HSBC Bank Overdraft Class Action Settlement Will Continue in NY State Court

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A New York federal judge says that he does not support an HSBC Bank USA NA class action lawsuit being moved to the federal court from a state court, where the bank is pursuing a $30 million class action settlement.

The plaintiffs involved in the HSBC Bank overdraft fee multidistrict litigation (MDL) wanted overdraft allegations to be ruled on in the New York federal court.

U.S. District Judge Arthur D. Spatt wrote in his Thursday decision that the class action settlement that HSBC is pursuing in the New York state court may proceed.

Judge Spatt said that he is going to wait on certifying two proposed federal class action lawsuits until there is a decision to accept or reject the HSBC Bank class action settlement by New York Supreme Court Judge Eileen Bransten.

In the meantime, HSBC will still need to submit to discovery requests that the plaintiffs have made in federal court until there is a decision in the state court on the class action settlement, Judge Spatt said.

HSBC Bank had argued that having to respond to discovery requests in two banks would be too burdensome, but Judge Spatt said that it’s a problem that HSBC has created.

“The court pauses to note again that these risks are the product of HSBC’s own making. Had HSBC moved to dismiss the Levin plaintiffs’ claims in the state court action, as it represented to Justice Bransten that it would do in August 2013, and had the motion been granted, there would not be competing actions in the federal and state court,” Judge Spatt wrote.

“HSBC does not paint a particularly sympathetic litigating picture,” he added.

The plaintiffs pursuing the HSBC overdraft fee class action lawsuit in the federal court wanted Judge Spatt to stop the settlement being pursued in the state court because HSBC did not follow through on its promise to dismiss the claims in the overdraft fee class action lawsuit and because the state court lawsuit had been stalled for so long due to the discovery process.

However, the New York federal judge said that the All Writs Act, under which federal judges are able to stop state courts from making rulings that could affect lawsuits being pursued in a federal court wasn’t applicable in this situation because the federal HSBC overdraft fee class action lawsuit was not close to settling.

“The fact that settlement discussions occurred in no way suggests that prompt settlement was or is likely,” the New York federal judge says. “Indeed, HSBC indicates that settlement discussions ceased in August 2014.”

In addition, HSBC opposes class certification in the federal proposed class action lawsuits.

“Further, the prospect of settlement between Jura and Hanes and HSBC in the consolidated proposed class action appears even more remote in light of the proposed settlement in the State Court Action on a nationwide class action basis, possibly encompassing the claims in this consolidated proposed class action,” Judge Spatt adds.

The plaintiffs in the federal class action lawsuits contend that they would get more than $30 million from HSBC Bank over the overdraft fee allegations. They had also said that the HSBC class action settlement was reached in “secret,” apart from the federal MDL.

Judge Bransten said that she was waiting to grant preliminary approval to the HSBC class action settlement until Judge Spatt had made his decision on the motion to stay.

All of the plaintiffs in the HSBC class action lawsuits allege that the bank caused its customers to rack up more overdraft fees by posting the largest transactions first, not in the order in which they occurred.

The federal plaintiffs are represented by Cuneo Gilbert & LaDuca LLP, Cotchett Pitre & McCarthy LLP, Rigrodsky & Long PA and Cohen Law Group PC.

HSBC is represented by James L. Bernard, Nathan H. Stopper, Joseph E. Strauss, Julia B Strickland and Wesley M. Griffith of Stroock & Stroock & Lavan LLP and Erika J. Karnaszewski of Nelson Mullins Riley & Scarborough LLP.

The HSBC Bank Overdraft Fee Class Action Lawsuit MDLs are In re: HSBC Bank USA NA Debit Card Overdraft Fee Litigation, Case No. 2:13-md-02451, in the U.S. District Court for the Eastern District of New York, and In re: HSBC Bank USA NA Checking Account Overdraft Litigation, Case No. 650562/2011, in the Supreme Court of the State of New York, County of New York.

UPDATE: The HSBC Overdraft Fee Class Action Lawsuit Settlement is open! Class Members have until June 6, 2016 to file Claim Forms.