Bank of America Protests Judge's $45 Million Fine In Homeowner Case
April 12 2017 - 5:17PM
Dow Jones News
By Katy Stech
Bank of America Corp. asked a bankruptcy judge to reconsider his
$45 million fine over its treatment of a California couple who
requested lower mortgage payments, calling the amount
"unprecedented in its magnitude."
In court papers, bank officials asked Judge Christopher Klein to
amend his 107-page ruling against the bank, arguing that his
"excessive" fine amount violates guidance from Supreme Court
justices in 2008 meant to prevent outsized awards. The fine, the
bank said, stands as the largest punitive damages award for
violations of bankruptcy law's automatic stay rules, which ban
lenders from advancing foreclosures and taking other actions.
The ruling, issued March 23, said that bank officials mistreated
California couple Renee and Erik Sundquist as they fought to save
their home outside Sacramento from foreclosure. The decision, which
renewed attention to the mortgage industry's loan-servicing
business, called for the Sundquists to donate most of the $45
million award to five law schools and two legal-aid nonprofits.
The bank's amendment request, filed in U.S. Bankruptcy Court in
Sacramento, said the award far surpasses the punitive damages
amounts handed down in similar cases, including when a Louisiana
judge issued a $3.2 million fine against Well Fargo & Co. in
2013. The median punitive damages award in instances where someone
violated bankruptcy's automatic stay protection is $4,500, the bank
said.
"The court's punitive award represents a stunning departure from
past practice," the bank said.
Judge Klein set a May 9 hearing to go over the bank's request.
The bank also appealed the ruling, which will put the dispute
before another federal judge.
The Sundquists' trouble began in 2008 when the couple's
construction business closed during the economic downturn and they
bought a cheaper home. They borrowed roughly $590,000 from a lender
later taken over by Bank of America with a promise from a loan
official that they could request lower monthly payments.
The Sundquists stopped making payments in March 2009 after Bank
of America officials said they wouldn't consider loan modifications
for customers who were current on payments. In the following years,
their roughly 20 loan modification requests were "routinely either
lost or declared insufficient, or incomplete or stale or in need of
resubmission or denied without comprehensible explanation," Judge
Klein's ruling said. The couple filed for bankruptcy in June
2010.
The ruling was punctuated by dozens of excerpts from Ms.
Sundquist's journal, which the judge used to show the extent of the
couple's efforts to resolve their issues with the bank and the
emotional distress that effort took on them. In its amendment
request, Bank of America said the journal's excerpts should be
disallowed because they weren't properly admitted as evidence.
The bank also said that Judge Klein's order for the Sundquists
to donate money to five law schools associated with the University
of California system, along with two consumer-advocacy nonprofits,
was "unconstitutional." An attorney for the Sundquists declined to
comment.
Federal law says punitive damage money can't flow to entities
that weren't harmed by bad behavior and "bar courts from
undertaking broad-based, public-interest policy-making," the bank
said in court papers.
In addition to the fine, the judge awarded $1,074,581.50 in
damages to the Sundquists.
Write to Katy Stech at katherine.stech@wsj.com
(END) Dow Jones Newswires
April 12, 2017 17:02 ET (21:02 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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