BofA overcharge bill reaches $111 million

The final portion of a 10-year, class-action legal battle over a bank's trust account fee overcharges that affected many Marin residents has been tentatively settled.

San Rafael attorney Robert Mills, who served as co-lead attorney for the plaintiffs, said the case against Bank of America has led to what might be the highest recovery in proportion to principal losses ever achieved in a class-action case of its kind.

The case also has led to the establishment of new legal protections intended to prevent reoccurences, he said.

The $33 million settlement, given tentative approval this week by U.S. District Court Judge Saundra B. Armstrong in Oakland, is in addition to two prior payments by the bank that brings the total amount paid to $111.5 million.

Mills said most of the 8,500 trustee beneficiaries, including more than 450 charities, will soon receive checks proportional to their original loss. Most are in the "high four- to low five-figure range," while one Marin woman is due about $300,000, he said.

Nearly all of the victims in the case were from California, with many of them from Marin, because the lawsuit is tied to actions of California-based Security Pacific Bank, which merged with Bank of America in 1992.

"This is an extraordinary case," Mills said. "With most settlement cases of this kind, especially against major financial institutions, you see victims getting paid pennies on the dollar. In this case, the people are getting 412 times their original loss."

Mills began work on the case in 1993 after the original plaintiff, Carol Nickel of Tulare County, consulted her San Rafael sister about unexpected charges from Security Pacific Bank on what was supposed to be a "fixed fee" trust account. 

It turned out that Security Pacific had instituted fee increases starting in 1974 that led to the trustee fee being about triple what it was supposed to be, Mills said.

After the overcharging was made public, Bank of America rolled back the fee charges and agreed to pay back $24 million in overcharges and $18 million in simple interest.

However, the trust beneficiaries contended they were due a larger interest amount as well as punitive damages for the overcharging, which lead to the lawsuit.

In 1996, the district court ruled no further compensation was due, but it did set a trial for the punitive damage claim, a proceeding that never occurred after Bank of America settled that part of the case in 2002 for $36.5 million.

As the result of an appeal, the 9th U.S. Circuit Court of Appeals ruled in 2002 that the trustee beneficiaries were due the profits the bank made using the overcharged money and not just simple interest as compensation.

The case landed back in district court, where the tentative settlement was reached after further proceedings.

Bank of America admitted no wrongdoing in settling the lawsuit rather than continuing a costly legal battle.

"Bank of America maintains that it made full refunds to all trust beneficiaries with interest before this litigation commenced and that it acted at all times in good faith and in the best interest of the trusts and their beneficiaries," the bank said in a written statement.

Mills said the decadelong case has led to significant legal developments, including that trust beneficiaries can pursue punitive damages even when a trustee voluntarily repays overcharges and that victims of such fraud are entitled to a prorated share of all profits made by the trustee during the time it had the wrongfully acquired funds.

"The legacy of this case will be that, if fiduciaries do this kind of thing and get caught, that they just can't repay what they took and leave it at that," Mills said. "They will be penalized."