(November 2019) A federal jury awarded Monette Saccameno $582,000 in compensatory damages and $3 million in punitive damages against her mortgage loan servicing company, Ocwen. On appeal, the Seventh Circuit lowered the punitive damage award to $582,000. Saccameno v. United States Bank National Association, 943 F.3d 1071 (7th Cir. 2019). This blog post discusses the Seventh Circuit’s decision and its reasoning for reducing the punitive damage award in a ruling written by the Honorable Judge Amy St. Eve.
Monette Saccameno originally filed for Chapter 13 bankruptcy after her home loan went into foreclosure. Chapter 13 bankruptcy is a promise to a debtor: if you comply with the bankruptcy plan, then you can get a fresh start. As Judge St. Eve noted, for Monette Saccameno that promise went unfulfilled. She had done everything that was required of her, including making 42 monthly mortgage payments under the bankruptcy court’s watchful eye. Near the end of her bankruptcy, Saccameno even obtained statements from her mortgage servicer, Ocwen, stating that she was paid up and even that she had paid too much. The bankruptcy court granted her a discharge.
After receiving a bankruptcy discharge, Ocwen immediately began trying to collect money from Saccameno that it was not owed and threatening foreclosure again. Saccameno thought it was a simple mistake. She sent Ocwen all the paperwork it could have needed to fix its records. When that did not work, she sent it again. Then she sent it a third and fourth time, with a request from an acquaintance, a lawyer, for an explanation why Ocwen thought she owed money. As noted by Judge St. Eve, Ocwen did not truly grasp how wrong its records were until almost four years later, two days into Saccameno’s jury trial when its witness was testifying and admitted that Saccameno had made all 42 payments.
At trial, the jury awarded Saccameno substantial damages for the pain, frustration, and emotional torment Ocwen put her through. The jury ordered Ocwen to pay $500,000 in compensatory damages based on three claims that did not allow an award of punitive damages (breach of contract, the Fair Debt Collection Practices Act, and a claim under RESPA). However, Saccameno’s claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS 505/1, did allow for punitive damages. For the Consumer Fraud claim, the federal jury awarded Saccameno $3,000,000 in punitive damages, plus compensatory damages of an additional $82,000. An interesting note that was not part of the appeal is the parties stipulated to an award of $750,000 in attorneys’ fees to the plaintiff’s lawyers after the trial concluded. (15-cv-1164, Dkt. 344)
Sufficiency of the Punitive Damages Evidence
Ocwen appealed the punitive damage award. It first argued that there was insufficient evidence for the jury to award punitive damages at all. Under Illinois law, punitive damages may be awarded only if the defendantʹs tortious conduct evinces a high degree of moral culpability, that is, when the tort is committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others. Slovinski v. Elliot, 927 N.E.2d 1221, 1225 (Ill. 2010) (quoting Kelsay v. Motorola, Inc., 384 N.E.2d 353, 359 Ill. 1978)). When the defendant is a corporation, like Ocwen, the plaintiff must demonstrate also that the corporation itself was complicit in its employees’ tortious acts. Kemner v. Monsanto Co., 576 N.E.2d 1146, 1156 (Ill. App. Ct. 1991).
On appeal, Judge St. Eve concluded that the evidence at trial was sufficient to award punitive damages (although not $3 million), noting among other evidence that:
- “Ocwen’s servicing of Saccameno’s loan was chaos from the moment Ocwen began working on the loan in 2011 to the day of the jury’s verdict seven years later”;
- Ocwen offered no real explanation for any of the errors its employees made or how it could be avoided in the future;
- Ocwen never acted to correct its mistakes, and was unwilling to take steps to determine what occurred;
- The utter lack of explanation supported a finding of corporate complicity by ratifying Ocwen employees’ conduct, citing Mattyasovszky v. W. Towns Bus Co., 330 N.E.2d 509, 512 (Ill. 1975) (listing four ways this complicity can be demonstrated);
- Ocwen’s representative at trial knew nothing about the employee (Marla) that miscoded Saccameno’s bankruptcy payments;
- Ocwen’s representative at trial testified that she did not speak with Marla, did not know where Marla’s office was, did not know how long Marla had been an Ocwen employee, and did not know if she remained one to this day.
- No one at Ocwen took any steps, whatsoever, to investigate how Marla’s mistake was made or how Ocwen would prevent it from happening again.
- Ocwen offered no evidence of any “attempt to alter its procedures.”
- The jury’s ratification finding was supported further by Ocwen’s complete lack of insight into its other, unnamed employees’ errors on this file;
- Ocwen had made false oral and written statements regarding Saccameno’s default and engaged in unfair practices in violation of consent decrees that Ocwen previously had entered with various regulatory bodies, addressing, among other things, its inadequate recordkeeping, misapplication of payments, and poor customer service.
Due Process Considerations
The Seventh Circuit next addressed the amount of punitive damages awarded by the jury – $3,000,000. Ocwen argued that the amount exceeded constitutional limits. But the court noted that the Constitution is not the most relevant limit to a federal court when assessing punitive damages, as it comes into play “only after the assessment has been tested against statutory and common-law principles.” A federal court can (and should) reduce a punitive damages award before it reaches the outermost limits of due process.
