As many of the nation's largest banks write big checks to settle a massive federal class-action lawsuit involving overdraft fees, BancorpSouth instead has opted for the controversial legal strategy of trying to duck out of the proceedings.
The case is under appeal. It's possible, if not a longshot, that the little ($13 billion in assets) Tupelo, Miss.-based bank could succeed in short-circuiting a legal machine that got the better of its far larger peers (see story). If it fails, however, it will have racked up expenses in two jurisdictions.
The federal case involves allegations that BancorpSouth and dozens of banks wrongfully reordered debit card transactions to maximize overdraft charges to retail customers.
Because of the large volume of cases involving similar overdraft claims, a judicial panel was formed to route the legal traffic. Most of the cases have been made part of a multi-jurisdiction litigation in the U.S. District Court in the Southern District of Florida under the oversight of District Judge Lawrence King.
More than a dozen banks have already settled or are seeking court approval of settlement proposals so far. In one of the most recent such moves, Citizens Financial Group's agreed in late April to pay $137 million (see story).
Initially, BancorpSouth appeared to be on the same track as many of its peers. The bank was sued in May 2010, and five months later the judicial panel folded the case to it to the multi-district litigation. BancorpSouth and its legal adversaries then spent 18 months in discovery, in the hope of pursuing mediation and a settlement.
An expert retained by the plaintiffs estimated that class damages were in excess of $42 million. The figure prompted BancorpSouth's counsel to declare that it would go to trial rather than agree to such a figure.
Meanwhile, the bank was putting a Plan B into action. Even as its lawyers explored the possibility settling with the Florida plaintiffs, they were talking with an unrelated plaintiffs' team in Arkansas. That class action initially was filed in state court in August 2011 and then voluntarily dismissed one month later when the parties agreed to pursue settlement negotiations.
Read the full story at AmericanBanker.com.
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