2.6 Million Dollar Fair Credit Reporting Act Verdict Reduced Again


Yesterday, in Bach v. First Union, the Sixth Circuit Court of Appeals reduced the verdict for violating the Fair Credit Reporting Act. The original verdict was $400,000 in compensatory damages and 2.6 million in punitive damages.

The first appeal resulted in the court directing the district court to review the punitive damage award and reduce it. The district court did so by reducing the punitive damage award by $400,000, the amount of the compensatory damages.

On the second appeal, the appellate court said the punitive damages could not exceed the compensatory damages. Thus, the maximum the punitive damage award could be is $400,000 for a total verdict of $800,000 (plus we assume attorney’s fees and costs).

The court felt in this specific case that because the compensatory damages were so high that the punitive damages should not exceed the compensatory damages. The court cautioned, however, that if smaller compensatory damages had been awarded, a greater ratio (than 1:1) might be appropriate.

A couple of observations. First, this case shows the potential for large verdicts in FCRA cases. Defendants in these cases often claim that no jury will punish the furnishers of information (such as First Union or Wachovia now) or credit reporting agencies (such as Equifax, Experian and Trans Union). It also shows that significant compensatory damages ($400,000) can be awarded in these cases which is also something that the industry lawyers suggest won’t or can’t happen.

While we don’t think the court should have reduced the punitive damage award again, fortunately the verdict is still substantial and will hopefully encourage the industry to take errors on credit reports seriously.

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