The Plaintiffs in multidistrict litigation (MDL) have agreed to a settlement with Capital One Bank NA. In their complaint, the Plaintiffs alleged that banks acted in bad faith by processing transactions in an order that would net the bank the most in overdraft fees. The Plaintiffs asked a Florida federal court for preliminary approval of the settlement with Capital One, which they say is worth more than $31.7 million. The settlement, 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. The Plaintiffs’ motion states that 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 requested a final approval hearing for May. The Plaintiffs said in their filing with the court:
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.
Capital One had tried three times to get the court to dismiss the case. In June, a Florida federal judge rejected the bank’s attempt to apply to its case a Ninth Circuit decision holding that similar charges against Wells Fargo & Co. were preempted by the National Bank Act. The suits were filed all around the country in the late 2000s. All took issue with banks’ practice of deducting money from accounts not in chronological order, but instead based on the size of transactions, allegedly to maximize the number of overdraft fees. The bulk of the suits were filed in Florida. In most all of the cases a class was certified.
Some of the banks were able to compel arbitration based on provisions in their customer agreements. But those that were not able to do so – including JPMorgan Chase Bank NA, Bank of America NA, and TD Bank NA – have settled. Other recent settlements include M&T Bank’s agreement to pay $4 million and Synovus Financial Corp.’s proposed $3.9 million settlement. Under the most recent 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.
It was reported that settlement class members who do not opt out will automatically receive pro-rated shares from the settlement fund. 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. If the settlement is approved, 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.
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