Legal Memorandum: Standards for Punitive Damages Award

Issue: What are the standards for an award of punitive damages under the Fair Credit Reporting Act in an action brought in the Fifth Circuit?

The constitutional standards for punitive damages awarded in state courts, as announced in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 134 L. Ed. 2d 809 (1996), do not apply to punitive damage awards under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681n.  See, Kolstad v. American Dental Ass’n, 119 S. Ct. 2118 (1999) (holding that standards for award of punitive damages under Title VII are announced in the federal statute that authorizes such awards).  Thus, under § 1681n, a credit reporting agency that "willfully fails to comply with any requirement imposed under [the FCRA] with respect to any consumer" is subject to punitive damages. 

The Fifth Circuit has held that, in considering an award of punitive damages, a jury should take into account (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the harm suffered and the damage award; and (3) the difference between the damages awarded in this case and comparable cases.  See Patterson v.  P.H.P. Healthcare Corp., 90 F.3d 927, 943 (5th Cir. 1996).*FN1  It is clear, however, that these factors are not exclusive, and that the review of a punitive damages award for excessiveness involves numerous considerations. 

The likelihood of future harm and the need to deter it are likewise relevant factors.  Where a defendant shows neither remorse nor any intention of taking steps to prevent future recurrences, a substantial award is appropriate as a deterrent.  See […]