Bank of America Fees Class Action Settlement to Stand

The U.S. Court of Appeals for the Ninth Circuit ruled in favor this week of upholding a $66.6 million class action settlement involving Bank of America fees.

In a split decision, the majority of the three-judge panel decided on Wednesday that the settlement over extended overdraft fees the bank had been charging on overdrafted accounts should go ahead. The dissenting judge took issue with the amount of money the plaintiff’s lawyers are slated to get and the level of compensation earmarked for the plaintiffs themselves.

The class action lawsuit was filed in February 2016 by lead plaintiff Joanne Farrell on behalf of herself and an estimated Class of as many as 7 million other customers who Bank of America had charged $35 for having an overdrawn account in addition to an initial $35 in overdraft fees.

Lawyers for Bank of America fought to get the case dismissed, but U.S. District Judge M. James Lorenz ultimately sided with the plaintiffs in 2016 and cleared the path for the case to proceed.

In his ruling, Judge Lorenz said the concept behind the extra Bank of America fees was akin to charging interest on a line of credit – the fees were triggered when a customer’s account become overdrawn and the overdraft protection provided by the bank kicked in.

Unsatisfied with that interpretation, Bank of America’s legal team appealed Judge Lorenz’s decision to the Ninth Circuit. Meanwhile, representatives on both sides of the class action lawsuit had been negotiating and, in October 2017, announced they had reached a tentative settlement agreement that would have Bank of America paying out $66.6 million.

The terms of the settlement would have Bank of America paying $37.5 million to reimburse customers who paid the fees in question between Feb. 25, 2014 and Dec. 30, 2017. The bank would also pay $29.1 million to customers whose accounts were closed as a result of the overdraft fees.

In addition to providing reimbursement, the bank agreed to stop charging the extended $35 fees until 2023 – unless the U.S. Supreme Court took the matter up and decided differently than Judge Lorenz that such fees should not be considered the same as interest.

The judge granted approval to the settlement deal in September 2018.

Still, the case was not over. Class Members Estafania Osorio Sanchez, Amy Collins and Rachel Threatt objected to the settlement, arguing the financial relief the Class Members stood to get was too little and the $14.5 million in legal fees awarded to the plaintiffs’ lawyers was too much.

The majority of the Ninth Circuit panel hearing their appeal disagreed on all counts.

“In short, neither the settlement nor the fee award raises an eyebrow,” the six-page majority opinion said.

U.S. Circuit Judge Andrew Kleinfeld was the lone dissenting voice. In his opinion, which supported the objecting Class Members, he said most of the plaintiffs will end up getting $1.07 per $35 fee paid. The judge also noted that those whose accounts were closed, and who suffered credit score damage because of it, would only receive $35 no matter how many of the $35 overdraft fees they had paid.

Regarding the amount of legal fees awarded to the plaintiffs’ attorneys, the majority judges affirmed the lower court’s method of calculating them based on a percentage of the total settlement award.

In his dissenting opinion, which was three times as long as the majority’s ruling, Judge Kleinfeld noted the lawyers for the Class Members reported working 2,158 hours on the case. This meant they would be compensated at a rate of $6,700 an hour – much more than their stated billing rate of $250 to $800 per hour. Had the Bank of America fees settlement be calculated based on the going rate, the legal team would have been awarded $1.42 million.

“That amount of money is not an insubstantial incentive,” Judge Kleinfeld wrote in his opinion.

Were you charged extended fees by Bank of America? Tell us about it in the comment section below.

Collins is represented by Robert Clore of Bandas Law Firm PC. Sanchez is represented by Paul S. Rothstein and N. Albert Bacharach Jr. Threatt is represented by Theodore H. Frank, Hamilton Lincoln Law Institute. The Class Members are represented by Deepak Gupta of Gupta Wessler PLLC.

The Bank of America Fees Class Action Lawsuit is Joanne Farrell, et al. v. Bank of America NA, Case Nos. 18-56272, 18-56273 and 18- 56371, in the U.S. Court of Appeals for the Ninth Circuit.

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