James C. Sturdevant, who has made millions suing the major California banks, offers them some friendly advice.
"Never say |take it or leave it' to a customer," he said, "particularly if the customer is an attorney.
Mr. Sturdevant launched his barrage of class actions, which challenged late and over-limit fees on bank credit cards, after one San Francisco bank refused to raise a credit limit for his wife and law partner, Patricia Sturdevant.
Since 1986, actions taken by Sturdevant & Sturdevant on behalf of cardholders have cost California banks upward of $20 million in awards and settlements, and millions more in legal costs.
No Plans to Quit
And Mr. Sturdevant isn't easing up, to the chagrin of the state's top bankers.
"In the name of people who can't manage their affairs very well, a tremendous cost has been imposed," says Gregory O. Wilhelm, director of governmental relations at the California Bankers Association and Mr. Sturdevant's most vocal antagonist.
Mr. Wilhelm has lobbied, so far unsuccessfully, to change the consumer protection law that Mr. Sturdevant has been capitalizing on. Mr. Wilhelm warns that without legal relief, California banks will want to move their card operations to states with more flexible pricing regulations.
What has escalated into a major legislative controversy began with the turndown of Mrs. Sturdevant by Hibernia Bank, before its acquisition by Security Pacific Corp. in 1988.
Hibernia made national headlines in 1974 when one of its branches was held up by a gang that included the newspaper heiress Patricia Hearst. But to Mr. Wilhelm's way of thinking, Hibernia may go down in California banking history for its unwittingly role in the decline of the state's credit card industry.
The Hibernia card had what Mr. Sturdevant calls a "pinball over-limit fee." It rang up a $6 charge for every transaction over the assigned credit limit. The penalty could be "substantial" if a heavy card user inadvertently exceeded the ceiling, Mr. Sturdevant said.
Frequent Flier
At the time, Patricia Sturdevant was working for the law firm of Alioto & Alioto on a case that required frequent trips to Florida. She said she exceeded her limit as a result of the unexpected charge volume.
Earlier, Mrs. Sturdevant had requested a low credit limit. She asked to have it increased when the bill arrived with the over-limit penalties. The bank refused.
Mr. Sturdevant had already established the practice that his wife would join in 1986. Earlier that year, before she joined the firm, Mr. Sturdevant researched California law, filed her suit, and Hibernia ultimately settled for $300,000.
Mr. Sturdevant alleged that the over-limit fee violated a state law that prohibits liquidated damages -- or penalty fees on consumer accounts.
In effect, the law requires that the fees, which are imposed on cardholders on a take-it-or-leave-it basis, be determined by the cost to the bank of collecting the delinquent amount.
Crocker Takes a Hit
The case against Hibernia attracted some press attention and led to additional class actions. The next target was Crocker National Corp., which settled for $3.78 million. Crocker subsequently was merged into Wells Fargo & Co.
In a related case, a jury forced Wells Fargo to repay $5.2 million of illegal penalty fees.
A suit against Security Pacific, since absorbed into BankAmerica Corp., resulted in a $2.6 million payback to cardholders. And most recently, a judge in San Francisco Superior Court awarded nearly $14 million to a class represented by the Sturdevants.
Bankers see all this as scandalous. While the consumers are being repaid about $3.50 apiece, they say, the real beneficiaries of these legal battles have been the Sturdevants, who have taken multimillion-dollar fees.
According to Mr. Wilhelm, Wells Fargo's expenses in its case totaled more than $17 million, $3.5 million of which was paid to Sturdevant & Sturdevant. (Mr. Sturdevant said the $17 million included four separate cases, including the Crocker case, for which Wells wound up on the hook. The $3.5 million in fees were split among several law firms.)
What's more, bankers say, their late and over-limit fees have not been excessive by national standards. First Interstate Bancorp's late charges ranged from $3 to $5, and its over-limit fee was $10. Out-of-state banks that compete in California charge as much as $20.
Out-of-state Banks Sued
Early last year, San Diego attorney William S. Lerach, who is noted for suing corporations on behalf of shareholders, filed a raft of suits similar to the Sturdevants' against out-of-state banks. He claimed that they, too, should have to comply with the California liquidated-damages law.
