11th Circuit Reduces Punitive Damages for Consumer Reporting Agency’s FCRA Violations

The Eleventh Circuit Court of Appeals recently affirmed a $250,000 compensatory damages award and reduced a $3.3 million punitive damages award to $1 million.  The court held that the plaintiff presented sufficient evidence to prove that the consumer reporting agency willfully violated FCRA by failing to follow reasonable procedures to connect background information to common names.  The court found a $3.3 million punitive damages award unconstitutional under the Due Process Clause and, pursuant to standards established by the Supreme Court, reduced the award to $1 million.

The consumer reporting agency’s standard procedure for background report requests on individuals with common names required three identifiers—such as name, date of birth, or social security number—to find a reasonable match between the record and the individual.  The defendant, however, admitted that it actually permitted matches with only two identifiers.  Furthermore, the court explained that the defendant’s system had no procedure to ensure that an individual who had been mispaired with a report belonging to a person with a similar name would not be mismatched in the future with other reports of the same person.  In this case, the plaintiff was denied multiple job opportunities because of failed background checks that misattributed a criminal record to the plaintiff.

FCRA requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy” in preparing consumer reports and permits a private right of action for negligent or willful violations.  The court affirmed the district court finding that the defendant willfully violated FCRA by failing to obtain three identifiers for individuals with common names.  Beyond not following its own procedures, the court explained that the defendant failed to create adequate procedures “to flag the existence of an inaccurate first report for purposes of future reports concerning the same subject.”

The court explained that, in considering punitive damages, Supreme Court standards require a reviewing court to analyze the degree of reprehensibility of the defendant’s conduct and the disparity between the harm suffered by the plaintiff and the punitive damages award.  The court evaluated factors enumerated by the Supreme Court and concluded that the reprehensibility of the defendant’s conduct was sufficient to warrant an award of some punitive damages.  Furthermore, the court explained that a 4:1 ratio of punitive damages to compensatory damages is the default guideline, but can be adjusted based on several factors.  Considering the facts of the case, the court held that the 4:1 ratio was appropriate, and reduced the punitive damage award to $1 million.