Following the Eleventh Circuit’s decision last month in McGinnis v. American Home Mortgage Servicing, Inc., No. 14-13404, mortgage servicers should be aware that failing to recognize and correct miscalculations of a borrower’s payment may subject them to liability for extreme and outrageous conduct in certain circumstances.

American Home Mortgage Servicing, Inc. took over the servicing of mortgages on several rental properties in Georgia owned by Jane McGinnis. American’s welcome letter to McGinnis stated that her monthly payment had risen over $200 from the amount she had been paying the previous servicer. Believing she did not owe this additional amount, McGinnis continued paying the original amount, and American charged her additional fees for the apparent deficiency. Eventually, American conceded that it had miscalculated the payment amount, but insisted that McGinnis pay the previously incurred late fees. American eventually foreclosed on one of McGinnis’s properties due to nonpayment of these late fees and related charges. McGinnis sued America for wrongful foreclosure, intentional infliction of emotional distress, and conversion, among others.

The jury awarded McGinnis $6,000 in compensatory damages, $500,000 in emotional distress damages, and $3,000,000 in punitive damages. The trial court then granted American’s motion to reduce the punitive damages award to $250,000, holding that there was insufficient evidence that American acted with specific intent to cause harm as required to overcome Georgia’s $250,000 statutory cap on punitive damages. Both parties appealed to the Eleventh Circuit.

The Court held that American’s acts could constitute “extreme and outrageous conduct” sufficient to support the jury’s award of emotional distress damages, because American agents frequently harassed McGinnis by phone and mail, American foreclosed in a fairly short amount of time for a relatively small amount of money, and American failed to correct McGinnis’s account despite McGinnis’s several attempts to seek relief from American’s miscalculated payment amount.

The Court also reversed the trial court’s reduction of the punitive damages award. The Court held that American had failed to preserve a Rule 50(b) motion on the issue of American’s specific intent to harm because it had not specifically raised that issue in the trial court. The Court remanded the case to the trial court for further proceedings.

The text of the opinion is available here.