Bank of America $410 Million Overdraft Fee Settlement Preliminarily Approved

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Earlier this year, Bank of America agreed to pay $410 million to settle sprawling litigation stemming from allegations that consumers were charged unlawful overdraft fees. The cases were consolidated into an MDL action in the Southern District of Florida as In re Checking Account Overdraft Litig., No. 09-MD-02036-JLK (S.D. Fla. filed June 10, 2009). Bank of America was the first of the more than 30 bank defendants to settle—other defendants include JPMorgan Chase, Wells Fargo, U.S. Bank, and Citibank—and preliminary approval of the settlement is expected to signal the parameters of acceptable settlement terms to other defendants. The larger banks’ total exposure is estimated to be in the billions of dollars. Given that, and coupled with the fact that legislative and administrative reforms enacted since the cases were filed effectively outlaw the complained-of practices, it is unlikely that the banks, already financially challenged, will take their chances at trial. By settling first, Bank of America might well have worked that dynamic to its advantage, as the plaintiffs in the remaining actions communicate a willingness to go to trial and hold out for better settlements.

Further complicating the settlement calculus: Some of the defendants, led by JP Morgan Chase, are asking that the district court reconsider its earlier denial of a Rule 12 motion to dismiss in light of new authority concerning federal preemption—not AT&T v. Concepcion, but the considerably more arcane Baptista v. JP Morgan Chase Bank, No. 10-13105, 2011 U.S. App. LEXIS 9568 (11th Cir. May 11, 2011). Baptista, available here, concerns the preemptive effect of the National Bank Act (12 U.S.C. § 21 et seq.) and the complex interplay between federal and state regulation of banks.