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Public Victories Hide Private Feuds in Overdraft Fee Case

Plaintiffs' attorneys who are accusing a few dozen of the nation's largest banks of ripping off consumers by manipulating overdraft fees have put on an impressive display of legal firepower in court, positioning themselves to potentially score massive settlements or verdicts.

Outside the court's confines, however, some of those same plaintiffs lawyers are putting on quite a spectacle among themselves.

Over the last three years, the consortium has been building a case that accuses the banks of systematically manipulating the processing of debit card transactions for millions of consumers in a deliberate bid to maximize the fees they pay when they overdraw their checking accounts. The class action firms have already leveraged a voluminous amount of internal documents proffered in discovery, as well as the banks' own mistakes, into a settlement with Bank of America, a certification of a federal class action against Union Bank and a raft of other cases divided up to overcome the banks' defenses.

Behind the scenes, however, the litigation has been tinged by reputational concerns and infighting.

Late Friday Jeremy Alters, a Miami, Fla., attorney, resigned from the executive committee. Alters is the attorney who originally brought the overdraft case against Bank of America that became the foundation of the class action. An Argentine law firm has sued Alters, claiming that it played a role in bringing him the plaintiff and deserves a quarter of Alters' possibly multi-million dollar fee. A series of articles in Miami's Daily Business Review and other publications recently detailed defections from his firm, a controversy involving a sports marketing firm he owns, and a preliminary complaint filed with the Florida Bar Association in an matter unrelated to the overdraft case.

Alters denies the substance of the sundry allegations, but acknowledges that the news stories pose a potential distraction.

"It is never easy living with the First Amendment," he told American Banker on Sunday, promising to "take the steps necessary" to refute the criticisms.

"I resigned from the PEC [plaintiffs' executive committee] because in my 15 years of practice, my clients, the consumers I represent against major corporations come first," he said.

In another dustup among the plaintiffs' attorneys in the overdraft cases, on Monday Barry Himmelstein, also a former member of the executive committee while at Lieff Cabraser Heimann & Bernstein, filed objections to the Bank of America settlement. Himmelstein alleges that his former legal allies sought to obscure from class members the fact that their proposed settlement would reward the class members they supposedly represent with recoveries of a mere $29.71 each — "less than a single overdraft fee," as Himmelstein put it in an objection filed with the court. Himmelstein has also feuded over fees and other matters with his former colleagues at Lieff Cabraser, which he has sought to dissolve.

With unconsolidated overdraft suits in various stages of litigation across the country, the executive committee has feuded with class action attorneys elsewhere as well. Meantime, attorneys outside the executive committee have complained of being excluded from cases they brought.

"Some things have come to light that might not be the prettiest to look at," said Alan Kaplinsky, who is defending banks at Ballard Spahr. But disagreements among plaintiffs attorneys in complex litigation are not uncommon, and Kaplinsky says he's seen no sign they're hampering the class action suit.

"Plaintiffs attorneys, they're a different type of lawyer," he said.

There is no disputing that plaintiffs attorneys have brought the case a great distance. While overdraft fees and "high-to-low" processing - which banks allegedly used to maximize overdraft fees - were a tempting target for mass tort suits, attorneys faced serious obstacles in putting together a case. A central challenge was the doctrine of preemption, which dictates that banks can't be sued under state laws for actions permitted by federal regulators such as the Office of the Comptroller of the Currency.

To overcome the preemption hurdle Alters and colleagues, including eventual coordinating counsel Bobby Gilbert, argued that the high-to-low overdraft processing was incidental to banking and could be challenged on common tort and contract grounds. In March of 2010, U.S. District Court Judge Lawrence King for the Southern District of Florida agreed. (His decision is under appeal.)

Teaming up with veteran Florida appellate attorney Bruce Rogow, Alters' firm and the eventual co-lead counsel, Aaron Podhurst of Podhurst Orseck, won permission to oversee the consolidated litigation in Judge King's court. In practice, say attorneys on both sides, Podhurst and Gilbert have played the biggest roles. (Gilbert has since left Alters' law firm for Grossman Roth, though his role in the case never substantively changed.)

The biggest banks have themselves partly to blame for remaining in the hot seat, say plaintiffs' attorneys unaffiliated with the executive committee. They describe as a series of unforced errors by the banks that prevented their cases from being remanded to the penny-stakes realm of consumer arbitration.

Last year, the Supreme Court ruled that such agreements were binding, as long as the terms of arbitration weren't "unconscionable."


(1) Comment



Comments (1)
This says it all

Instead of being told that they will receive a refund of less than one illegitimate overdraft charge for every ten they paid, class members were told -- falsely -- that the amount of their anticipated refund "cannot be determined at this time," he wrote.

Who let the Foxes gaurd the hen house?
Posted by atlas115 | Tuesday, October 04 2011 at 12:57PM ET
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