Farrell v. Bank of America, N.A.
3:16-cv-00492
S.D. Cal.Aug 31, 2018Background
- Plaintiffs sued Bank of America (BoA) in a putative class action alleging BoA’s $35 Extended Overdrawn Balance Charge (EOBC) assessed after a 5-day failure to cure an overdraft constituted unlawful interest under the National Banking Act (12 U.S.C. §§ 85, 86).
- The class period is Feb 25, 2014–Dec 30, 2017; roughly 7,078,199 class members received notice; 100 opted out; 11 objections were filed and one objector appeared at final approval.
- Procedurally: BoA’s motion to dismiss (arguing EOBCs are not interest) was denied; BoA obtained permission to seek interlocutory appeal to the Ninth Circuit; parties settled after mediation and informal discovery; Court granted preliminary approval and later considered final approval along with fee and service-award motions.
- Settlement terms: (1) injunctive relief — BoA to stop charging EOBCs for five years (value estimated at ~$1.2 billion); (2) $37.5 million cash fund to qualifying class members (net residue ≈ $22.86M after fees/costs); (3) at least $29.1 million in debt forgiveness (up to $35 per qualifying member); (4) BoA pays most administration costs; any residual funds after distribution go to cy pres.
- Court considered Rule 23(a)/(b)(3) factors, adequacy (including potential conflicts between Cash and Debt recipients), fairness (Hanlon factors), class notice adequacy, and reasonableness of attorneys’ fees ($14.5M requested; reduced from $16.65M).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EOBCs constitute "interest" under the National Banking Act (central common legal question) | EOBCs operate as interest and thus violate the NBA when effective rates exceed statutory limits | EOBCs are non-interest fees and therefore not governed by the NBA | Court previously denied BoA’s dismissal; for settlement purposes the common legal issue predominates and supports certification and settlement approval |
| Class certification under Rule 23(a) and (b)(3) | Class of ~7M satisfies numerosity, commonality (EOBC/interest question), typicality, adequacy, and predominance; class action is superior | No persuasive challenge to numerosity/commonality; objectors argued conflicts between subgroups (cash vs debt recipients) and notice deficiencies | Court certified settlement-only class; found Rule 23(a) and (b)(3) satisfied; notices adequate |
| Adequacy/conflict of interest between Cash-portion and Debt-portion recipients | Named plaintiffs (cash recipients) fairly represent class; Debt recipients receive more favorable relief but no conflict that undermines adequacy | Objectors argued Amchem-type conflict: interests of debt-forgiveness recipients differ from cash claimants | Court found no disabling conflict; compared to Volkswagen, representation adequate; Amchem not controlling here |
| Reasonableness of attorneys’ fees and costs | Class Counsel sought $14.5M (21.1% of combined cash + debt relief) and $53,119.92 costs; argued results, risk, and injunctive relief justify fees | Objectors argued fee is excessive and that debt relief is illusory so denominator should exclude it | Court approved $14.5M (not applying lodestar cross-check), finding 21.1% reasonable given results, injunctive value (~$1.2B), class reaction, counsel’s risk and skill; costs and $20,000 service awards granted |
Key Cases Cited
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (class certification commonality/typicality standards)
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (factors for approval of class-action settlements and Rule 23 analysis)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (conflicts among class subclasses can defeat adequacy)
- In re Volkswagen "Clean Diesel" Mktg., Sales Practices, and Prods. Liab. Litig., 895 F.3d 597 (9th Cir. 2018) (analyzing adequacy where subclass recovery differs)
- Officers for Justice v. Civil Serv. Comm., 688 F.2d 615 (9th Cir. 1982) (scope of court review for class settlement fairness)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (percentage-of-recovery vs. lodestar methods for attorney fees)
- Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir. 2002) (factors for determining reasonable percentage fee awards)