On this issue, the court addressed three guideposts: (1) the degree of reprehensibility, (2) the disparity between the harm suffered and the damages awarded, and (3) the difference between the award and comparable civil penalties. Reviewing these guideposts, the court concluded that the $3,000,000 punitive damage award exceeded constitutional limits should be reduced to $582,000.
Reprehensibility
The first and most important guidepost is the reprehensibility of the defendant’s conduct, which is judged based on five factors including whether:
- The harm caused was physical as opposed to economic;
- The tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others;
- The target of the conduct had financial vulnerability;
- The conduct involved repeated actions or was an isolated incident; and
- The harm was the result of intentional malice, trickery, or deceit, or mere accident.
The Seventh Circuit held that the first two factors were not present in this case. On the third factor, the court held that the close connection between Saccameno’s bankruptcy and the conduct in this case supported some award of punitive damages. As for the fourth factor, the court noted that recidivism is not required and that it has consistently found this factor to be met in cases involving repeated acts against the same person. In any event, the court held that the record contained evidence that Ocwen was a recidivist. The consent decrees described how it had treated other customers as it did Saccameno, and that it had continued its ways despite repeated warnings from regulators. The number of opportunities Ocwen had to fix its mistakes is the core fact that justified punitive damages in this case. For the last factor – whether the harm was “the result of intentional malice, trickery, or deceit, or mere accident” the court agreed that Ocwen’s actions were not “mere accident” and that the evidence shows instead “reckless indifference” to Saccameno which was sufficient to sustain this factor even though Ocwen had not preyed on Saccameno intentionally.
Ultimately, the court held that Ocwen’s conduct was reprehensible, but not to an extreme degree. It caused no physical injuries and did not reflect any indifference to Saccameno’s health or safety. Ocwen was, however, indifferent to her rights, including those rights that originated from her bankruptcy. No evidence supported that Ocwen was acting maliciously, though the number of squandered chances it had to correct its mistakes came close. Judge St. Eve ruled that these factors pointed toward a substantial punitive damages award, but not one even approaching the $3,000,000 awarded here. Judge St. Eve specifically mentioned McGinnis v. American Home Mortgage Servicing, Inc., 901 F.3d 1282, a factually similar case, but there the jury found a specific intent to harm, and the Eleventh Circuit considered evidence supporting all five factors. Ocwen’s conduct was less reprehensible than that in McGinnis and thus warranted a smaller punishment.
Ratio of Punitive Damages to Actual Damages
Ocwen’s primary concern on appeal was with the second guidepost, the disparity between the harm to the plaintiff and the punitive damages awarded. Judge St. Eve agreed with Ocwen’s argument that the district court wrongly inflated this ratio by looking to the entire compensatory award ($582,000) instead of just the $82,000 awarded under the Consumer Fraud Act. Furthermore, Judge St. Eve noted that the $3,000,000 punitive award was not a modest award, and the $82,000 in compensatory damages for the Consumer Fraud claim was substantial enough that a huge multiplier was not needed to reflect harm that was “slight and at the same time difficult to quantify” and concluded that a single-digit punitive damages ratio relative to the $82,000 reflects an appropriate punishment on these facts. Accordingly, Judge St. Eve concluded that $582,000 is a considerable compensatory award for the indifferent, not malicious, mistreatment of a single $135,000 mortgage and that nearly all of this compensatory judgment award reflected emotional distress damages that “already contain [a] punitive element” and that a ratio of compensatory to punitive damages should not exceed 1:1.
Civil Penalties
The final guidepost discussed by the court is the disparity between the award and “civil penalties authorized or imposed in comparable cases.” The court first looked at the $50,000 monetary penalty authorized by the Consumer Fraud Act, which can be calculated per offense if there is intent to defraud. 815 ILCS 505/7(b). Looking at this factor, the court held that Ocwen’s actions were not so reprehensible that they might justify an award equal to the maximum penalty for 60 intentional violations. There was no evidence that Ocwen’s actions in this case were either intentional or fraudulent, only indifferent, and therefore, this aspect of the third guidepost pointed toward a lower punitive damage award.
The second civil penalty was the possibility that Ocwen could have its license to service mortgages suspended or revoked under the Illinois Residential Mortgage License Act (RMLA), 205 ILCS 635/4-5. Judge St. Eve ruled that the district court did not err in considering the possibility that Ocwen could lose its license.
Remedy
Ultimately, Judge St. Eve ruled that considering all the factors together, he maximum permissible punitive damages award was $582,000, holding that an award of this size “punishes Ocwen’s atrocious recordkeeping and service of Saccameno’s loan without equating its indifference to intentional malice.” As noted by the court, a $582,000 punitive damage award:
- Reflects a 1:1 ratio relative to the large total compensatory award;
- Reflects a roughly 7:1 ratio relative to the $82,000 awarded on the Consumer Fraud Act claim alone
- It is equivalent to the maximum punishment for less than 12, not 60, intentional violations of the Consumer Fraud Act
- It is “miniscule” compared to the value of Ocwen’s business license.
Antonio DeBlasio is the founding member of the DeBlasio Law Group. He has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2024. Only 5% of attorneys receive this distinction.
This blog post was co-authored by Casey Delury; Pre-law student at Elmhurst College