Bank Lawyer's Blog

Clamping Down On Class Action Legal Fees

A potentially disturbing warning has come out of California (paid subscription required): class action plaintiffs' attorneys' fees might [shudder] come to be based upon actual work done. While this isn't disturbing to American banks and other businesses who've been victimized by subject to class action lawsuits in which the plaintiffs are rewarded with a Pez dispenser and a signed copy of "Transcendental Meditation The Trump Way," while their attorneys rake in bazillions a tidy sum, it must be disconcerting to the vultures lawyers who run class-action firms. We'll try to say a prayer for all of them (my preference would be "Lead all souls to heaven, especially those most in need of thy mercy").

Typically, attorneys who represent plaintiffs in class actions—like employees accusing a company of discrimination, or customers claiming a product misled them—are paid a percentage of any money recovered for their clients. The payouts, which nationally average about 25% of the collected funds, can be substantial.

But a Berkeley, Calif., lawyer who has waged a decadeslong crusade to reduce class-action fees is pushing to pay lawyers based only on the hours they put into a case.

“Every dollar class lawyers get for their fee is a dollar the class doesn’t get for recovery,” the lawyer, Lawrence Schonbrun, said.

He lost his fight in two lower courts, but the Supreme Court of California decided earlier this year to consider the issue and could rule in the coming months. Mr. Schonbrun argues that California case law requires the hourly method to be applied, an interpretation that others dispute.

[...]

The California appeal stems from a 2004 wage-and-hour class action against staffing firm Robert Half. In 2013, a judge approved a $19 million settlement on behalf of 4,000 employees, who said they were denied overtime pay and other benefits. Using the percentage method, $6.33 million was slated for the plaintiffs’ attorneys.

Mr. Schonbrun, who represents one of the employees, is trying to convince the court that the lawyers should instead be paid according to the amount of work they put in.

But the plaintiffs’ lawyers say in a court filing that if their percentage-based fee is overturned, “class counsel will be less inclined to take on complex class action suits against large, well-financed institutions.” They haven’t been paid while the appeal works its way through the courts. Robert Half said it doesn’t have a stake in the fee dispute.

Being less inclined to take on complex class action suits against large, well-financed institutions" is a bad thing?

The CFPB would think so. Last month, it proposed to ban arbitration provisions that would prevent consumer financial class action lawsuits. The political left ant the trial lawyers' bar in this country have been making whoopee together for years, so that's to be expected. On the other hand, if trial lawyers only get paid for the actual hours they work, that still will act as a deterrent to class action lawsuits no matter what the CFPB does regarding arbitration provisions. I mean, why would a lawyer want to only get paid for what he or she actually does? Are you kidding me??

Before we get all misty-eyed about the folks who are taking this fight to the California Supreme Court, however, let's drill down a bit deeper into their motivation.

Mr. Schonbrun, who began his fight against high fees in the late 1990s, is part of an active field of so-called fee objectors, who step into class actions to challenge the plaintiffs’ attorneys’ fees.

Such objectors sometimes make side deals with plaintiffs’ lawyers looking to avoid prolonging a lawsuit, and they can be paid as much as $1 million, those familiar with the practice say. Mr. Schonbrun said he has filed objections in 150 cases and in some instances received more than $100,000 for his role in reducing a fee.

You read that right: some of the professional "fee objectors" cut deals with class action lawyers to ease up in return for the payment of some cold, hard cash. All sides of the bar in this struggle make hard examples of "soft and cuddly."

As usual, the people getting the short end of the stick are the plaintiffs.

Theodore Case, an American Airlines pilot in Atlanta who has been a plaintiff in a class-action labor dispute for more than 12 years, said he unsuccessfully fought against his lawyers to reduce their fee request of $15.5 million, based on a 30% calculation of a settlement. When paying a percentage, “the only people it benefits is the attorneys,” said Mr. Case, who received about $113,700 of the settlement money.

Funnel Accounts: Be Very Afraid

While slaving away for "The Man," alert reader John Thomas warned me that FinCEN's black ops storm troopers are hot on my trail and to run for cover before they scooped me up and waterboarded me, not for any useful information I might cough up but just for the sheer pleasure of watching me drown.

Funnel account activity was the standout trend in Suspicious Activity Report (SAR) filings in 2014, according to the latest report from the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

FinCEN’s second annual SAR Stats,  published Wednesday, highlights how FinCEN uses SARs to track down criminals through their use of the financial system. It was based on SARs filed from March 1, 2012, through Dec. 31, 2014.

FinCEN defines a funnel account as an account that receives multiple cash deposits, often in amounts below the cash-reporting threshold, and from which funds are withdrawn in a different geographic area with little time between deposits and withdrawals.

According to FinCEN, funnel account activity was mentioned almost 10,000 times in SARs in 2014.The same references occurred no more than 123 times in 2012 and 2013.

While it eventually occurred to John that FinCEN had misspelled my name, I doubt that would have deterred them for long. Upon receiving that warning, I stopped the practice of making multiple cash deposits, and now make a cash deposit only when checks received total $9,999.99, which given my astoundingly low billable hourly rate and dearth of clients will mean that I am making deposits only twice a year. In addition, I have bribed FinCEN's pet goat, Elizabeth Maxine Waters-Warren, with a family concoction: funnel cake. I have thereby assured myself that any SAR with the name "funnel," "funnell," or "kevin" eventually will go the way of most SARs: into a compost heap.

Thanks for the heads up, John. You saved my bacon, or at least, my cabrito.

Disparate Impact: Full Speed Ahead

The successor to the infamous Thomas Perez at the US Justice Department's Civil Rights Division, Vanita Gupta, has served fair warning that (as we predicted) the folks who run Justice intend to use the recent SCOTUS decision that validated "disparate impact" in the fair housing arena to pursue the statistically-proven racist scum in the quest to ensure that every one who wants one can get a home loan. She thinks that disparate impact discrimination is part and parcel with much broader abuses, like cops killing racial minorities and otherwise profiling minorities for disparate law enforcement abuse. America is racist, and Gupta's gonna root out racism wherever she can find the statistics to make her case.

“High-profile incidents across the country have thrust us into a national dialogue over the use of excessive force, racial profiling and stereotyping, officer and public safety and a festering lack of trust between police departments and the communities they service, particularly low-income communities of color,” said Gupta.

“But underneath so much of the unrest that we’ve seen in Ferguson, Missouri; Baltimore; New York; and cities across America," she said, "lies a foundation of systemic inequalities and discriminatory biases, built up over decades, not days."

She specifically pointed to lack of credit in affected communities as a root cause of this year’s troubles.

“To break down barriers to opportunity we must protect the rights of people to borrow money without bias or discrimination,” said Gupta. “Discrimination is a multiplying force. It can have a devastating domino effect on a person’s future economic prospects. And that is why equal access to credit is a fundamental part of our work. Credit provides the means for families to own a home, to buy cars so they can get to work, and to increase their earnings so they can invest in their own future.”

“Credit enables people to uplift their lives and build a brighter future,” said Gupta.

That's right: systemic racism in American society is rooted in a lack of credit availability for racial minorities, according to Gupta. If the federal government can ensure that every citizen can get credit, this country can overcome more serious problems which are the result of the "multiplying force" of that credit discrimination. How do they plan to do that? Suing banks on the basis of statistical analyses founded on flawed assumptions and squeezing cash out of them is only the tip of the enforcement iceberg. Gupta has much more "robust" remedies in mind.

“Whether mandating that a bank open a branch in a neighborhood neglected for years or requiring an auto lender to limit the discretion of its dealers, we recognize the value of resolutions that extend beyond the distribution of dollars,” said Gupta.

Of course, at the same time, Justice will use Operation Choke Point to drive payday lenders, auto title lenders, and other "high risk/high reward" lenders out of the market. That will leave all those great "small loan" programs that the FDIC tried to "encourage" banks to make a few years ago and that never gained traction because banks couldn't charge enough (most programs had a maximum APR of 36%) to justify the cost of administration and the serious problem of nonpayment. You can bet your life that they'll be resurrected, along with more creative solutions in the great game of credit redistribution.

 And, of course, two guys named Guido and Louis (The Lip) will always be available on local the street corner to take care of the needs of the needy in an extra-judicial manner.

Are we having fun yet?

The Lesser Of Two Evils

In a fascinating bit of humbuggery, the US House of Representatives decided last week not to follow the lead of the US Senate and, instead, chose to screw the Federal Reserve rather than the banks who are members of the Federal Reserve System. Of course, both houses of Congress are robbing Peter to pay Paul, his cousin Guido, and their extended family back in Sicily, but that's beside the point. The point is that bank-bashing took a back seat to the realization that next year is an election year, and pissing off bankers might have to take a back seat to fundraising needs until after the first week of November 2016.

Nobody likes the Fed (except when it bails out the world), so messing with that august entity is usually fine and dandy, politically speaking.

The New York Times lays it all out for us.

The banking industry scored a surprise victory on Thursday when the House voted to pay for part of a new highway bill by draining a rainy-day fund at the Federal Reserve rather than cutting federal payments to some of the nation’s largest banks.

The Senate, scrounging for road-building money, voted earlier this year to reduce the Federal Reserve’s annual dividend payments to large commercial banks, saving about $17.1 billion over the next decade. The House was to follow suit, but after loud protests from the big banks, its final version of the highway bill preserves those dividends and instead requires the Fed to provide $59.5 billion over 10 years instead of putting the money into an account intended to cover potential losses.

