A Classless Action

A massive consumer lawsuit against U.S. Bank ends in nickels and dimes for the plaintiffs, but big checks for attorneys

On Friday, December 1, while most Americans were riveted by the arguments before the U.S. Supreme Court concerning the protracted presidential election, Bill Lorence and his 11-year-old son Chad were headed from their home in Maple Grove to the federal courthouse in downtown Minneapolis. Both Lorences are former customers of U.S. Bank who had their names and personal and financial information sold to telemarketing firms. As members of a class-action suit against U.S. Bancorp, the bank's parent company, they wanted to be at the courthouse by 9:00 a.m. so they could object to a proposed settlement of the suit.

In the courtroom, they joined a small crowd made up of the judge, the court clerk, several plaintiffs attorneys and a lawyer representing the bank. But with the exception of two other plaintiffs who'd shown up to protest the proposed settlement, everybody seemed ready to ink the deal and go home. "The mood was very professional and low-key, and all these guys were in agreement about the settlement. But we were there because we wanted it clear that we were not okay with it," recalls Bill Lorence. "I'm sure this will be spun as a great settlement that shows U.S. Bank is an upstanding member of the community and that this is a great payoff for class members. But the fact is, we're getting nothing out of this, and the lawyers' fees are completely out of proportion to our payments." Despite their pleas and hopes, Lorence and the other unhappy plaintiffs felt that by the time they left the courtroom, the settlement was a done deal.

In June 1999 Minnesota Attorney General Mike Hatch sued U.S. Bank claiming that the company violated customers' privacy. Thirty-six other states quickly joined the suit, which charged that the bank profited from selling customer data. It also riled five individuals with accounts at U.S. Bank who, within months, filed a suit of their own. By June of this year the second suit had morphed into a massive class action involving 12 law firms and potentially four million class members, all of them U.S. Bank customers who opened credit-card or checking accounts before July 1999. (The class includes several categories of plaintiffs, each eligible for a different level of compensation.) The suit is unusual because it requires putting a price on privacy, whereas most class actions stem from allegations of personal injury or monetary loss.

Bill Lorence says it cost him $4,000 to restore his privacy after U.S. Bank sold his personal and financial data
Tony Nelson
Bill Lorence says it cost him $4,000 to restore his privacy after U.S. Bank sold his personal and financial data

The settlement, which was indeed signed on December 11 by Federal Magistrate Judge Jonathan Lebedoff, calls for the bank to pony up around $3.5 million, with $10,000 going to the original plaintiffs, nearly $1.3 million going toward plaintiffs' lawyers fees and costs, leaving $2.2 million to be divvied up by more than 80,000 class members who have filed claims to date. "Right now, it stands as a payout of $25 per person," explains Peter Knoll, a financial analyst and lawyer from Longmont, Colorado, who is spearheading the objection campaign and a possible appeal. "People have until December 31 to file a claim. If the judge honors that deadline, there's no telling how many people we'll have."

Knoll is especially concerned about a stipulation in the settlement that frees U.S. Bank from writing out claim checks of less than $10. If there are eventually enough plaintiffs to reduce each award to that amount, the bank would have the option of donating some of the award money to the University of Minnesota Law School or other "human services agencies" instead.

In addition to the four formal oral objections in the courthouse that day--including one each from Lorence and his son--the settlement has also drawn complaints from some 70 current and former bank customers around the country. Now that the settlement has been approved, those complaints may fall on deaf ears, although a retired judge still has to review some of them and Knoll is mounting an appeal. Attorneys for the bank--and even some for the plaintiffs--say the low payout scheme is justified since no one was actually injured by the bank's actions.

In addition, the lawyers representing the individual class members believe their fees are fair and reasonable because of, as one brief puts it, "the difficulties posed by class-action litigation in general and the particular difficulties posed by the novelty of consumer privacy." The brief goes on to point out that the "counsel had to educate themselves in the particulars of both the banking industry and the practices of telemarketers."

Sitting in a Perkins in Golden Valley two weeks after the hearing, Bill Lorence looks every bit the straight-arrow, middle-class family man in a faded red button-down shirt, blue jeans, and a neat crop of strawberry-blond hair. A 37-year-old Mora native, he attended St. Cloud State University and has worked in the accounting department of Target for 17 years. His involvement with U.S. Bank began in 1992, when he took out a second mortgage on his house. Eventually, he had more than eight accounts, including a credit card, a checking account, and a savings account with the bank, which was then known as First Bank System. Soon his wife and two children also had accounts set up in their names.

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