Suzanne Sloane knew giving birth would be painful, but she did not foresee the ensuing two-year ordeal that would wreck her credit and drive her to the brink of divorce.
As Sloane delivered a boy at Prince William Hospital in Virginia on June 25, 2003, Shovana Sloan, a recent hire in the hospital's administration surreptitiously stole the new mother's identity.
The 4th Circuit's award is a harbinger, says Fred Cate, a professor at Indiana University's School of Law-Bloomington. "It is a high award, [but] I don't think we will look back in three or four years and think so. It's part of a broader willingness of juries, judges and government officials to find liability for errors in data systems that harm people."
Because many businesses just "ignore errors ... we are going to see more liability," predicts Cate, an expert on information security. The downside risk could be immense since an estimated 27 million adults were identity theft victims between 1998 and 2003. While court-approved jury awards for emotional distress under the FCRA typically have ranged between $20,000 and $75,000, the 4th Circuit bluntly served notice that "past precedent fails to fully reflect the unfortunate current reality" of identity theft.
The jury found that Equifax violated the FCRA by failing to follow reasonable procedures designed to assure maximum accuracy on Sloane's credit report and by failing to conduct a reasonable investigation to determine whether the disputed information was inaccurate. Equifax was also found negligent for failing to delete information that the company found to be inaccurate, incomplete or unverified, and for reinserting previously deleted information into her credit file.
On appeal Equifax didn't dispute the findings, but said that the District Court should have ordered remittitur of the emotional distress damages to no more than $25,000. The 4th Circuit panel held that there was "substantial ... objective evidence" supporting a significant emotional distress award. While other FCRA compensatory awards have been much lower, the plaintiffs in those cases experienced "isolated or accidental reporting errors," the appeals court noted. Alarmingly for defendants, the 4th Circuit said it found guidance on damages in defamation case law where emotional distress awards in the range of $250,000 are frequently sustained.