Sunday, December 30, 2007, 6:14 PM

Fourth Circuit Limits Noneconomic Damages

Last Thursday, in Sloane v. Equifax Info. Serv., LLC, the Fourth Circuit vacated a judgment awarding $245,000 in noneconomic damages to the plaintiff in a Fair Credit Reporting Act (FCRA) case. The Court reduced the award to $150,000 and granted a new trial nisi remittitur. The case is significant, because it likely will be viewed as imposing an outer limit of $150,000 for noneconomic damages in FCRA and similar cases.

The Fourth Circuit has long warned that emotional distress is fraught with vagueness and speculation and is easily susceptible to fictitious and trivial claims. For this reason, a plaintiff must reasonably and sufficiently explain the circumstances of the injury with demonstrable emotional distress, and not resort to mere conclusory statements. The factors properly considered in determining potential excessiveness of an award for emotional distress including: the factual context in which the emotional distress arose; evidence corroborating the testimony of the plaintiff; the nexus between the conduct of the defendant and the emotional distress; the degree of such mental distress; mitigating circumstances; physical injuries suffered due to the emotional distress; medical attention resulting from the emotional duress; psychiatric or psychological treatment; and the loss of income, if any.

In this case, the plaintiff had her identity stolen, and the thief racked up tens of thousands of dollars of debt in plaintiff's name. Despite repeated requests by plaintiff, Equifax failed to correct her credit report, and despite the passage of a substantial period of time (21 months), Equifax left the matter uncorrected, resulting in a disastrous credit rating. Aside from injuries arising from plaintiff's inability to obtain credit over a substantial period of time, the distress caused insomnia and the deterioration of plaintiff's marriage. The jury awarded her $106,000 for economic loss and $245,000 for mental anguish.

On appeal, Equifax didn't deny that plaintiff suffered emotional distress for which some damages were appropriate. Rather, Equifax challenged the amount of noneconomic damages.

The Court agreed that, in evaluating whether an award of damages for emotional distress is excessive under Rule 59(a), a comparative analysis of similar cases is warranted. The Court observed, however, that finding helpful precedent for comparison is not a simple task. The Court cited a few recent FCRA cases, and found that approved awards typically range from $20,000 to $75,000 (with one outlier case from the Sixth Circuit approving a $400,000 award). But while the Court deemed these cases helpful, it found that they differed from the case before the Court because the plaintiffs in those cases suffered from isolated or accidental reporting errors, whereas the plaintiff here, a victim of identify theft, suffered systematic manipulation of her personal information; although Equifax wasn't responsible for the identity theft, it failed to correct the credit report over a protracted period of time.

The Court ultimately concluded that "considering the extensive corroboration offered at trial concerning the many months of emotional distress, mental anguish, and humiliation suffered by [plaintiff], we believe that the evidence does support an award in the maximum amount of $150,000." Even though "this amount is appreciably more than that awarded for emotional distress in most other FCRA cases," the Court deemed this case more severe than the typical FCRA case.

This case is significant in two respects. First, it confirms that, in the context of a Rule 59(a) excessiveness challenge, a comparative analysis is appropriate. A defendant's task is to identify comparable cases based on the type of conduct and injury and to determine the present value of the range of awards in those cases. Second, given the Court's assessment that this case is more severe than the typical FCRA case and the fact that a comparative analysis will be used in future cases, it seems likely that this case will be viewed by courts in this Circuit as imposing an outer limit for emotional distress damages in FCRA and similar cases.

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