by There was sufficient evidence of the mortgage servicer’s reckless indifference to the mortgagor’s rights to support a punitive damage award eight times the compensatory damage award for invasion of privacy. May v. Nationstar Mortgage, No. 16-1285, 16-1307 (8th Cir. March 29, 2017).
While in chapter 13 bankruptcy, Jeannie May entered into an agreement with her mortgagee to pay down her mortgage and arrears. After she was discharged from bankruptcy, the mortgage servicer, Nationstar, sent her a mortgage statement in which it misstated a $51 credit as a $5,162 debit. Nationstar also damaged Ms. May’s credit score by incorrectly reporting a delinquent debt. Ms. May spent the next two years trying to get Nationstar to correct the admitted error. Instead of correcting the problem, however, Nationstar commenced aggressive collection efforts including threatening of foreclosure, conducting periodic property inspections, and making numerous mocking and sarcastic phone calls to her. Ms. May sued Nationstar alleging invasion of privacy under state law, and federal claims under RESPA, FDCPA and FCRA. The jury awarded compensatory damages of $50,000 for the invasion of privacy, and $50,000 for the violation of the FCRA. It also awarded $400,000 in punitive damages for the invasion of privacy.
The parties cross-appealed with Nationstar arguing that its culpability was limited to a series of inadvertent errors that did not add up to reckless indifference or evil motive as required under Missouri law to support a punitive damages award.
The circuit court disagreed. It was the province of the jury to weigh the conflicting evidence and a finding of reckless indifference will be overturned only in the complete absence of probative facts. The court found sufficient evidence to support the jury’s finding.
Nationstar next argued that the $400,000 punitive damage award was excessive and in violation of its due process rights under the Fourteenth Amendment. To violate due process, punitive damages must “shock the conscience of the court or demonstrate passion or prejudice on the part of the trier of fact.” A court will consider: 1) the degree of reprehensibility, 2) the compensatory to punitive damage ratio, and 3) how the award compares to awards in similar cases.
With respect to reprehensibility—the most important of the three factors—the court found that it may be demonstrated by showing any of the following: physical harm, indifference or reckless disregard of health or safety of others, financial vulnerability of the victim, repeated conduct, or intentionality. The court found there was evidence of each of these factors to support the jury finding.
As to the compensatory to punitive damage ratio, Nationstar argued that the 8:1 ratio was excessive. Again the court disagreed. Noting that it had affirmed ratios as high as 5.7:1, the court considered the degree of Nationstar’s culpability as well as the percentage of the company’s net worth the punitive damage amount represented: thirty-three thousandths of one percent. It found that the ratio did not render the award unconstitutional.
Finally, in a comparison of this case with others, the court noted that while few cases of this type rested on a theory of state law invasion of privacy, compared to cases with similar facts the award was in line.
The court concluded that the punitive damage award was adequately supported.
Ms. May cross-appealed on the grounds that the lower court erroneously excluded the testimony of a witness who was unrelated to Ms. May’s case but who had had similar experiences with Nationstar and whose testimony Ms. May offered to rebut Nationstar’s anticipated defense of innocent inadvertence. The court found no abuse of discretion in excluding the testimony, as Ms. May was still able to counter Nationstar’s evidence of good faith and, allowing the testimony would have resulted in a “mini-trial” on an unrelated case.
Ms. May also challenged the district court’s jury instructions on her RESPA claim. The controversy surrounded an instruction based on an amendment to the statute under which the requirement that a creditor respond to a request for information does not apply if the request is identical to an earlier request to which it did respond. Nationstar argued that the amendment was merely a codification of a common sense application of the law and therefore the instruction was correct. Nationstar also noted that Ms. May did not object to the instruction at the time.
Because of her failure to object the court reviewed the instruction for “plain error.” It found none. There were many grounds upon which her RESPA claim might have failed and no indication that this instruction was dispositive. The fact that Ms. May received a jury verdict of $500,000 in damages suggests that she was vindicated at trial without regard to the RESPA claim.