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McGinnis v. American Home Mortgage Servicing, Inc.

United States District Court, M.D. Georgia, Macon Division

March 6, 2017




         This case is presently before the Court on remand from the Eleventh Circuit Court of Appeals for consideration of Defendant Homeward Residential's motion for new trial on the issue of punitive damages. Upon due consideration of the Eleventh Circuit's mandate, the evidence, the parties' arguments, and the relevant law, the Court finds that the jury's punitive award in this case is neither unconstitutional, unconscionable, nor excessive in light of the evidence presented at trial.


         Plaintiff Jane McGinnis (“McGinnis”) filed the present action for wrongful foreclosure, conversion, interference with property, and intentional infliction of emotional distress against Defendant Homeward Residential, Inc. (“Homeward”), the servicer of the mortgages on several properties for which Plaintiff was a landlord. At the end of a bifurcated trial, the jury found against Homeward on all claims and awarded McGinnis $3, 506, 000.00 in damages ($6, 000.00 for her economic injury, $500, 000.00 for her emotional distress, and $3, 000, 000.00 in punitive damages).

         After the trial, Homeward renewed its motion for judgment as a matter of law under Rule 50 of the Federal Rule of Civil Procedure (“Renewed JMOL”), and also moved, in the alternative, for a new trial and/or remittitur of damages under Rule 59. Homeward's Renewed JMOL was granted only on the issue of punitive damages.[1] The motions were otherwise denied.

         The parties, thereafter, cross-appealed, and the Eleventh Circuit Court of Appeals affirmed this Court's ruling in its entirety. That opinion was vacated a short time later (following a decision by one the judges to recuse herself), and the appeal was referred to a second panel.[2] After review, the second panel affirmed all but one of the Court's rulings, concluding that Homeward was procedurally barred from challenging the punitive damages award in its Renewed JMOL.[3] The Court's ruling on this issue under Rule 50 was accordingly reversed. The case was then remanded to this Court for consideration of the same arguments under Rule 59, which had been timely raised by Homeward but not yet ruled upon by the Court.

         Homeward's motion for new trial on the issue of punitive damages is thus now again before the Court.[4] On remand, the parties were allowed to each file a supplemental brief for consideration. Homeward filed a post-appeal motion, and McGinnis filed a response thereto.[5] Homeward then moved to file a reply brief.[6] That motion is GRANTED over McGinnis's objection, [7] as her response included new arguments to which Homeward may respond. The reply has thus been considered.[8]


         Homeward's “Post-Appeal Motion to Reduce Punitive Damages Award, or Alternatively for New Trial or Remittitur”[9] is now ripe for consideration.

         I. Standard of Review under Rule 59

         Rule 59 of the Federal Rules of Civil Procedure allows the district court to order a new trial on evidentiary grounds if the trial judge, in his discretion, determines that the jury's verdict is against the “great weight” of the evidence presented at trial.[10] Thus, because the weight of the evidence is considered, the district judge may grant a new trial even if there was sufficient evidence to prevent a directed verdict under Rule 50.[11]

         When considering a motion for new trial, however, the district judge may not substitute his own credibility choices and inferences for those made by the jury.[12] The jury's verdict may be set aside on evidentiary grounds only if “the verdict is against the great - not merely the greater - weight of the evidence.”[13] The jury's award of damages must likewise stand undisturbed unless the amount is shown to be clearly outside “the universe of possible awards which are supported by the evidence.”[14]

         With these standards in mind, the Court now turns to the arguments raised in Homeward's Motion for New Trial: (1) that the jury's punitive award is unconstitutionally excessive; (2) that the jury's punitive award is grossly excessive under Georgia law; and (3) that the jury's verdict on punitive damages is against the great weight of the evidence presented at trial.

