cases, we look beyond a simple analysis of the mathematical ratio to ensure that

the punitive damages award still serves the goals of punishment and deterrence,

particularly against wealthy defendants.     See id.   On the other hand, the act of

misreporting credit information provides no direct financial benefit to a defendant, so

multimillion dollar awards are rarely necessary to achieve punishment and deterrence.

See TXO, 509 U.S. at 462; Bach, 486 F.3d at 155.

      These principles lead us to conclude that the jury’s punitive damages award of

$2.5 million is unconstitutionally excessive in this case. Because Ocwen does not profit

from misreporting its customers’ account information, and errors in reporting are easily

detected by consumers after the fact, we conclude that a multimillion dollar punitive

damages award far exceeds the amount necessary to sufficiently deter similar

wrongdoing in the future. In addition, $2.5 million is an amount greatly disproportionate

to the reprehensibility of Ocwen’s conduct, and thus exceeds the amount necessary for

punishment or retribution.    Therefore, we hold that, under the second State Farm

guidepost, the punitive damages award is unreasonably disproportionate to the $6,128.39

award of compensatory damages.

                                           C.

      We have recognized that “our options in remedying an excessive verdict are not

unlimited.” Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 305 n.2 (4th Cir. 1998). A

plaintiff has a right under the Seventh Amendment to have a jury set the amount of

                                           27
punitive damages. Def. Indus., Inc. v. Nw. Mut. Life Ins. Co., 938 F.2d 502, 507 (4th Cir.

1991) (en banc). However, within this context, we also have acknowledged the practical

value of having an appellate court set the upper limit of punitive damages that will

withstand scrutiny under the Due Process Clause, and have addressed the manner in

which this may be achieved. In our decision in Cline v. Wal-Mart Stores, Inc., we

observed that “for purposes of avoiding conflict with the Seventh Amendment, the

preferable course, upon identifying a jury’s award as excessive, is to grant a new trial nisi

remittitur, which gives the plaintiff the option of accepting [a] remittitur or of submitting

to a new trial” on the particular damages held to be excessive. Cline, 144 F.3d at 305 n.2.

       In Cline, we examined a $182,500 award of punitive damages under factors that

pre-dated the Supreme Court’s decision in State Farm, and held that $50,000 was the

“outermost punitive damages award that could be sustained.”           Id. at 306–07.     We

accordingly reduced that award to $50,000 and granted a new trial nisi remittitur, giving

the plaintiff the option of accepting the reduced award or of submitting to a new trial on

that issue. Id. at 307.

       We employ the same methodology here, and turn to consider the outermost

punitive damages award that can be upheld on the evidence presented. Although our

decision in Saunders did not result in a new trial nisi remittitur, that case nevertheless

provides useful guidance regarding the upper constitutional boundary for punitive

damages awards in this FCRA case.

       We ultimately held in Saunders that the jury’s award of $80,000 in punitive

damages was too low to require remittitur for constitutional reasons. Saunders, 526 F.3d

                                             28
at 154–55. In reaching this conclusion, we recognized that willful violations of the

FCRA have the potential to cause emotional harm even in the absence of economic

damages. See id. at 152–53. Moreover, in concluding that a punitive damages award 80

times larger than the statutory damages award was constitutional in a case involving a

large corporate defendant, our decision provided fair notice to defendants that punitive

damage awards in FCRA cases appropriately may reflect high, double-digit multipliers of

the statutory or compensatory damages awarded. See id. at 154–55.

          Unlike in Saunders, however, the jury here found that Daugherty had suffered

actual damages, which reflected an injury in kind and amount more serious than the

statutory award of $1,000 imposed in Saunders. 526 F.3d at 147. We therefore apply a

higher, double-digit ratio than the one we approved in Saunders in fixing the upper limit

of punitive damages in this case. Accordingly, we hold that $600,000 is “the outermost

punitive damages award that could be sustained” on the evidence presented. See Cline,

144 F.3d at 307. We therefore reduce the punitive damages award to $600,000 and

award Daugherty a new trial nisi remittitur, providing him the option of accepting the

reduced amount of punitive damages or of proceeding to a new trial on punitive damages.

See id.

                                             V.

          For these reasons, we affirm the district court’s judgment, except with respect to

the court’s award of punitive damages. We reduce the award of punitive damages, grant

a new trial on punitive damages nisi remittitur, and remand the case to the district court

                                              29
with instructions to provide Daugherty the option of accepting the reduced punitive

damages award of $600,000 or of proceeding to a new trial on punitive damages.

                                                                AFFIRMED IN PART,
                                                                 VACATED IN PART
                                                                  AND REMANDED

                                          30