A Suit That Makes More Cents for the Lawyers
“What’s that?” I asked, pointing to the rumpled document in the trunk of my son’s car.
I could see that it was a check and was making a thinly disguised point about the indifferent treatment he was giving it. He played along.
He said he had sued Bank of America and won.
“Zero and 49/100 dollars,” he read, delivering the bottom line with dramatic flair. For those unaccustomed to tiny amounts, that’s 49 cents.
My 34-year-old son, Chris, it turned out, had joined the millions of Americans who become plaintiffs in class-action lawsuits, without any effort on their part or even their knowledge. The suits are filed by lawyers who allege corporate misdeeds and negotiate settlements that are generally divided two ways: one large piece for the lawyers and many minuscule pieces for their clients.
Depending on your perspective, the lawyers who file such cases are either tireless crusaders trying to keep big corporations honest, or ambulance chasers exploiting the law to line their pockets.
It’s debatable whether my son’s check was worth cashing, but I saw value in it far exceeding the face amount. Like a musty papyrus, this piece of paper held a story -- if only I could unravel it.
There wasn’t much to go on. The check bore the machine signature of a Dan Rosenthal of Novato, Calif., no title or company name given. A detachable receipt identified the case as Edell vs. Bank of America, filed in Pima County, Ariz. Some fine print at the bottom declared the check void after a fast-approaching deadline.
Who was this Dan Rosenthal? I wondered. How many checks like this had he written?
My search for answers began with a call to Tucson, seat of Pima County.
“Dang, this is a fat one,” said a helpful clerk named Lisa who picked up the phone on the first ring, retrieved the case file and paged through it to find these basic facts:
The case was filed in 2001 in Pima County. After some skirmishing, it was settled May 24, 2004. Without admitting fault, Bank of America agreed to pay $4.2 million. The plaintiff’s attorneys took half of that.
The class, estimated at 1.95 million bank customers, got the other half. Nominally, that would be about $1.10 per member. But, of course, there were unspecified costs.
Next, I called the attorneys.
Bank of America had a string of them in Tucson, Phoenix and San Francisco. Arne D. Wagner, at the San Francisco end, said he’d be glad to talk about the case, but he’d need clearance through corporate communications. Thereupon, Wagner stopped returning my calls. Corporate communications called back three weeks later to say the bank would have no comment.
The plaintiff’s attorney, Brian Strange, who practices in Los Angeles, specializes in class-action lawsuits against big corporations, his website stated. A list of his recent wins included Mayemura et al vs. Chase Manhattan Bank ($22.5 million) and Schwartz et al vs. Citibank ($36 million). My son’s case wasn’t mentioned.
The Citibank case made news when the attorneys received $7.2 million and the remainder was divvied up among 20 million class members.
Strange promptly called back and volunteered that he sometimes gets letters from his own clients disparaging their puny awards. He said the multimillion-dollar fees he collects are just compensation for the time and money he invests on society’s behalf.
“If you’re not going to be rewarded for risk, you might as well be a defense lawyer,” he said.
In the Edell case, Strange said, he forced Bank of America to change credit card billing practices that he alleged resulted in consumers being charged fees they didn’t deserve.
The fact that individual victims may be out only a small amount is not the point, he said.
“If you have 30 million cardholders and they take a dollar from each cardholder, and they do it for four years, that’s $120 million,” Strange said. “I don’t feel bad about a 50-cent compensation for someone who only had a dollar in damages.”
Since most class-action lawsuits are filed in superior courts around the country, there are no national data on the aggregate amount that goes out in awards.
But the widespread view that these cases swelled in the last decade, driven by lawyers who scout county courthouses for accommodating judges, pressured Congress to act this year. A new law that President Bush personally campaigned for will force many of these cases into federal court where, its authors hope, judges will be less inclined to approve large settlements.
That’s a twist on the work of a 1960s federal judicial panel that strengthened class-action law as a tool for social justice. The panel wrote a rule allowing certification of a class without all of its members being known.
It allowed, for example, a single member of a minority group to press a case that would force an establishment to open its doors to all members of the group, said Nick Pace, a researcher for Rand Corp.'s Center for Civil Justice in Santa Monica.
As the use of the law evolved into product liability and consumer practices, the rule allowed the certification of classes that could include millions of unknown members, such as the customers of a credit card company.