         I. The Jury's Punitive Award is Not Unconstitutionally Excessive

         The first issue before the Court is whether the jury's punitive award is so excessive that it violates due process. A punitive damages award may run afoul of the Due Process Clause “when it can fairly be categorized as grossly excessive” in relation to “a [s]tate's legitimate interests in punishing unlawful conduct and deterring its repetition.”[15] The relevant question in this case is thus whether the jury's award is grossly excessive in relation to Georgia's strong interest in preventing a mortgage servicer from unfairly exercising its power of sale.[16]

         When deciding whether an amount of punitive damages offends due process, three factors must be considered: the degree of reprehensibility of the defendant's conduct; “the disparity between the actual or potential harm suffered by the plaintiff and the punitive . . . award”; and “the difference between the punitive damages awarded and civil penalties authorized or imposed in comparable cases.”[17]

         A. Reprehensibility

         The degree of reprehensibility of a party's conduct is the “dominant consideration” in determining whether a punitive award is excessive.[18] Evaluating the reprehensibility of a defendant's conduct is meant to ensure that the “damages imposed on a defendant . . . reflect the enormity of his offense.”[19] The “gravity of the defendant's conduct” must therefore be balanced with the “harshness of the award of punitive damages”[20] - i.e., a higher degree of reprehensibility weighs in favor of a larger award of punitive damages. With respect to this inquiry, courts have been instructed to consider a number of sub-factors, such as whether the harm caused was physical or economic; whether the defendant's conduct showed an indifference to the health and safety of others; whether the target of the conduct was financially vulnerable; whether the conduct involved repeated actions or a single incident; and whether the evidence showed malice, trickery, or deceit.[21] Thus, for example, repeated “conduct which causes emotional as well as economic harm [may be viewed as] more reprehensible than that which causes only economic harm.”[22]

         After considering the facts of this case in light of the relevant factors, the Court finds a high degree of reprehensibility in Homeward's conduct. During the trial of this case, there was ample evidence presented to show that Homeward was aware of both McGinnis's financial vulnerability and her good-faith attempts to notify Homeward of its error in calculating the amount owed.[23] Homeward nonetheless bullied and harassed McGinnis to pay greater amounts and flatly maintained that she was required to pay “any amount” it demanded, regardless of whether it was reasonable or in error.[24]When McGinnis refused to pay the disputed amounts, Homeward proceeded with foreclosure in a short amount of time; and as a result of Homeward's repeated refusals to concede its error, McGinnis suffered not only an economic injury but also physical and emotional harm.[25] Homeward's actions in this context were reprehensible and warrant a substantial penalty beyond the award of compensatory damages.

         B. Ratio Between Compensatory and Punitive Damages

         The Court must next consider the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award.”[26] In this inquiry, the mathematical ratio of punitive to compensatory damages is instructive.[27] A single-digit ratio (less than 10-to-1) will most likely comport with due process.[28] There is, however, no firm rule or “bright-line ratio which a punitive damages award cannot exceed.”[29]The core question is whether the amount of punitive damages is “reasonable and proportionate to” the amount of compensatory damages recovered.[30] The reasonableness of the award thus depends “on the facts and circumstances of the defendant's conduct and the [actual and potential] harm” that was likely to result.[31]

         In this case, the ratio of punitive to compensatory damages is 5.9-to-1.[32] This is a single digit ratio and not presumptively suspect.[33] Homeward, nonetheless, contends that, even at a single-digit ratio, the punitive award offends due process because of McGinnis's substantial recovery for emotional distress.

         In support of its motion, Homeward relies on frequently-cited caselaw suggesting that, if an award of compensatory damages is substantial, it is possible that “a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.”[34] Prior cases have also suggested that a punitive damages award “more than four times the amount of compensatory damages might [in some cases] be close to the line of constitutional impropriety.”[35] These suggestions, however, are no more than suggestions - intended to be instructive; they neither demarcate an uppermost limit for a punitive award nor mandate the use of any particular calculation for determining whether a punitive damages award is outside the acceptable range.[36] Federal courts have “consistently rejected the notion that the constitutional line is marked by a simple mathematical formula.”[37]

