Northern California Record

Friday, November 22, 2019

Court OKs $24.5 million settlement against Navy Federal Credit Union in overdraft fee class action


By Charmaine Little | Jun 13, 2019


SAN DIEGO – On May 28, the U.S. District Court for the Southern District of California green-lighted a $24.5 million settlement in a class action lawsuit against Navy Federal Credit Union over overdraft fees.

U.S. District Judge Cynthia Bashant also granted in part and denied in part the plaintiffs' motion for $6.1 million in attorneys’ fees and other expenses. The judge dismissed the case and instructed the court to enter the final judgment.

Plaintiffs Jenna Lloyd and Jamie Plemons initially sued over the credit union's collection of Optional Overdraft Protection Fees (OOPS) from the class for debit card transactions. They allege the fees were authorized on accounts with positive balances but settled into negative balances because of subsequent transactions.

The plaintiffs alleged the credit union was not allowed to charge the fees on transactions that were green-lighted on an account that had a positive balance but settle into a negative account balance. The plaintiffs and the class alleged breach of contract, breach of covenant of good faith and fair dealing, conversion and unjust enrichment.

The parties were able to reach a settlement agreement, which the court ruled on in the current opinion.

Bashant approved the $24.5 million settlement and an order for Navy Federal to pay $500,000 in settlement costs. The settlement will go toward class members, class counsel for any attorneys’ fees and court expenses, court-awarded service awards, settlement administration costs that are more than the Navy Federal Settlement Administration Costs Cap, and to pay back Navy Federal to meet its cap. The settlement anticipates a $5,000 service award for the named plaintiffs as well as permission for the class counsel to request attorneys’ fees up to 35 percent.

The Class Action Fairness Act of 2005 says the district court will have original jurisdiction for matters over $5 million, and requires minimal diversity.

“At this point, there is no question that the amount in controversy CAFA requires is satisfied given the $24,500,000 settlement amount as well as the parties’ own estimation that the class could have covered up to $60 million at trial, if successful,” Bashant wrote.

The judge also pointed out that Navy Federal agreed the settlement was fair and reasonable.

When it came to attorneys’ fees, the judge pointed out that class counsel asked for $6.1 million instead of the max of $8.5 million. 

“Considering the circumstances of this case, however, the court finds that percentage-of-the-fund method is appropriate for assessing the reasonableness of the requested attorneys’ fees,” Bashant wrote.

Attorneys for the class were from the law firms of Kopelowitz Ostrow, the Kick Law Firm, Tycko & Zavareei and McCune Wright Arevalo.

Since the overdraft fees were $20, the judge added that class counsel doesn’t have much of an incentive to argue this case other than on a contingency fee method. 

“Accordingly, the court finds the requested amount of attorneys’ fees is reasonable and grants plaintiffs’ request,” said the court.

As for court fees and non-taxable costs, the judge said the class counsel gave proof of the $143,038.82 of expenses they considered “'costs and expenses reasonably spent during the litigation,'” the ruling states. Included in that amount was $132,500 for expert fees to Arthur Olsen. 

Considering this, more than 90 percent of the expenses would be for one person’s fees, which include a breakdown from conference calls to the general expert fee. The issue is that Navy Federal estimated damages for the class at about $60 million before the parties reached the settlement agreement. While the plaintiffs referenced Olsen’s conclusion in their motion for final approval, they said in the preliminary approval that their expert would calculate damages. 

“Yet, as a matter of awarding funds from the settlement fund, the court cannot find reasonable the $109,100 price tag for an exercise that appears to post-date the preliminary approval order, and which merely confirmed what the parties already understood to be the class’s potential recovery,” Bashant wrote.

Because of this, Bashant awarded settlement fund of expenses of $33,938.82, which includes an award of $23,400 for Olsen's work. 

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