$225,000 Punitive Damages Award Upheld Where Creditor Repeatedly Contacted Customer After Being Notified of Attorney Representation

Earlier this year, a district court for the Middle District of Florida upheld a jury award of $225,000 in punitive damages in a debt collection case finding the defendant’s conduct “reprehensible” based on the physical harm caused to the plaintiff, the defendant’s indifference or reckless disregard of the harm it caused to the plaintiff, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

In Medley v. DISH Network, the plaintiff signed up for the defendant’s satellite TV service, but later became unable to pay for the subscription. The defendant offered a “pause” program that allowed the plaintiff to suspend service for up to nine months at a cost of $5 per month, which the plaintiff accepted. Ultimately, the plaintiff filed for chapter 7 bankruptcy protection, listed the defendant as an unsecured creditor, and obtained a discharge of her debt. The plaintiff’s lawyer sent two faxes to the defendant providing notice that the plaintiff was represented by counsel. After receiving notice of representation, the defendant sent five billing notifications to the plaintiff and made six telephone calls attempting to collect on the $5 monthly payment.

The plaintiff filed suit against the defendant alleging, among other things, violation of § 559.72(18) of the Florida Consumer Collection Practices Act (FCCPA), which makes it unlawful for a debt collector to communicate with a debtor if the debt collector knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address.

The FCCPA claim was ultimately tried before a jury , which awarded the plaintiff $1,000 in statutory damages, $8,750 in actual damages for emotional distress, and $225,000 in punitive damages.

The defendant filed a motion to reduce the punitive damages award on constitutionality grounds, which the court denied. The most important factor in determining whether a punitive damages award is constitutional is the “reprehensibility” of the defendant’s conduct, which the court found was satisfied, based on the physical harm caused, the defendant’s indifference or reckless disregard of that harm, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

First, the court found that emotional distress suffered by plaintiff — confusion, worry over her credit, and heart racing — was a form of physical harm that could support punitive damages. Second, the court found that the evidence supported a finding of indifference to or reckless disregard of the health and safety of others. Specifically, the defendant repeatedly contacted the plaintiff despite its knowledge that the plaintiff was represented by counsel and that she had filed for bankruptcy due to her financial troubles. Further, the defendant testified that approximately 50,000 of its customers file bankruptcy each year, meaning that the defendant routinely deals with individuals who are financially vulnerable. Against this backdrop, the court found that the lack of employee training regarding the requirements of the FCCPA or debt collection actions that are precluded under the law and the systemic failure to document attorney representation demonstrated an indifference to the plaintiff and others in her position “who are at a low point in their lives and are most vulnerable.” This same evidence also supported findings that the plaintiff was financially vulnerable and that the defendant had engaged in repeated collection activity.

The court also rejected the defendant’s argument concerning the disparity between the actual damages award of $8,750 and the award of $225,000 in punitive damages. The defendant argued that 26:1 ratio was excessive and should be at most 4:1. The court rejected this argument noting that the analysis cannot be reduced to a “simple mathematical formula.” Specifically, the court explained that the purpose behind punitive damages is retribution and deterrence, and that the wealth of the defendant must be considered. Given the large size and customer base of the defendant, the court found that the $225,000 award was consistent with those purposes “without being grossly excessive.”