         Thus, “particularly egregious conduct . . . may justify bumping the acceptable ratio to a higher level.”[38] The Eleventh Circuit has, many times, upheld ratios greater than 5.9-to-1.[39] Punitive awards having a greater ratio of disparity have even been upheld in cases factually similar to this one: In Brim v. Midland Credit Mgmt., Inc., [40] for example, the district court upheld a ratio of 6.23-to-1 after finding a high degree of reprehensibility in the defendant's attitude of indifference and failure to investigate consumer complaints, where there was: evidence that plaintiff made numerous efforts “to have the defendant correct its records”; testimony “regarding … the amount of time [the plaintiff] had to devote to his credit … because of defendant's actions or inactions”; and evidence “that the defendant's sole effort [in response to consumer complaints] was to check its records against its very own records.”[41]

         Furthermore, the actual injury caused to McGinnis in this case is not the only relevant consideration: The potential that existed for a greater harm is also relevant.[42] If the potential or likelihood for greater harm is high, the jury may impose a higher award to “teach a duty of care” and/or deter the repetition of such conduct.[43] Heavier punitive awards are likewise “justified when wrongdoing is hard to detect (increasing chances of getting away with it)” or when the value of the economic injury provides little incentive to sue.[44] Indeed, in some cases, only a heavy penalty will cause the kind of “memorable and unmistakable sting” necessary to punish and deter repetition of the conduct.[45]

         All of these justifications for a large award of punitive damages are present here. The potential for financial and economic harm - if Homeward's conduct was repeated on a large scale - is tremendous. The indifference and obstinacy shown by Homeward's agents in this case likewise suggest that a strong deterrence from repetition may be needed. Smaller actions by Homeward - such as the collection of unreasonable amounts, fees and expenses - may also be hard to detect, and the amounts collected, in just a single case, may often be too small to justify litigation. Homeward is, in addition, a wealthy corporation: “AHMSI [was] the 13th largest mortgage servicer in the country managing nearly $71 billion in loan servicing, ”[46] and thus a higher award may necessary to achieve the desired goals of punishment and deterrence.

         The Court, therefore, does not find the jury's punitive award to be disproportionately excessive.

         C. Civil Penalties

         The final factor to be considered in this analysis is the amount of any civil penalties authorized or imposed in comparable cases.[47] This factor is often accorded less weight than the first two.[48]

         In this case, Homeward asks the Court to compare the civil penalties authorized under the Real Estate Settlement Procedures Act (“RESPA”)[49] with the punitive damages awarded. RESPA, however, provides no real guidance in this case; and Homeward fails to identify any comparable cases in which RESPA penalties were considered or imposed. The Court thus give little, if any, weight, to this factor. Yet, even if RESPA penalties were to be considered, the Court suspects that they would also weigh in favor of a large punitive award, as even under RESPA, there is no cap on the penalty which can be imposed in the case of multiple intentional wrongs by a lender.[50]

         Accordingly, and having now weighed all of the relevant factors identified above, the Court finds that the jury's punitive award in this case cannot be fairly categorized as grossly excessive in relation to the State's legitimate interests.[51]

         II. The Punitive Damages Award is Not Unconscionable under State Law

         Homeward next contends that the jury's punitive award is grossly excessive under state law. The Court presumes, as does McGinnis, that Homeward's argument is made under Georgia's common law criteria for determining whether a punitive award is excessive.[52] Most relevant to this inquiry is that, under Georgia law, the purpose of an “award of punitive damages . . . is to deter the repetition of reprehensible conduct by the defendant or others.”[53] “Because deterrence is based on factors other than the actual harm caused, ” Georgia has “rejected the notion that punitive damages must necessarily bear some relationship to the actual damages awarded by the jury.”[54]

         Thus, in Georgia, a punitive award will generally be upheld absent evidence that there was a “prejudice or bias on the part of the jury.”[55] If there is no direct proof of prejudice or bias on the part of the jury, Georgia courts will “look to the ratio of compensatory to punitive damage (and other federal guideposts) for some evidence that the punitive damages award is infected by bias or prejudice.”[56] The bar for satisfying this standard is, however, a high one: Georgia courts have stated that, for an award to be set aside on the ground that it is excessive, it must, “when considered in connection with all the facts, ” “shock the moral sense, appear exorbitant, flagrantly outrageous, and extravagant.”[57] It must be “monstrous indeed”; it must carry its death warrant upon its face.”[58]

         In this case, the Court finds no direct proof that the jury's award was infected by other considerations, bias, or prejudice;[59] nor does the Court find (for those reasons already discussed in Part I. supra) that the amount of the jury's punitive award is so excessive as to “shock the judicial conscience.” The Court accordingly does not find the award to be grossly excessive under Georgia law.

