Confidential
Settlement – $33,000,000Judge
Court
USDC Northern
Attorneys
Plaintiff
Derek G. Howard
(Derek G. Howard Law Firm)
Jerome B. Falk Jr.
(Arnold & Porter Kaye Scholer LLP)
Defendant
Matthew L. Larrabee
(Dechert LLP)
Experts
Plaintiff
William C. Sarsfield
(technical)
Facts
A class action complaint was filed on behalf of 6,500 trust beneficiaries alleging that from 1975 to 1993, Security Pacific National Bank, and then after a merger, Bank of America, overcharged $25 million in trustee fees to personal trusts. Bank of America refunded the overcharges and simple interest of $17 million before the suit. Thus the bank's total refund was over $42 million. After a bench trial in 1997, the presiding judge found in favor of Bank of America and held that simple interest was the appropriate remedy for compensatory damages. The suit requested punitive damages as well. In 2000, the parties entered into a partial settlement which resulted in the payment of $36.5 million in exchange for a release of the punitive damages claim, but not compensatory damages. This settlement expressly preserved the compensatory damages claim, and called for an appeal to the District Court's 1997 decision on those damages. In a published decision, the Ninth Circuit reversed the district court and ordered the Bank of America to disgorge all profits earned on the underlying fee overcharges Nickel v. Bank of America 9th Circuit 2002, 290 F. 3d 1134. Following additional proceedings on remand, the district court held that the criteria for measuring the bank's profits was based on the return on equity method. Subsequently, this second and final settlement was reached. On appeal, the bank was ordered to disgorge all profits earned on fee overcharges.
Settlement Discussions
Confidential
Damages
In prosecuting the compensatory damages appeal, the plaintiff sought to obtain the bank's profits on the underlying $25 million in trust overcharges. Under the terms of the settlement, any recovery was limited to one of two alternative amounts. As one alternative, if it was determined that there were additional compensatory damages owed in any amount up to $12.5 million, this would result in a damages recovery of $12.5 million. As a second alternative, if additional compensatory damages were found to be above the $12.5 million, the additional recovery would be capped at $40 million. When the bank's initial refund of over $42 million is combined with the total settlements of over $69.5 million, the total damages recovery totals over $111 million. Plaintiff counsel reports that this is the largest reported damages recovery involving fees charged to trust beneficiaries of personal trusts.
Result
$33,000,000
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