Now congressional negotiators must decide which to hit, the Fed or the banks.

The Times notes the ultimate injustice of either alternative funding source: funds for highways are supposed to come from the gasoline tax. Naturally, politicians don't want to pass a tax raise that would enrage supporters of both Bernie Sanders and Ben Carson (which covers the political spectrum from coast-to-coast). Moreover, banks are (almost) lower than lawyers in the mind of the average mouth-breathing, knuckle-dragging voter, and bending banks over the back of the sofa isn't generally a risky play. So, whether it's the Fed or its member banks that pay the unjust price of this latest boondoggle, the banking system will pay a price.

If the banks pay the price by being shortchanged, considerably, on dividend income from the Fed, that will hurt their bottom lines. Moreover, Fed Chair Janet Yellen is probably correct in her warning that the Fed will lose members. On the other hand, if the Fed is the direct loser, its surplus will take a hit, which is not something that is in the interest of the financial system. The article points out that the surplus is in addition to capital the Fed raises by selling shares and it may not be needed to bail out the Fed if it goes negative over the next few years as it unwinds the stimulus. It also observes that Congress has tapped the surplus in the past. Setting aside the fact that just because you beat up an old lady and steal her Social Security check one month does not justify making it a habit, this would be the first time since the Fed was created that Congress would completely drain the surplus and prevent it from being refilled.

Other commenters, including some members of Congress, also think either choice is a loser.

"They’re both bad," said Aaron Klein, director of financial regulatory reform at the Bipartisan Policy Center, although he noted Congress has a history of tapping the Fed’s reserves.

Even the author of the House plan sounded apologetic. "This is not perfect policy, but it is much better than the alternative," Representative Randy Neugebauer, a Texas Republican, said on the House floor early Thursday. Mr. Neugebauer said he hoped that future transportation funding "comes from transportation users and not completely unrelated sectors of our economy."

When Porky sprouts wings, Randy.

One silver lining to this dark cloud is that it has upset Maxine ("The Socializer") Waters.

"How many of my colleagues or their constituents have a safe investment that pays this well?" Representative Maxine Waters, a California Democrat, asked on the House floor Thursday morning. "Most of my constituents are lucky to earn a penny a month on their bank accounts."

The fact that the dividend rate paid by the Fed to its members has absolutely nothing to do with the appropriate source of funding for highway construction is beside the point to The Socializer. The money's there, banks are getting it, they're making a better return than me and my friends, the federal government wants the money, so what's the problem? Take it!

I can't wait for either Hillary Clinton or The Greatest Show On Earth (EVER!) to get into the White House in 2017 and set all this right.

Dude (Does Not) Look Like A Lady

Our crack field correspondents have alerted us to a phenomenon that we hope is nipped in the bud: male bank robbers dressed as hideously ugly women.

The bank heist tactic known among criminal elements as "Dude Looks Like A Lady" (aka "The Caitlyn Jenner Option")  attempts to throw witnesses off their game (and, in some cases, off their feed) by disguising the perpetrators as members of the feminine persuasion when, as a matter of nature-over-nurture, fact-based scientific theory, the criminals actually performing the robbery lean decidedly to the masculine end of the gender spectrum. Apparently, the intent of this charade is to simultaneously strike within a witness's Orbitofrontal Cortex both his or her "Gloria Steinem" and "Norman Mailer" regions, igniting a Patriarchal vs. Matriarchal War of the Neurons that renders accurate observation, much less coherent articulation, impossible.

The game was played in connection with a particularly violent kidnapping of a young man and the subsequent robbery of a credit union in upstate New York using that man's car, in which two of the male robbers dressed as women and all of the gang was apprehended. It appears that gender confusion was not effective. Either that, or one "man" was caught and ratted out the rest. Regardless, you'd think that failure might have been enough to discourage copycats. If you did, you'd be wrong.

Police in Anne Arundel County, Maryland, say that a man “seemingly disguised as a female” was arrested for robbing a local bank.

Just before noon on October 29, police were told that the Hamilton Bank in Pasadena, MD was being robbed by an Asian woman with a knife.

During the investigation, police learned that the robber displayed the knife and demanded money. But instead of a woman, police identified the suspect as a man named Dixon Kuon Henderson, 59, of Baltimore. Henderson appeared to be dressed as a woman during the crime, police reported.

The suspect’s car was quickly located and Henderson was found inside.

Henderson was arrested and charged with armed robbery. He was being held Friday on $500,000 bail.

Dixon looks as much like a woman as the rodent who lives atop Donald Trump's noggin looks like a head of actual human hair. Whatever he is, he is not going to pass for female, ever, even in Moldova.

Was that last sentence politically incorrect? For that matter, was this entire post politically incorrect? If so, then "Mission Accomplished."