         III. The Punitive Award is Not Excessive in Light of the Evidence Presented

         The final question before the Court is whether the jury's punitive damages verdict is against the great weight of the evidence presented at trial.[60] Before reaching this issue, however, the Court must first address the procedural objection raised on remand. In her post-appeal response, McGinnis contends that Homeward is procedurally barred from now challenging the sufficiency of the evidence as to punitive damages in its motion for new trial because it did not raise any objection to the sufficiency of this evidence prior to the verdict.

         As the Court discussed at length in its prior order, [61] litigants are barred, under Rule 50 from raising arguments for the first-time post-judgment. However, Rule 59, applicable here, does not have the same procedural bar.[62] A district judge may grant a new trial under Rule 59 based on the weight of the evidence - even if there was sufficient “evidence [to] prevent the direction of a verdict” at trial under Rule 50.[63]

         Still, not all arguments may be raised for the first time in a motion for new trial. A district court need not grant a new trial under Rule 59 based on arguments or theories that were previously available, but not pressed.[64] As McGinnis suggests, Homeward could have argued at trial that there was insufficient evidence to present the claims for capped and/or uncapped punitive damages to the jury, but it did not. Homeward is thus barred from making those arguments now.

         Homeward's present argument - that the amount of the jury's award on punitive damages is excessive in light of the great weight of the evidence presented at trial - poses an entirely different question, is subject to different burden of proof, and was not one available to Homeward at trial. At trial, Homeward could not yet have known what the damages award would be. Homeward is thus not procedurally barred from raising the two evidentiary challenges now before the Court.

         A. Willful and Wanton Misconduct

         Homeward first contends that the jury's punitive damages award must be vacated or remitted because, under Georgia law, punitive damages may not be awarded absent a finding that the defendant's actions were “willful, malicious, fraudulent, wanton, oppressive, or intentionally taken without concern for the consequences that might result therefrom.”[65] Homeward suggest that there was little or no evidence presented at trial from which the jury could infer “willful misconduct, malice, fraud, wantonness, oppression, or an entire want of care” on its part. Homeward thus believes the jury's finding of such conduct was against the clear weight of the evidence.

         After a review of the evidence, the Court strongly disagrees. The Court in fact finds (as it has before)[66] ample evidence from which the jury could infer that Homeward continued to harass and demand payment from McGinnis with a willful and wanton disregard for Plaintiff's rights and conscious indifference to the consequences of its actions.[67] The jury's decision to award punitive damages in this case was thus not against the great weight of the evidence presented at trial.[68]

         B. Specific Intent to Harm

         Homeward next argues, in the alternative, that the jury's award of uncapped punitive damages must be vacated or remitted because the jury's finding of “specific intent to harm” - a prerequisite to an award in excess of Georgia's $250, 000.00 statutory cap - is against the clear weigh to the evidence.[69]

         This Court has already found that the evidence presented at trial sufficiently demonstrates that Homeward's conduct was “extreme and outrageous, ”[70] “reprehensible, ”[71] “wanton, ”[72] and “reckless.”[73] The same evidence, however, is not necessarily sufficient to also satisfy the standard of proof required for finding a specific intent to harm.[74] In fact, when previously considering this issue under Rule 50, the Court found no evidence that Homeward set-out or desired to cause McGinnis harm at the time it inherited her loan.[75] The Court likewise found no evidence that Homeward would have otherwise desired to cause Plaintiff's injuries or that it believed the injuries actually suffered by Plaintiff were substantially certain to result from its obstinacies and demands for payment.[76] “All evidence instead suggests that Homeward intended and believed its conduct would cause Plaintiff to make the payments demanded.”[77]

         On remand, however, McGinnis asks the Court to reach a different conclusion. McGinnis contends that, while the Court may have been correct in finding “no direct evidence” to show that Homeward “purposely sought” to cause the specific injuries McGinnis's suffered, there is, nonetheless, evidence from which the jury could infer specific intent - i.e., evidence that Homeward engaged in a course of conduct despite knowing that it would almost certainly harm McGinnis.[78]