Ironically, one of the defendants, the credit card unit of Household International, is among those that have moved operations in part to escape the California restrictions.
"Somebody's paying the freight for all of this, and I don't see how consumers are benefiting," said Mr. Wilhelm of the California Bankers Association. "Consumers are also shareholders, something these guys seem to lose track of."
Mr. Wilhelm contends that his trade group has been unable to get a bill amending the liquidated-damages law through the legislature because of lobbying by the California Trial Lawyers Association, which sees the current law as a golden goose.
Mr. Sturdevant shrugs off the criticism, saving the banks could cut off his source of fees by complying with the law. He said he is getting the consumers their money back the same way the banks took it -- a little at a time.
If bankers want to fight with trial lawyers, he added, it shouldn't be with him but with their own counsels. The banks' law firms are paid for litigation, win or lose, while plaintiffs' lawyers must win to collect a fee. What's more, it can take years between the filing of a class action and the final award.
Mr. Sturdevant suggested bankers ask their attorneys "why they're insisting on going to trial on cases they know they're going to lose.
Settlement Attempted
"In the Wells Fargo case, we tried to settle," he said. "We had to litigate the case. We did the same in Security Pacific. We tried to settle the First Interstate case" for $3 million.
Now, he said, First Interstate has posted a bond of $21 million, pending the outcome of its appeal. And it faces an additional claim for reimbursement for late and over-limit fees it continued to collect after the first suit was filed.
Lawyers from Severson & Werson, which represented First Interstate, declined to be interviewed.
While bankers have suggested the Sturdevants are going after banks because that's where the money is, the Sturdevants say the cases are only a part of a broad public-interest practice.
"These late and over-limit cases we got into on a fluke," Mrs. Sturdevant says. Her preferred targets are merchandisers who charge too much and fly-by-night finance companies.
"What appeals to me about [the practice] is going after the scummy illegal practices that too many big businesses engage in," she said. "The banks aren't particularly bad actors."
After earning a law degree at Boston College, where he won a moot court competition, Mr. Sturdevant worked in public advocacy programs in Connecticut and in Northern California, where he met and married Patricia in the late 1970s.
In 1980 he opened his law office, specializing in unfair business practices and civil rights.
Mrs. Sturdevant entered her career in public advocacy after graduating from the University of California at Los Angeles with a law degree and undergraduate degree in psychology.
She developed a reputation as a tough litigator while at the prominent and politically connected Alioto & Alioto. She was co-counsel to the Oakland Raiders in their antitrust challenge to the National Football League, which had refused to allow the team to move to Los Angeles.
Indeed, some observers believe that Mrs. Sturdevant's broad experience has given the Sturdevant firm an edge in court battles with banks.
"The secret to Jim Sturdevant is Pat Sturdevant," said Lawrence J. Appel, a consumer lawyer who is notorious in banking circles for suing the state's major credit card issuers for price fixing.
|Very Fine Ethical Sense'
Aside from a "big-time litigation background," Mrs. Sturdevant brings "a very fine ethical sense" to the courtroom, Mr. Appel said. "She will not litigate unless she thinks there is not only a sound basis in law but also a public policy to be served."
Mr. Appel rejected the notion that the Sturdevants are picking on banks opportunistically. He pointed to his own experience in the price-fixing case, in which he "zeroed out" -- earned nothing -- after a seven-year legal battle.
Mr. Sturdevant does seem to take some glee in pounding on the banks.
In one pending case, the Sturdevants are representing the California Trial Lawyers Associaton and consumers in challenging an arbitration provision being imposed on checking and credit card customers. The Sturdevants argue that the arbitration procedure would deprive consumers of their right to a jury trial.
The defendant, which sees arbitration as a less costly way to settle disputes, is BankAmerica.
Mr. Sturdevant pointed out that as a result of its Security Pacific acquisition, BankAmerica has swallowed up the remnants of Hibernia Bank.
"What goes around comes around," he said.
