March 28, 2017

Sacramento bankruptcy judge orders bank of Bank of America to pay $45 million in punitive damages, including $40 million to nonparties (Sundquist v. Bank of America)

The Daily Journal (subscription required) is reporting that U.S. Bankruptcy Judge Christopher M. Klein of Sacramento issued an opinion last week requiring Bank of America to pay $1 million in compensatory damages and $45 million in punitive damages for wrongfully foreclosing on a couple's home.  But the 45-to-1 ratio is by no means the most eye-catching aspect of the award.  According to the Daily Journal article, the order directs Bank of America to pay most of the punitive damages to non-parties: the National Consumer Law Center and the National Consumer Bankruptcy Rights Center would receive $10 million each, while five law schools in the University of California system would receive $5 million each. 

Legal commentators have argued for many years that punitive damages should be given to charities, rather than to the plaintiffs and their attorneys.  And I have seen news reports in which a victorious plaintiff promises to donate a punitive damages award to charity.  But this is the first time I can recall any court actually ordering a punitive damages award to be gifted to a non-party.  I haven't seen the order yet, but I am wondering what authority the judge relied on in making that ruling.  And how did he go about selecting the beneficiaries of that award?  This promises to be interesting. An appeal seems virtually certain.