         McGinnis is correct that this Court is not bound by its previous ruling on this issue.[79] The Eleventh Circuit vacated this Court's ruling under Rule 50 and did not reach the issue of specific intent on appeal. McGinnis is also correct that a finding of specific intent may be supported by either (1) evidence that the actor desired to cause the consequences of its act or (2) evidence the actor knew the consequences of his act were certain, or substantially certain, to result and still went ahead.[80] Intent to harm thus does not require direct proof. A jury can find intent through consideration of the words, conduct, demeanor, motive, and circumstances connected with the defendant's actions[81] - or as in this case, the actions of the defendant's agents.[82]

         The Eleventh Circuit Court of Appeals has also rejected attempts “to narrow [the] definition of specific intent” in a manner that requires proof that the defendant purposely sought to cause the harm suffered.[83] The Court's instruction to the jury (to which Homeward did not object) also did not define specific intent so narrowly.[84]Homeward thus cannot now argue that more is required;[85] nor can Homeward escape an uncapped punitive award because it was not absolutely certain which one of multiple harmful consequences would result from its actions. To infer specific intent, the jury only needed to find evidence that the defendant knew it would certainly (or almost certainly) cause harm to the plaintiff and yet continued in the same course of conduct despite the known consequences of its actions.

         Yet, upon review of this Court's prior findings under Rule 50, it is apparent that Homeward's arguments[86] (and thus this Court's consideration thereof) focused primarily on the first method of proof and the lack of evidence that Homeward specifically set-out or desired to cause McGinnis's injuries. The Court thus will now, in light of McGinnis' arguments on remand, revisit this issue and further consider the evidence she identified as creating an inference of Homeward's specific intent to harm.

         1. Evidence of Homeward's Conduct and Awareness of its Error

         McGinnis first contends that evidence demonstrating Homeward's conduct, words, demeanor, and knowledge of its error is sufficient proof of its intent to harm.[87]At trial, McGinnis indeed produced evidence and testimony to show the jury that she did not owe the amounts demanded and that she repeatedly notified Homeward both of its error in calculating her escrow payment and that its demands for payment were unreasonable.[88] McGinnis then showed the jury that, despite both her good-faith efforts and Homeward's “own tacit admission of its erroneous calculation and subsequent decrease in the escrow amount, ”[89] its agents “continually failed to justify the increase, ” refused to “retract its demand that [she] pay the inflated amount, ”[90] and responded to her requests for help with indifference, obstinacy, and, at times, belligerence.[91] The Court agrees that this evidence would allow the jury to infer an intentional, rather than mistaken, infliction of harm.

         This evidence was also, for the most part, un-rebutted by Homeward at trial. When questioned, Homeward could neither verify nor produce a copy of its escrow analysis to justify the payment increase.[92] Homeward's witness, Christopher Delbene, just blindly “insisted that [Homeward's] escrow analysis was correct, even though he had not seen the document and had not attempted to calculate the escrow.”[93] It was also Homeward's position, according to Delbene, that “Plaintiff was required to pay any amount Homeward demanded, regardless of whether it appeared reasonable or in error, simply because that is what she agreed to under the note and mortgage, ”[94] and, if there was an error, Plaintiff could later request a refund of any amounts received in excess of what was necessary to pay her taxes and insurance at the end of the year.[95]Meanwhile, however, McGinnis would be deprived of the use of her money, possibly “hundreds of dollars … every month on each of her seven loans, ”[96] without any firm guarantee that those amounts would actually be refunded.

         Homeward's own evidence (or lack thereof) thus did little or nothing to dispel the inference of an intent to harm. From the evidence presented, the jury could have reasonably inferred that Homeward's agents continued in the same course of conduct despite the knowledge of its error and a belief that its actions would certainly (or almost certainly) cause McGinnis harm - whether it be from the Homeward's wrongful taking and withholding of hundreds of dollars each month (if she did make the payments) or from Homeward's eventual foreclosure on her ...

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