Sloane v. Equifax Information Services, LLC
510 F.3d 495, 2007 WL 4535267, 2007 U.S. App. LEXIS 29805 (2007)
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Rule of Law:
Under the Fair Credit Reporting Act (FCRA), a consumer may recover substantial damages for emotional distress resulting from a credit reporting agency's negligent and protracted failure to correct inaccuracies, provided the distress is substantiated by specific, detailed, and corroborated evidence of its nature and manifestation.
Facts:
- In late 2003, a hospital employee named Shovana Sloan stole Suzanne Sloane's identity after Sloane gave birth at the hospital.
- Shovana Sloan used Suzanne Sloane's social security number to fraudulently obtain more than $30,000 in credit cards, loans, and cash advances.
- In January 2004, Suzanne Sloane discovered the fraud, notified the police, and immediately contacted Equifax to report the identity theft and place a fraud alert on her file.
- Despite Sloane's efforts, Equifax failed to correct her credit report, leading to her and her husband being denied a home loan pre-qualification in March 2004 because of her 'terrible' credit score.
- In October 2004, the Sloanes were denied financing for a used car, and in January 2005, they were offered a less favorable adjustable-rate mortgage instead of a fixed-rate loan due to the persistent errors on her Equifax report.
- After Sloane sent formal dispute letters in March and May 2005, Equifax not only failed to correct items but also re-inserted previously deleted incorrect information and created a second, mixed credit file.
- Equifax sent a letter to Sloane's home addressed to the identity thief, Shovana Sloan, warning the thief that her identity might be compromised.
- The 21-month ordeal caused Sloane significant emotional distress, including chronic insomnia and severe marital strain that led the couple to sleep in separate rooms and contemplate divorce.
Procedural Posture:
- Suzanne Sloane filed suit against Equifax Information Services, LLC, and other entities in the United States District Court, alleging violations of the Fair Credit Reporting Act (FCRA).
- Sloane settled her claims with all defendants except for Equifax.
- The case against Equifax proceeded to a jury trial.
- The jury returned a verdict in favor of Sloane, awarding her $106,000 for economic loss and $245,000 for mental anguish, humiliation, and emotional distress.
- Equifax filed a post-trial motion for judgment as a matter of law and for a new trial or remittitur, which the district court denied.
- The district court also awarded Sloane $181,083 in attorney’s fees without permitting Equifax to submit a written opposition.
- Equifax, as appellant, appealed the judgment on damages and the award of attorney's fees to the U.S. Court of Appeals for the Fourth Circuit, with Sloane as appellee.
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Issue:
Under the Fair Credit Reporting Act, is a jury's award of $245,000 for emotional distress excessive when a consumer provides detailed and corroborated testimony of protracted anxiety, insomnia, and severe marital strain resulting from a credit reporting agency's 21-month failure to correct errors caused by identity theft?
Opinions:
Majority - Judge Motz
Yes, the jury's award was excessive, but substantial damages for emotional distress are warranted when supported by objective and corroborated evidence of prolonged harm. To support an award for emotional distress, a plaintiff must provide more than mere conclusory statements and must reasonably and sufficiently explain the circumstances of the injury. The court applied factors from precedent, including the factual context, corroborating evidence, the nexus between the defendant's conduct and the distress, and any physical manifestations. Here, Suzanne Sloane provided substantial objective evidence: her testimony was detailed and corroborated by her husband; the distress was directly linked to Equifax's repeated failures over 21 months; and it manifested in physical symptoms like insomnia and caused severe, documented marital strain. While the court rejected comparisons to older, less severe FCRA cases and distinguished this from defamation, it found the $245,000 award disproportionate. After surveying other modern FCRA cases, the court concluded that the maximum award supported by the evidence was $150,000, reflecting the protracted nature and severity of Equifax's numerous FCRA violations.
Analysis:
This decision is significant for establishing a modern benchmark for emotional distress damages under the FCRA, particularly in cases involving identity theft. It clarifies that while juries have discretion, appellate courts will review such awards for excessiveness by applying a multi-factor test that demands specific, corroborated evidence of harm. The case provides a new, higher ceiling for what constitutes a reasonable award in severe FCRA cases, acknowledging the profound and prolonged distress that a national credit agency's negligence can inflict in the digital age. This holding strengthens the position of identity theft victims and puts credit reporting agencies on notice regarding the substantial financial consequences of failing to reasonably investigate and correct errors.
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