Pace takes a moderate view of class-action law. He sees it as a tool that still empowers the masses to hold corporate America accountable in a way that individuals can’t. But he agrees with critics who say that many judges are too quick to approve settlements that don’t help the victims.
To find out how the court worked in the Edell case, I spent a day hunched over an 18-inch stack of papers in a court building in downtown Tucson, a languid civic center rich in desert hues, Native American motifs, historic buildings and friendly people. Bank of America’s credit card headquarters is in Arizona.
A civil court file can be like a good nonfiction book with some of its chapters torn out. This file was full of information and useful leads, but did not tell a complete story.
Strange’s complaint alleged two deceptive practices. First, it said, the bank sometimes assessed customers fees for charging over their limits, even when they hadn’t. If they were close to the limit, the complaint said, their balances could be pushed over without their knowledge by a bank charge, such as a late fee.
Second, it said, the “minimum payment” due, which was printed on the bill, wasn’t always the real minimum. Other fees could show up elsewhere on the bill, resulting in a late fee for customers who failed to add them to the minimum.
A single paragraph defined the class with an all-inclusive stroke: anyone with a credit card who paid or was charged “over-limit fees from Jan. 5, 1995, to Dec. 31, 2003.”
Bank of America’s attorneys filed a motion to dismiss the case, based on the argument that customers, by the mere act of using their cards, accepted binding arbitration as the final means of settling all disputes.
The judge never ruled on that motion. Instead, negotiations began.
The settlement agreement didn’t say whether any effort would be made to apportion members of the class according to the amount of harm each suffered. The only exception was Anthony K. Edell, the one named plaintiff, who was awarded $5,000 for his time and effort.
The bank was to credit all class members with active accounts, and the rest of the money would be administered by Rosenthal & Co. of Novato. Bank of America also agreed to change its credit card billing practices so that “minimum payment” will include everything due.
A lengthy brief on attorneys’ fees was the most detailed filing. Strange offered two theories for why he and the other attorneys deserved half the $4.2-million settlement. One was based on the time actually spent on the case, which came to $534,165, at $300 to $500 an hour for Strange and his legal team. But since they’d taken a risk, working without certainty that they’d be paid, they deserved four times that amount.
The other theory used a formula derived from sample billings to project that the bank’s customers would be spared $4.2 million in future fees because of the settlement’s new billing procedures. This doubled the value of the settlement to $8.4 million.
That, Strange said, placed the $2.1 million into the comfortable range of lawyers’ usual contingency fees of 25% to 30% of the settlement.
Strange told the court the deal was the best his clients could expect considering the real possibility that the bank would prevail in its arbitration argument.
Without saying which of the two theories she accepted, Judge Deborah Bernini approved the deal. Her order also included a confidentiality agreement, prohibiting any party from discussing the case with the media.
In a brief interview in her courtroom, Bernini acknowledged that she could have rejected the settlement, but said she acceded for the general benefit to society.
In all the record, little was said about the victims except the part of Bernini’s order barring them from pressing any future claim against Bank of America on the practices covered in the lawsuit. Plaintiff Edell was no more than a name on paper, cited as a representative of the class but never developed as a person.
I wanted to ask him whether he originated the case, or whether Strange found him, but his Tarzana address was whited-out, and an electronic trace on his name produced several dead-ends, including two false addresses and telephones that went unanswered.
With my leads nearly exhausted, there were still many unanswered questions. But I felt close to answering the one question that my son shared with millions of others: to cash or not to cash a check that probably would cost the bank more to process than it would pay.
My last call was to Rosenthal & Co., the Novato firm that boasts it has administered more than 400 settlements worth more than $1.5 billion. General manager John Keane listened politely to all my questions. The clincher was one I had asked both attorneys without getting an answer: “Who gets the 49 cents when a check isn’t cashed?”
Keane called back an hour later to say that as a neutral third party, Rosenthal would have no comment. Later, a spokeswoman for Bank of America called. Though she was not at liberty to disclose the amount, any money not claimed would go to a charity, she said. She couldn’t say which one.
That was the last piece of information I needed. My advice to my son was “cash the check,” no matter how much trouble it might be.
That’s four bits that won’t go to a charity no one will name.