A jury in San Francisco has acquitted Bank of America of charges that it conspired with two other California banks to fix credit card prices.
The verdict late Tuesday ended a costly seven-year legal battle and vindicated Bank of America's strategy of not settling the case out of court. A loss could have cost the BankAmerica Corp. subsidiary three times the alleged damages, or $2.8 billion.
1st Interstate, Wells Settled
The other accused companies -- First Interstate Bancorp and Wells Fargo & Co. -- paid a combined $57 million in settlements last year, even as they strenuously denied wrongdoing.
"In some respects, [the Bank-America victory] may be the start of a trend where big corporations no longer pay blackmail money just to avoid a jury trial," said Gregory Scott Spencer, senior counsel to the bank.
The attorneys who brought said the class-action suit they are contemplating an appeal.
The suit was filed in 1986 on behalf of people who held cards issued by the three banks between 1982 and 1986. The banks were alleged to have kept credit card rates artificially high since 1966.
Like many big corporations, BankAmerica had been inclined to seek settlements of such claims rather than paying the costs of trials. But by 1986, the bank was beginning to reconsider that policy, according to an official who was there at the time.
Within weeks after the price-fixing complaint was file "we did a thorough investigation and decided on the principle that they were not going to get a penny out of BankAmerica," a company spokesman said on Wednesday.
According to Mr. Spencer, attorneys for the plaintiffs tried to sell the bank on a settlement.
He described their approach as follows: "Your potential exposure is going to be about $2 billion. If you have a 1% chance of losing, give us $20 million, if you have a 2% chance, $40 million."
"We said we will not play that game," the BankAmerica counsel said.
Lawrence J. Appel, lead attorney for the plaintiff group, denied making such an offer-. "We've never seen it as anything other than a case that needed to be tried and resolved by a jury," he said.
Mr. Spencer characterized the evidence as flimsy: "They tried to take bits and pieces of speeches and memos over a 30-year period and stitch them together as proof of conspiracy."
BankAmerica's legal fees were about $3.5 million, including the cost of in-house counsel, officials said. The plaintiffs could be held liable for only about $25,000 in court costs.
|Marginal' Claims Decried
Mr. Appel and his colleagues received about $8 million of the settlements from the other banks, while the cardholders in the group made $3 to $30 each.
Mr. Spencer said the case illustrated the need to change California law on summary judgment, which gives the courts little latitude to dismiss "marginal" claims before trial.
The stock market did not seem to react to BankAmerica's good news. The company's shares were up late Wednesday by 37.5 cents to $46.25, in line with the overall market. "Considering what the other banks settled for, I don't think it was a major risk item" for BankAmerica, said Ronald I. Mandle, a Sanford C. Bernstein & Co. analyst.
Some observers also noted that today's wider variety of credit card rates have likely made card price-fixing claims less appealing to litigators.
"If [opportunistic lawyers] see that juries are responsible and not acting on emotion, and that they aren't going to make any money, maybe they'll go away," said H. Robert Heller, president of Visa U.S.A.