A federal jury whacked Ocwen Loan Servicing with a verdict of $3 million in punitive damages under the Illinois Consumer Fraud and Deceptive Business Practices Act — on top of $582,000 in compensatory damages — based on evidence that Ocwen tormented Monette Saccameno by stubbornly attempting to collect mortgage debts she didn’t owe.

The 7th U.S. Circuit Court of Appeals concluded that the evidence justified punitive damages under Illinois law, though it shaved that award to $582,000. Saccameno v. U.S. Bank, No. 19-1569 (Nov. 27, 2019).

Here are brief highlights of Judge Amy St. Eve’s opinion (with light editing and omissions not noted):

Around 2009, Saccameno fell behind on her $135,000 home mortgage and her bank, U.S. Bank National Association (nominally a defendant but irrelevant for our purposes), began foreclosure proceedings. To keep her home, she sought the protection of the bankruptcy court and, in December 2009, began a Chapter 13 plan under which she was required to cure her default over 42 months while maintaining her ongoing monthly mortgage payments.

Saccameno first began having problems with Ocwen in October 2011, shortly after it acquired her previous servicer. Ocwen sent her a loan statement saying, inexplicably, that she owed $16,000 immediately.

With her attorney’s advice, Saccameno ignored the statement and continued making payments based on her plan. Her statements continued to fluctuate: her February 2013 statement said she owed about $7,500, her March statement, $9,000.

A month later, Ocwen now owed Saccameno about $1,000 in credit, and Ocwen told her she did not need to pay again until September. Still, Saccameno continued making payments through June, the last month of her plan.

At that time the bankruptcy court issued a notice of final cure, informing Ocwen that Saccameno had completed her payments. Ocwen never responded to the notice, and the court entered a discharge order on June 29, 2013. Saccameno’s last statement pre-discharge showed that the credit in her favor had grown to $2,800 and she was paying down her loan.

Within days, however, an Ocwen employee, whom Ocwen refers to only as “Marla,” reviewed the discharge but mistakenly treated it as a dismissal. As far as Ocwen was concerned, then, the bankruptcy stay had been lifted and it could immediately start collecting Saccameno’s debts.

This might not have been a problem — for Saccameno of course did not have a debt anymore — but Marla’s mistake was only the tip of the iceberg. Apparently, in March, Ocwen had manually set the due date for Saccameno’s plan payments to September 2013, hence the credit.

That manual setting took place in a bankruptcy module that overrode and hid Ocwen’s active foreclosure module, which instead reflected that Saccameno had not made a single valid payment in 2013, as each check was being placed into a suspense account and not being applied to the loan.

Marla’s dismissal entry deactivated the bankruptcy module and reactivated the foreclosure one. If Marla had properly marked Saccameno’s bankruptcy as a discharge, then someone in Ocwen’s bankruptcy department would have reconciled the plan payments with the suspense accounts before closing both modules.

Instead, on July 6 and 9, Ocwen sent Saccameno two letters saying it had not heard from her since its nonexistent recent communication about her “severely delinquent mortgage.” The letters offered the contact information of governmental and nonprofit services for people unable to make their home mortgage payments.

They also warned Saccameno that failure to respond could result in fees from foreclosure, sale of the property and eviction, and that this process could ruin her credit, making it hard for her even to find a new rental property. Saccameno understandably dubbed these the “you’ll never rent in this town again” letters.

Before these letters arrived, Saccameno called Ocwen to ask about lowering her interest rate. An Ocwen employee said she was not eligible because she was several thousand dollars in default. Knowing this was a mistake, two weeks out from her discharge, Saccameno asked how to correct the records and was given a number where she could fax her documents. She did so a few days later, and with that paperwork Ocwen corrected Marla’s mistake before July was over.

If only that were the end of this story. With the corrected records, Ocwen’s bankruptcy department performed a reconciliation and recognized that Saccameno had made several payments in 2013, so her default was nowhere near as large as the employee had said.

Nevertheless, it somehow determined that she had missed two payments during her bankruptcy, so she was still in default — albeit to a lesser extent — and the foreclosure module remained open.

