Sundquist v. Bank of America: $45 Million for violations of Automatic Stay

by the LendingLies Team

In most cases, the damages awarded to homeowners are so paltry that they do little to punish unlawful conduct or to deter future behavior by servicers.  The banks continue their crime spree unabated.  Those days may be over.  A bankruptcy court in Sacramento, California recently issued a $45 million dollar punishment in a case of a wrongful home foreclosure and eviction in a deliberate violation of the automatic stay.

The court described the plaintiff-debtors’ treatment by defendant Bank of America as “Kafkaesque”, and found the homeowner’s deeply emotional testimony (one of them attempted suicide during the ordeal) completely credible, awarding more than $1 million in actual damages for the loss of their home and subsequent emotional distress. The court noted that Bank of America had repeatedly settled cases with federal and state regulators for hundreds of millions, and even billions, of dollars, in recognition of serious and repeated compliance failures, including some related directly to servicing home mortgages.

The homeowners didn’t bring up the issue that Bank of America via Reconstruct Trust likely had no standing to have filed a Proof of Claim in the bankruptcy in the first place.  Filing a false proof of claim in bankruptcy is an additional $500k penalty.  The bank may think twice about violating state and federal law if penalties, fines, sanctions and awards are enacted for such egregious and unconscionable behavior.

The fascinating 107-page opinion discusses at length with the dilemma of awarding enough punitive damages to effectively deter the defendant while avoiding an unseemly windfall to the plaintiffs. The decision resulted in a $40 of the $45 million punitive award to consumer advocacy organizations and the five public California law schools. Citing an Ohio case, state statutes and several law review articles, the court proposes this split award technique as an appropriate step forward in the federal common law of §362(k) punitive damages. A vicious appeal is sure to follow.