Sundquist Update: Bank of America Appeals $45 Million Bankruptcy Fine

By K.K. MacKinstry

The bank claims the fine amount is ‘unprecedented in its magnitude’ because Bank of America is routinely not punished for its criminal behavior.

sundquist-opinion

Bank of America Corp. requested a bankruptcy judge to reconsider the $45 million fine over its Kafkaesque treatment of a California couple who requested a loan modification, calling the amount “unprecedented in its magnitude.”

In court papers, counsel for Bank of America asked Judge Christopher Klein to amend his 107-page ruling against the bank, arguing that the “excessive” fine amount violates guidance from Supreme Court justices in 2008 meant to prevent outsized awards.  The fine stands as the largest punitive damages award for violations of bankruptcy law’s automatic stay rules. The automatic stay prevents lenders from pursuing foreclosure and taking other actions while the bankruptcy protections are enacted.

The Sundquist ruling, issued March 23, said that bank officials abused Renee and Erik Sundquist as they fought to save their Sacramento home from foreclosure. The decision, shed light on the mortgage industry’s predatory loan-servicing tactics that have resulted in lost homes and traumatized homeowners.  The judge ruled that the Sundquists must donate most of the $45 million award to five California law schools and two legal-aid nonprofits.

In the bank’s amendment request filed in U.S. Bankruptcy Court in Sacramento, they claim that the award far exceeds the punitive damages amounts handed down in similar cases, and cite a  case against Wells Fargo & Co. That settled for $3.2 million fine in 2013. The median punitive damages for automatic stay violations is $4,500, the bank said.

“The court’s punitive award represents a stunning departure from past practice,” representatives for Bank of America stated.   Judge Klein set a hearing on May 9th to hear the bank’s request.  The bank will also appeal the ruling and the dispute may be heard before a different federal judge who is more sympathetic towards the bank.

In 2008 the Sundquists’ construction business was impacted during the economic downturn and they bought a less expensive home. They borrowed an estimated $590,000 and the servicing of their loan was later taken over by Bank of America with a promise from a bank official that they could request a loan modification.

In March 2009 the Sundquists were told to fall behind three months in order to qualify for a loan modification.  Over the following years, they would submit approximately 20 loan modification applications that 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 to protect their home.

The ruling referenced dozens of excerpts from Ms. Sundquist’s personal journal, which the judge used to show the extent of the couple’s efforts to resolve their issues with the bank and the emotional toll incurred over several years.  In its amendment request, Bank of America requested that the journal’s excerpts should be disallowed because they weren’t properly admitted as evidence and were hearsay. The judge ruled that the journals would be permitted.

Bank of America has complained that Judge Klein’s order that the Sundquist’s donate the majority of their award to five law schools associated with the University of California, along with two consumer-advocacy nonprofits, was “unconstitutional.” An attorney for the Sundquists declined to comment.  It would appear unconstitutional that the Sundquists were not allowed to decide how the funds should be dispersed considering it was their misery that resulted in the award.

Federal law states that punitive damage awards can’t be designated to entities that weren’t harmed by bad behavior and “bar courts from undertaking broad-based, public-interest policy-making,” the court papers show.

In addition to the fine, the judge awarded $1,074,581.50 in damages to the Sundquists.  Although this amount may seem large, it hardly covers the mental anguish, suffering and long term mental and physical health consequences the Sundquists have been subjected to at the hands of a bank who likely never paid a dime for their loan.

3 Responses

  1. […] via Sundquist Update: Bank of America Appeals $45 Million Bankruptcy Fine — Livinglies’s Weblog […]

  2. IMHO as a 21 year veteran with Bank of America on criminal behavior, Judge Klein’s opinion is nothing short of absolutely brilliant!

  3. The Judge erred by directing the the bulk of the punitive damages to parties other than the damaged party, who had suffered grievously at the hands of BofA. $45,000,000 is peanuts to the Bank. The Bank will go nuclear in order to prevent the Court’s ruling to stand as a precedent.

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