In August, Ocwen sent Saccameno a letter declaring that it had “waived” $1,600 in fees (that had been discharged) and that it was missing two of her plan payments (which, even if true, would also have been discharged under the terms of the plan).

While this was all going on, Saccameno remained optimistic and continued to make her monthly payments. Ocwen had accepted her payments for July and August 2013 but began rejecting them in September because each payment was not enough to cure her supposed default.

The jury heard all of this at trial — as well as testimony regarding the mental and emotional strain Saccameno went through because of Ocwen’s continuous errors.

Ocwen had promised the jury, in its opening statement, that it would explain why it received only 40 payments during the bankruptcy. It never had the chance, though, as Saccameno’s counsel diligently walked Ocwen’s representative through its own records payment by payment.

Just before lunch on the second day of trial, the representative counted to 42, confirming that Saccameno had made each payment. Ocwen never again argued otherwise. It instead focused on Marla’s mistake in July of 2013 — the marking of dismissal instead of discharge.

The jury evidently did not buy the story that Saccameno’s years of woeful treatment could be placed on the shoulders of a single, essentially anonymous, line employee.

Sufficiency of the evidence

Under Illinois law, punitive damages may be awarded only if “the defendant’s 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 (Ill. 2010).

When the defendant is a corporation, like Ocwen, the plaintiff must demonstrate also that the corporation itself was complicit in its employees’ tortious acts. See Kemner v. Monsanto Co., 576 N.E.2d 1146 (Ill. App. 1991).

Ocwen argues that the evidence could support only a finding of negligence, not a conscious and deliberate disregard for Saccameno’s rights.

It continues to place most of the blame on what it calls “an isolated ‘miscoding’ error committed by a lone employee, identified as ‘Marla.’”

Ocwen cannot pin this case on Marla. Her error was one among a host of others and each error was compounded by Ocwen’s obstinate refusal to correct them.

If this case were truly Marla’s fault, then Saccameno’s troubles would have lasted a month — most of July 2013. That was how long it took for Saccameno to point Ocwen toward Marla’s mistake, and for Ocwen to change the dismissal to a discharge.

The real problems only began at that point though, as Ocwen falsely claimed that Saccameno had missed two plan payments for the first time in August and started improperly rejecting Saccameno’s payments in September.

Ocwen apparently did not discover the former until the second day of trial and likely would have continued the latter until it filed for foreclosure, had this lawsuit not gotten in the way.

Ocwen contends that the miscounting of payments was also a human error — though it does not identify a human.

We are not sure how many human errors a company like Ocwen gets before a jury can reasonably infer a conscious disregard of a person’s rights, but we are certain Ocwen passed it.

Ocwen still has offered no real explanation for any of the errors its employees made, and never acted to correct its mistakes. This “unwillingness to take steps to determine what occurred” warranted punitive damages under the ICFA. Dubey v. Public Storage Inc., 918 N.E.2d 265 (Ill. App. 2009).

The utter lack of explanation also supports a finding of corporate complicity.

Illinois law insists on managerial involvement before punitive damages may be awarded against a corporation. See Mattyasovszky v. West Towns Bus Co., 330 N.E.2d 509 (Ill. 1975). Saccameno, however, interacted only with line employees and never escalated her dispute. The district court thus rightly recognized that the only plausible basis on this record for corporate complicity is that “the principal or a managerial agent of the principal ratified or approved the act” of its employees.

Ratification is governed by agency principles and is the equivalent of authorization, but it occurs after the fact, when a principal gains knowledge of an unauthorized transaction but then retains the benefits or otherwise takes a position inconsistent with nonaffirmation.

Illinois law permits a finding of ratification based on a corporation’s litigation conduct, if that conduct is inconsistent with nonaffirmation.

The jury, having little evidence to the contrary, concluded that Ocwen had accepted its employees’ indifference to Saccameno.

Ocwen insisted it had not seen errors like these before. The jury was not required to accept Ocwen’s bare assertion that this was a unique case and could have inferred that this is just how Ocwen does business.

For that, Illinois law permits punitive damages.