Guest Blog by Jeff Nolan and Ralph Young
Juries are continuing to show that they are willing to hold credit funishers accountable for actions that they should take but do not. NACA members Jed Nolan and Ralph Young were recently given a favorable jury ruling in such a case against Ocwen Loan Servicing, in which Ocwen was found to have violated the FDCPA by not adequately investigating credit reporting disputes. Here, Jed and Ralph share their lessons learned from this case and their tips on how you can successfully try similar cases.
In March 2013, David Daugherty reviewed his credit report in anticipation of refinancing his balloon note mortgage payment, which wasn’t due until July 2014—plenty of time to fix any errors. However, fifteen months and twenty-four Automated Consumer Dispute Verifications (ACDVs) later, Mr. Daugherty sued Ocwen Loan Servicing for not properly investigating the disputes he filed regarding his credit report. Ocwen verified two tradelines—one accurately showing that he was current, one showing foreclosure. Ocwen claimed that its investigations were adequate but a federal jury disagreed, awarding Mr. Daugherty $6,128.00 in compensatory and $2.5 million in punitive damages for willfully violating the FCRA.
The most important takeaway from our case: try these cases! Justin Baxter and Robert Sola have been preaching to everyone for years to try these cases. We now add our voice to that chorus. Our client had warts in the form of other negative trade lines besides the false foreclosure mark. Our client had warts in the form of failing to escrow mortgage payments after Ocwen rejected his payments. Ocwen was able to argue that (1) the other negative trade lines hurt his credit score (see Expert John Ulzheimer testimony) and (2) he already received a benefit by living in his home free for over a year. Despite these warts, and despite awarding only nominal compensatory damages, the jury still became angry enough at Ocwen to award significant punitive damages.
It became apparent during opening arguments that Ocwen was taking the position that it did nothing wrong. We heard several clichés throughout the trial to describe Ocwen’s duty under s-2b: Equifax was the quarterback calling ‘plays’ and Ocwen only ran the play that was called; Equifax was the coach calling plays and Ocwen was the point guard running the play that was called; Ocwen was just the mail carrier, sorting disputes by the zip code provided by Equifax; Ocwen was the car mechanic, fixing only what it was told to fix. Ocwen told the jury that it only had to look at the dispute code on the ACDV from Equifax and once it reviewed that specific code, its job was done. We were stunned by our good fortune. Was Ocwen completely ignoring its duty to conduct a reasonable investigation under Johnson v. MBNA? Especially in a district court in the Fourth Circuit where Johnson was decided?
Ocwen’s position crystallized during the examination of their 30(b)(6) witness (whom Ocwen hid and refused to produce until ordered by the Court on the third day of trial—make sure to subpoena the corporate rep to avoid my rookie mistake). She testified over and over again that Ocwen never looked beyond the dispute code provided by Equifax in the ACDV. We made a clear record that Ocwen never investigated anything beyond the specific dispute code on the ACDV. In our case, this was fatal to Ocwen. Our plaintiff had one mortgage but two tradelines. Ocwen didn’t report two tradelines but it continuously verified two tradelines (twenty-four times to be exact). One tradeline showed foreclosure. Some ACDVs only provided the 001-Not his dispute code and Ocwen told the jury that because the plaintiff did have a mortgage with Ocwen, the verification was accurate. The jury saw through this argument, as the ACDV listed on its face that foreclosure had started, which was clearly inaccurate. The foreclosure tradeline was “not his.” Ocwen did not even look at the entire ACDV before verifying it.
After half a day of questioning Ocwen’s 30(b)(6) rep, expert Evan Hendricks fed us a question that he told us Robert Sola had used to great effect: “Did Ocwen do anything wrong? Even just one thing?” Ocwen’s 30(b)(6) had been coached well. She firmly and confidently stated that, no, Ocwen had done nothing wrong in this case. The jury was aghast. At the FDCPA Conference in Miami, I recall David Humphreys giving credit to an outstanding defense lawyer who was able to keep a verdict at ~$900k, claiming that the verdict should have been higher but for the defense lawyer accepting responsibility for the defendant’s mistake(s) to the jury. Here, Ocwen refused to accept any responsibility for its willful disregard of s-2b.
I suspect that, as Evan Hendricks indicated, furnishers will now take s-2b claims more seriously in the wake of this and Mr. Baxter’s verdict in Texas. We were shocked that Ocwen, using a law firm from the heart of the Fourth Circuit and who had been counsel on the landmark Saunders v. BB&T case, would argue that its superficial investigations complied with s-2b. Ocwen’s counsel frequently reminded the Court during this entire litigation that it had tried many FCRA cases versus the inexperience of our firm. Nonetheless, I believe the Court was more inclined to grant our motion for directed verdict on the issue of willfulness than it was to grant Ocwen’s motion for directed verdict dismissing the case.
Which brings me back to the first point: try these cases! Juries are showing time and again that furnishers have to do more than they are doing. I welcome any feedback on better ways to protect our client from the slight compensatory award that we received. But the jury was able to look beyond a plaintiff that it didn’t feel was injured to make sure to punish Ocwen.
Jed Nolan graduated from the WVU College of Law in 2008. After working at Legal Aid of West Virginia, he joined Hamilton Burgess. He knows even less about the FCRA than you do, except that Ocwen gave him the opportunity to try a case.
Ralph Young graduated from the WVU College of Law in 1979. He has several multi-million dollar verdicts and was WV’s trial lawyer of the year in 2011. Ralph and Jed are NACA members who focus exclusively on consumer protection litigation under state and federal law.