$2.5-Million Fee Awarded in Banking Case May Be Record

A state appellate court Thursday awarded $2.5 million in legal fees, an apparent California record for an attorney in a public interest case, to a San Francisco lawyer who initiated the first legal action to prevent banks from driving dormant accounts into extinction with service charges.

In ordering that the fees be paid, the 3rd District Court of Appeal rejected state Controller Ken Cory’s assertion that private attorney Gary Near merely “piggybacked” onto Cory’s protracted legal fight against the Bank of America.

After more than a decade of litigation, the bank last year agreed to pay $25.4 million to depositors whose dormant accounts were not paid interest and eventually were wiped out by illegal service charges.

It is from the $25.4 million that Near will receive his payment. Still in dispute is another $60 million that Cory claims is owed by the bank to depositors.

Near, 45, a wiry, pipe-smoking long-distance runner who operates a one-man firm, termed the award a record for a public interest attorney in California and said it would be spent on “our just deserts.” A “trip to Brazil” was under consideration, he said.

Other legal sources said they too thought the sum set a record. The previous record was believed to be held by the Center for Law in the Public Interest in Los Angeles, whose attorneys received slightly over $2 million in 1980 in the Century Freeway case, said center co-director Carlyle W. Hall Jr.

Near was awarded the fees under California’s “private attorney general” theory of compensating private lawyers for lawsuits pursued in the public interest.

However, the appellate court ordered that he could not be compensated for the time he spent pursuing his legal fees, which Cory had blocked since 1982.

Deputy Atty. Gen. Yeoryios Apallas, who represented Cory, expressed “disappointment” at the appellate court’s action and said it was undecided whether the issue would be appealed again.

“There may be a request for reconsideration or we can go up to the Supreme Court for a review,” he said.

Near’s involvement in the case dated from the 1974 gubernatorial campaign between Democrat Edmund G. Brown Jr. and his Republican opponent, then-state Controller Houston I. Flournoy. Among other things, Brown charged that Flournoy failed to properly enforce the state unclaimed-property law, which requires banks to turn over to the state the contents of checking and savings accounts that had been “dormant” for at least seven years.

It then is the controller’s task to try to reunite the depositors with their money. Some big-name personalities that the banks could not find--but Cory later did--included former Gov. Edmund G. (Pat) Brown, Willie McCovey, Bob Hope, Lucille Ball and Candace Bergen.

At the time, many banks failed to pay interest on dormant accounts and service-charged them into extinction.

In the midst of the 1974 political campaign, Near recalled in a 1982 interview, he read of Brown’s charges and “light bulbs went off in my head.”

“I saw the perfect lawsuit--a taxpayer’s lawsuit against the government’s failure to enforce the law and the beneficiaries of that lack of enforcement, the banks,” he said.

Flournoy, in the meantime, hastily adopted “emergency” regulations aimed at making the banks more accountable. However, Near contended that the new rules fell far short and sued Flournoy in September, 1974, on behalf of two taxpayers: his secretary, Hanna M. Kerner, and a longtime friend from college, Margaret Slettland, a poet. Near won and blocked implementation of the regulations.

Shortly after he took office in 1975, Cory swiftly seized on the issue and sued several banks, including the Bank of America, in an effort to recover the depositors’ funds, plus interest. Over Cory’s opposition, a Sacramento judge allowed Near to join with Cory in pursuing the legal actions against the financial institutions.

From the outset, however, Cory opposed the award of public interest attorney fees to Near. In a long series of legal battles with Near, he maintained that Near performed little original legal research and “piggybacked” on the work of the attorney general.

When the trial court awarded Near the fees in 1982, Cory appealed to the 3rd District Court and lost. Likewise, he lost a second time on Thursday, and the court ordered Near to be paid $1.8 million for his efforts through 1982. With interest, this will total about $2.5 million, participants in the case agreed.

However, the Bank of America case remains mired in complex litigation.