Bank of America Puts Couple Through Kafka’s Trial; Must Pay $46 million

Franz Kafka Lives. This automatic stay violation case reveals that he works at Bank of America.

So says Judge Christopher M. Klein, in Sundquist v. Bank of America. What follows is a distressing story of malicious incompetence that destroyed the health of two elite athletes and cost Bank of America more than $46 million. Judge Klein continued:

The mirage of promised mortgage modification lured the plaintiff debtors into a Kafkaesque nightmare of stay-violating foreclosure and unlawful detainer, tardy foreclosure rescission kept secret for months, home looted while the debtors were dispossessed, emotional distress, lost income, apparent heart attack, suicide attempt, and post-traumatic stress disorder, for all of which Bank of America disclaims responsibility.

Bank of America’s The Foreclosure

Franz Kafka wrote of labyrinthine bureaucracies which entrap and torment the innocent. They are the everyday frustration of confusing forms and unhelpful staff almost everyone has experienced, magnified. If any case lives up to Kafka’s stories, the court felt that this is it. The court charts Bank of America’s progress through a dramatic arc of progressively more outrageous conduct. It starts with a problem all too many consumers have experienced: the mortgage modification run-around, in which the bank rejects a loan mod application for no reason, demands more documents or sits on requests for months only to reject them as “stale”. The Sundquists filed a bankruptcy to discharge their unsecured debt and reaffirmed Bank of America’s mortgage believing they could get a modification. But all the time, the bank was trying to foreclose on their home. The Sundquists filed a new bankruptcy to try to sort out the mortgage once and for all. Despite the automatic stay, Bank of America conducted a foreclosure sale and bought the Sundquists’ house. The sale was a violation of the stay, and was invalid. Nevertheless, the bank tried to evict the Sundquists and eventually they fled their home to avoid eviction. Only 6 months after the illegal foreclosure did Bank of America rescind the sale.

Of course, that’s not the end of the story. In the meantime the house was looted of its appliances, and the bank racked up over $20,0000 in HOA assessments, which it refused to pay because, after undoing the illegal foreclosure, the house was once more titled to the Sundquists. Bank of America fought for years to avoid paying for the harm it caused, through motions and appeals.

Judge Klein decided that Bank of America had to pay. His opinion runs to over 100 pages and has many more highlights, such as how Bank of America lied to the Consumer Financial Protection Bureau in responding to a complaint by the Sundquists. In assessing the Sundquists’ claim for attorneys fees, the court noted that

The key circumstance is Bank of America’s institutional obstinance and dishonesty . . . in refusing all recompense after the Sundquists discovered that Bank of America had secretly restored them to title after they moved and was demanding that they pay for damages resulting from Bank of America’s incompetent stewardship of its illegally-acquired property.

The Emotional Distress

Judge Klein also goes into detail about what he describes as “the human cost proximately resulting from the conduct of Bank of America”, illustrating that cost with heartbreaking excerpts from Mrs. Sundquist’s personal journal. They describe suicidal thoughts, self-harm and a suicide attempt and are too distressing to be reproduced here.

As the opinion repeatedly explains, all of this was “occasioned by [Bank of America’s] unrepentant disregard of the consequences of its illegal violation of the automatic stay.” One might well be left thinking whether the $1 million in actual damages awarded to the Sundquists is enough.  Indeed, Judge Klein repeatedly indicates that with better presentation of evidence, more might have been awarded.

The Punitive Damages

In awarding punitive damages, the court had more choice phrases for Bank of America:

“This case may constitute the paradigm case of . . . “reckless or callous” disregard for the law and for the rights of others and of malicious, wanton or oppressive conduct.” The case “smacks of cynical disregard for the law” and “Bank of America intentionally disregarded the law”. The court enumerates ways in which Bank of America knowingly and intentionally disregarded the law. This is not, says Judge Klein, a case of low-level employees making mistakes, but rather it is part of the bank’s culture: “[i]t is apparent that the engine of Bank of America’s problem in this case is one of corporate culture.”

The court awarded $45m in punitive damages, $40m of which will be distributed between various public interest groups, including the National Consumer Law Center.

The Lawyers

The flaw in the armor of Bank of America’s attitude of impunity is the potential for damages in civil litigation. Even there, however, the field is unbalanced. The record reflects that Bank of America has been represented in the Sundquist litigation by first-class law firms. In contrast, the legal representatives serving the Sundquists have not covered themselves in glory.

The Sundquists’ testimony about their difficulties in locating competent counsel is believable and demonstrates that there is a dearth of consumer lawyers with the resources and skills to be effective when representing consumers against Bank of America.

This inequality is one that all consumer lawyers will encounter: large corporations are represented by large, often multinational law firms, with armies of support staff and battalions of associates. The victims of corporations are often not so well off as the Sundquists – who were able to pay over $17,000 to an attorney. Many consumers are represented by local general practitioners, legal aid offices, non-profits, small firms and solo lawyers. Often the consumer has little or no money to pay their lawyer, who must gamble on recovering their fees months, or more likely, years, down the road, if they are able to win. The only advantage a consumer lawyer is likely to have is the Sundquist’s advantage: they were right, and Bank of America was wrong.

To find a lawyer who is a member of the National Association of Consumer Advocates, look here: