By Nathan Hale
Law360, Miami (January 14, 2015, 9:45 PM ET) — The plaintiffs in multidistrict litigation alleging banks acted in bad faith by processing transactions in an order that would net them the most in overdraft fees moved Wednesday in Florida federal court for preliminary approval of a settlement with Capital One Bank NA worth more than $31.7 million.
The deal, which follows settlement agreements with several other banks named in the 2010 suit, was worked out following about two years of settlement discussions and two rounds of mediation discussions, according to the filing. The four years of litigation in the case have included about 20 depositions and the production of more than 325,000 pages of documents and electronic files.
The plaintiffs described the agreement as “an outstanding result for the settlement class,” with the cash payment amounting to about 35 percent of the most likely maximum recovery the settlement class could have recovered through a trial. They have requested a final approval hearing for May.
“The action involved sharply opposed positions on several fundamental legal questions, including whether Capital One breached its duty of good faith and fair dealing to its customers when it engaged in high-to-low posting, as well as the enforceability to a contractually abbreviated period for bringing claims,” the plaintiffs said in their filing.
Capital One failed three times to have its case dismissed on preemption grounds. A Florida federal judge in June shut down the bank’s attempt to apply to its case a Ninth Circuit decision that similar charges against Wells Fargo & Co. were preempted by the National Bank Act.
The suits, which popped up all around the country in the late 2000’s, all took issue with banks’ practice of deducting money from accounts not in chronological order but based on the size of transactions, alleging it was designed to maximize the number of overdraft fees. The bulk of the suits were clustered in Florida, where they mostly prevailed on class certification.
Some banks were able to compel arbitration based on provisions in their customer agreements, but those that were not — including JP Morgan Chase Bank NA, Bank of America NA, and TD Bank NA — have settled for tens or hundreds of millions of dollars.
Other recent settlements include M&T Bank’s agreement to pay $4 million and Synovus Financial Corp.’s proposed $3.9 million pact.
Under Wednesday’s settlement, which would release Capital One from all claims in the suit, the bank would pay more than $31.76 million into an escrow account within 14 days of preliminary approval and will also pay all fees and costs for the notice program and administration of the settlement.
Settlement class members who do not opt out will automatically receive pro-rated shares from the settlement fund. The filing says that settlement class counsel and their experts have used Capital One’s data to determine which account holders were harmed by the high-to-low posting practice.
Class counsel will also seek service awards of $10,000 each for two class representatives in addition to the relief they receive under the settlement program.
Capital One has also agreed not to oppose class counsel’s request for attorneys’ fees up to 35 percent of the settlement fund, plus reimbursement of litigation costs and expenses, according to the filing.
The plaintiffs are represented by Podhurst Orseck PA, Bruce S. Rogow PA, Grossman Roth PA, Lieff Cabraser Heimann & Bernstein LLP, Baron & Budd PC, Webb Klase & Lemond LLC, Golomb & Honik PC and Trief & Olk, among others.
Capital One is represented by Jones Walker Waeschter Poitevent Carrere & Denegre LLP, Covington & Burling LLP and Morrison & Foerster LLP.
The case is In re: Checking Account Overdraft Litigation, case number 1:09-md-02036, in the U.S. District Court for the Southern District of Florida
–Additional reporting by Kate Greene, Paul DeBenedetto and Andrew Scurria. Editing by Andrew Park.
