‘Hero’ Judge Urged by Homeowners to Nix $45 Million BofA Penalty

  • Jurist who called bank ‘heartless’ is asked to rescind ruling
  • California couple say deal with lender will end ‘nightmare’

A California couple who were dragged through a Bank of America Corp. foreclosure called “brazen” and “heartless” by a bankruptcy judge have joined the lender’s request to be spared from a $45 million punishment.

U.S. Bankruptcy Judge Christopher Klein in Sacramento, hailed as a “hero judge” by Money magazine for coming down so hard on the bank, must now decide whether to approve a settlement that would rescind both the penalty and the scathing 107-page decision that accompanied it in March.

While Klein said the size of the punitive damages award against Bank of America was meant to “not be laughed off in the boardroom,” the couple who endured what the judge described as a “Kafkaesque nightmare” say the deal they’ve struck will leave them better off and avoid years more litigation and appeals.

The terms of the settlement are confidential, which is a concern for a group of nonprofit consumer advocacy groups and five University of California law schools that were slated to receive $40 million in the award the judge issued in March. The couple, Erik and Renee Sundquist, stood to collect $5 million in punitive damages, plus about $1 million for their losses, including for emotional distress and their costs of suing Bank of America.

‘Cynical Disregard’

The nonprofits aren’t opposing the settlement outright, but they’ve recommended that its terms be made public, in part to see if it includes any acknowledgment of wrongdoing by the bank and a commitment to avoid similar misconduct. The groups also urged the judge not to vacate his March 23 opinion that faulted Bank of America for "institutional obstinance and dishonesty" and said its actions smacked of "cynical disregard for the law."

"In the calculus of reprehensibility, Bank of America’s intentional conduct adds up to reckless and callous disregard for the rights of others," Klein wrote.

The bank asked the judge to respect that it reached a private resolution with the Sundquists and to keep the settlement’s terms secret.

“Disclosure of the settlement is unnecessary to establish that it would benefit the parties, conserve judicial resources” and encourage compromise, the company said in a filing Friday.

At a hearing Tuesday, lawyers for the bank and the couple got permission from the judge to return to court Oct. 4 after they discuss further whether to revise the settlement.

BofA Hit With $45 Million Award Over ‘Reckless’ Foreclosure

The Sundquists said in their Aug. 15 request to have the judgment thrown out and their lawsuit dismissed that it’s the only viable path for them to a meaningful recovery. The settlement will provide them with more money than the $6 million the judge awarded them, they said.

“It allows us to put an end to this nightmare that has permeated every aspect of our lives and that of our sons’ lives for so long," Erik Sundquist said in a court filing. "I cannot even begin to articulate how important it is to me as a husband and a father to end this phase of our life and go forward."

During the recession, the couple was told by the bank that if they wanted to modify their 6 percent mortgage loan, they had to let it go into default, according to Klein’s ruling. When they did so, even though they could afford the payments, the bank never agreed to a modification and the couple ended up in bankruptcy court.

By initiating foreclosure against the Sundquists, the bank violated a rule requiring legal actions to be put on hold during bankruptcy proceedings. By the time the bank realized its mistake and allowed the family to move back into the home -- months after they’d been evicted -- their major appliances had been stolen, according to the ruling.

Amid all this, Erik Sundquist was driven to attempt suicide and Renee Sundquist spent two days in a hospital with stress-induced heart attack symptoms, Klein said.

The bank said after the ruling that it had modified the processes in place at the time of the 2010 foreclosure.

‘Challenging Experience’

“Regrettably the customers had a challenging experience,” Bank of America said in a March statement.

In April, the bank argued in a court filing that Klein’s ruling was unconstitutional, unprecedented and heavily based on “hearsay” that shouldn’t have been allowed as evidence.

The lender particularly took issue with Klein’s findings that its agents “staked out the premises, tailed the Sundquists, knocked on doors, knocked on windows, and rang doorbells, all to the terror of the Sundquist family.”

“The bank would have challenged these accusations and many others if the Sundquists had made them at trial,” Bank of America said in a court filing.

The case is Sundquist v. Bank of America Corp., 14-02278, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

— With assistance by Robert Burnson

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