Appeals court overturns $1.5 billion judgment against Bank of America
Monday, November 20th 2006, 7:47 pm
By: News On 6
SAN FRANCISCO (AP) A state appeals court on Monday overturned a $1.5 billion judgment that a jury and judge had ordered Bank of America Corp. to pay 1.3 million senior citizens, saying the bank did not unlawfully raid their accounts.
After a six-week trial, a jury and judge in 2004 awarded $296 million in damages to the bank's affected customers, in addition to $1,000 in special damages to each one who could prove the bank's actions caused substantial emotional or economic harm. In all, the bank was on the legal hook for more than $1.5 billion.
But the 1st District Court of Appeal in San Francisco ruled that the bank did not breach state banking laws affecting seniors, as jurors were led to believe.
The class-action case centered on Bank of America collecting some check overdraft and other fees by taking money from direct deposit accounts set up to receive Social Security benefits. A jury found that Bank of America's actions violated California banking laws prohibiting banks from taking Social Security benefits to recover customer debts.
Bank spokeswoman Shirley Norton said, ``Bank of America maintained all along that it acted lawfully and followed standard banking practice maintaining and balancing customer accounts.''
The appeals court agreed, saying the lawsuit misapplied a 1974 California Supreme Court decision outlawing banks from using deposited public benefits to pay the account holder's separate credit card account.
In this case, the appeals court ruled that it was not illegal for a bank to apply ``Social Security benefits and other public benefit payments directly deposited to its customers' checking accounts to cover debits for overdrafts and overdraft fees.''
The plaintiffs' attorney, James Sturdevant, said he would appeal the case to the California Supreme Court. He said the law protects Social Security payments, often a senior's only income.
``My take on this decision is that it's absolutely wrong,'' Sturdevant said.