By Nicole D. Prysby, J.D.
A $3.3 million punitive damages award was unconstitutionally excessive where a consumer reporting agency erroneously attributed criminal convictions to an individual, causing him to lose two job offers, but did not act with malice.
While the reprehensibility of a consumer reporting agency’s conduct was sufficient to warrant the award of some punitive damages, a $3.3 million punitive damages award is unconstitutionally excessive, held the Eleventh Circuit Court of Appeals. The consumer reporting agency twice included criminal convictions for an individual with a similar name when it provided a criminal background report for the plaintiff. In both cases, the defendant failed to follow its own procedures, which would have required additional identifiers to verify a match. In both cases, the plaintiff’s job offer was rescinded and he brought Fair Credit Reporting Act (FCRA) claims against the consumer reporting agency. A jury awarded him $250,000 in compensatory and $3.3 million in punitive damages. The Eleventh Circuit found the punitive damages award to be excessive, given the lack of malice and the disparity between the harm suffered by the plaintiff and the punitive damages award. The court reduced the punitive damages award to $1 million (Williams v. First Advantage LNS Screening Solutions Inc., January 9, 2020, Carnes, J.).
The plaintiff (Richard Williams) was offered employment, and the criminal background check requested by the employer from the consumer reporting agency produced a report that indicated there were two cases associated with a "Ricky Williams" for sale of cocaine. Both cases stated that the "SSN on File" was the same as the first five digits of the plaintiff’s Social Security number, though the report indicated that the match between the plaintiff and Ricky Williams was based on their names and dates of birth. Although Richard Williams is a common name, the defendant did not follow its common-name procedure, which called for the use of three, not just two, identifiers. The plaintiff filed a dispute with the consumer reporting agency and the agency removed the criminal charges from his report, but the employer did not re-extend the job offer. The following year, the plaintiff applied for a different position, subject to a background check. Once again, the consumer reporting agency produced a report for the plaintiff that included criminal charges against Ricky Williams—this time, for assault and battery. The report did correctly exclude the previously disputed charges for cocaine sales. The plaintiff filed suit against the credit reporting agency, alleging violations of FCRA. The jury found that the consumer reporting agency willfully failed to follow reasonable procedures to ensure maximum accuracy and awarded the plaintiff $250,000 in compensatory damages and $3.3 million in punitive damages. The consumer reporting agency appealed.
The consumer reporting agency argued that the plaintiff failed to present evidence of damage to his reputation or evidence that it had acted willfully. The court rejected both arguments. The fact that the first employer declined to re-extend a job offer even after receiving the corrected report, is sufficient for a jury to conclude that he suffered some reputational harm. A reasonable jury could also conclude that the consumer reporting agency acted willfully. It recognized the need to require more than two identifiers when dealing with a subject who has a common name and its protocol required three identifiers, absent supervisor approval when that was not possible. But the evidence showed that obtaining a third identifier for an individual with a common name was rarely done, which supports an inference that in its actual practices, the defendant consciously disregarded a known risk of violating the FCRA. And although it had the technological capability to do so, it failed to develop a means to prevent additional criminal arrests or convictions belonging to Ricky Williams from being attributed to the plaintiff.
However, the court went on to hold that while the reprehensibility of the defendant’s conduct was sufficient to warrant the award of some punitive damages, the $3.3 million punitive damages award is unconstitutionally excessive. The plaintiff suffered emotional distress manifesting in physical symptoms, rather than only economic damages, he was financially vulnerable, and the defendant engaged in repeated reckless conduct. However, the defendant’s conduct did not evince a reckless disregard of the health or safety of others, because its reckless conduct did not have an impact beyond a particular person’s ability to obtain a particular job. There was no evidence of intentional malice, trickery, or deceit. Given the factors weighing in favor of a punitive damages award, an award of some level was appropriate. But the ratio of punitive to compensatory damages (more than 13:1) is much higher than the general benchmark of 4:1. After considering in- and out-of-circuit precedent, the court found that based on 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 punitive damages was excessive. The plaintiff failed to present evidence for how many of the misattributions by the defendant of another person’s criminal record involved a second mistake, such as happened here. Such evidence might have supported a higher punitive damages award. The application of a 4:1 ratio, which would reduce the punitive damages from $3.3 million to $1 million and yield a total award of $1,250,000, does pass constitutional muster. Such an award is sufficient to punish the defendant for its conduct and to deter future such misconduct, the court concluded.
Two concurring opinions were filed. Judge Martin stated that the jury’s award was not excessively gross and Judge O’Scannlan stated that a punitive damages award above $500,000 might have been considered excessive.
The case is No. 17-11447.
Attorneys: Barry Seth Balmuth (Law Office of Barry Seth Balmuth) and Michael Massey (Massey & Duffy, LLC) for Richard Alexander Williams. Frederick T. Smith (Seyfarth Shaw, LLP) for First Advantage Background Services Corp.
Companies: First Advantage Background Services Corp.
MainStory: TopStory ConsumerCredit FairCreditReporting
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