Jeffrey M. Ostrow and Jason Alperstein
Jeffrey M. Ostrow and Jason Alperstein (Melanie Bell)

Case: Jane Simpson, Shirley Liddell and others similarly situated v. Citizens Bank

Case no: 2:12-cv-10267

Description: Unjust enrichment

Filing Date: Jan. 20, 2012

Judge: U.S. District Judge Denise Page Hood, Eastern District of Michigan

Plaintiffs attorney: Jeffrey Ostrow and Jason Alperstein, Kopelowitz Ostrow, Fort Lauderdale; Ruben Honik, Golomb & Honik, Philadelphia; Hassan Zavareei, Tycko & Zavareei, Washington

Defense attorney: Dennis Haffey, Matthew Mitchell and Samantha Walls, Dykema Gossett, Bloomfield Hills, Mich.

Settlement amount: $2 million

Details: In 2009, the Kopelowitz Ostrow firm began filing class action lawsuits against banks around the nation alleging abuses in the application of overdraft fees.

Plaintiffs case:Customers were not informed they were automatically enrolled in overdraft protection plans. These plans applied overdraft fees rather than decline charges when insufficient funds were in a checking account and without informing clients at the point of sale on debit card transactions.

To enhance profits even further, banks employed a resequencing system that delayed transactions, sometimes over a period of days, to amass more overdraft charges by clearing transactions from largest to smallest amounts.

Kopelowitz Ostrow had obtained 12 class action overdraft settlements totaling $112 million, including a $2.5 million settlement with Community Bank N.A. in Pennsylvania last November.

Jane Simpson of Taylor, Mich., became the first class representative in the civil action against Citizens Bank, a Flint, Mich.-based bank with 220 branches in Michigan, Ohio and Wisconsin. Her local attorney was Robert Gittleman of Farmington Hills.

Simpson alleged in her 2010 complaint that she was charged three overdraft fees of $36 each for a total of $118 on transactions that took place over three days. Had the bank processed the transactions chronologically, she would been charged only one fee.

Early in the litigation, a second class action was filed against Citizens by another law firm, Golomb & Honik. The court consolidated the two cases and added Shirley Liddell of Flint as the second class representative.

Their claimed causes of action included breach of covenant of good faith and fair dealing, unconscionability, conversion, unjust enrichment, violations of the Electronic Fund Transfer Act and the Michigan Consumer Protection Act.

Defense case: Citizens filed a motion to dismiss. The bank argued its system for posting transactions was spelled out in its account agreement. Citizens claimed the right to post multiple transactions in one day “in any order convenient to the bank.”

It also asserted as a defense that transactions do not necessarily reach the bank in chronological order. Vendors may submit transactions for processing days later.

“The vast majority of a customer’s deposit account transactions do not arrive at the bank on a real-time basis,” the bank said in its answer to the complaint. “To characterize transactions as being ‘re-ordered’ is incorrect.”

Citizens argued the plaintiffs failed to state a valid claim because none of the causes of action had a foundation in state law.

Outcome: During the litigation, other class actions based on the same facts were reaching settlements. Public perception was negative toward banks, and many changed their posting practices. The bank filed a joint notice of settlement with Simpson and Liddell on March 7, 2013.

In a Jan. 31 order approving the settlement, Hood noted the plaintiffs risked losing on the motion to dismiss because the account agreement language suggested Citizens “adequately disclosed its practice.”

“Under the circumstances … the settlement reached with Citizens Bank outweighs the gamble of continued litigation,” Hood said.

The class size was put at 61,000. Hood found the $2 million recovery was about 30 percent of the probable damages. Of the $2 million, she granted $5,000 service awards to each of the two class representatives.

In addition, she awarded $660,000 in attorney fees and $91,529 in costs to class counsel.

Comments: “For the most part, of the banks we sued and resolved cases with, we got them to modify their practices,” Ostrow said. “There are some banks out there that are still doing it that we have not sued. And there are banks with arbitration provisions; those banks continue to do it. But we made a massive change in the industry.”

Post-settlement: Barring settlement, Ostrow is scheduled to go to trial this fall in a class action against BancorpSouth in Gainesville federal court.