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A Brooklyn appeals court has sanctioned Sullivan & Cromwell for engaging in “frivolous conduct” in its defense of a proposed class action suit over credit card late fees in Westchester County Supreme Court. In Naposki v. First National Bank of Atlanta, 2572/00, the Appellate Division, 2nd Department, ordered the firm to pay $5,000 to the state Lawyer’s Fund for Client Protection for failing for nine months to inform either plaintiffs counsel or the court of a settlement in a California class action involving identical claims. Both suits had charged that the credit card division of Wachovia Bank, Sullivan & Cromwell’s client, improperly applied late fees and other penalty charges to accounts according to the hour of payment rather than the day. Wachovia settled the California case, Valloud v. Wachovia, for $775,000 in September 2002. The New York plaintiffs had appealed the trial court’s dismissal of their suit. But they were not informed of the West Coast settlement until the eve of oral arguments in June 2003, when Wachovia urged dismissal on res judicata grounds. Sullivan & Cromwell’s representation of Wachovia on both coasts was led by Robert Sacks, managing partner of the firm’s Los Angeles office. The 2nd Department said Sullivan & Cromwell had not provided any reasonable explanation for the delay in informing plaintiff’s counsel and the court of the Valloud settlement, particularly since the firm twice requested an extension in the matter. Plaintiff’s counsel has argued that the delay was intended to prevent it from challenging the West Coast settlement, which it claims is inadequate. Sacks Wednesday said the delay was inadvertent. He said the responsibility for informing the plaintiff’s counsel rested with the class counsel in California. Sacks said he did not personally handle the case in New York, which was argued by an associate. The appellate court also overturned the dismissal of the Naposki case by the Westchester trial court, reinstating the claim and permitting the American Association of Retired Persons to file an amicus brief. The panel said the lower court had erred in its determination that the claim had been mooted by Wachovia’s attempt to refund the late fees. The unanimous 2nd Department panel included Justices Anita Floria, Robert W. Schmidt, Barry Cozier and Stephen G. Crane. Steven L. Wittels and Jeremy Heisler represented the plaintiffs. By sanctioning an elite firm, Heisler said, “The court was serving notice that, high or low, you will be held to a uniform code.”

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