Threatt v. Farrell

Docket number: 3:16-cv-00492-L-WVG (S.D. Cal.); 18-56371 (Ninth Circuit)

In this class action, plaintiffs alleged that the extended overdrawn balance charges (EOBCs) that Bank of America, N.A. charged on consumer checking accounts violated the usury provision of the National Bank Act. Under the settlement, class members—those who were charged an EOBC that was not refunded during the class period—will receive a pro rata share of the $37.5 million cash fund or, if their account was closed with a negative balance, “debt reduction” up to $35 at a collective value of $29.1 million.

Class counsel sought attorneys’ fees of more than $7700 per hour of work on the case. They requested fees of $16.6 million while their claimed lodestar is only $1.4 million. The alleged lodestar itself appears to be overinflated meaning that they are asking the court to award them between 11 and 18 times the value of the time they spent working on the case. At the same time, class members recover less than 10% of the potential value of their claims, and the debt reduction has dubious value because it forgives bad debt worth pennies on the dollar to the defendant.

On behalf of a class member, CCAF objects to the windfall fees requested by class counsel. The district court overruled the objection and approved the settlement and fee request in full without modification.

On behalf of the class member, CCAF has filed an appeal to the Ninth Circuit. Arizona and 6 other states’ attorneys general filed an amicus brief in support of judicial scrutiny of attorneys’ fees. The oral argument occurred on March 2, 2020 (video).

On September 2, 2020, a split panel affirmed the district court’s order. Senior Judge Kleinfeld dissented, agreeing with CCAF that the agreement not to collect was illusory and thus that the fee award was disproportionate and exhibited the subtle signs of self-dealing described in Bluetooth. In spite of the 18-page dissent, the panel’s memorandum was designated as unpublished.

On March 23, 2021, CCAF filed its Petition for Writ of Certiorari with the Supreme Court to resolve a circuit split over whether courts should consider lodestar awards in settlements like this where plaintiffs assign themselves approximately ten times their ordinary billing rates as attorneys’ fees.

We told the Supreme Court class members would get about $1.03 for each $35 fee. Class counsel told the Supreme Court this was “wrong” and the real figure was about $10. After the Court denied cert, ending the case, the settlement fund issued checks for $0.91 per fee.

This case was formerly a project of the Competitive Enterprise Institute and now is being actively litigated by the Hamilton Lincoln Law Institute.

Case Documents