A state appeals court Monday overturned a judgment that Bank of America Corp. must pay $1.5 billion to 1.3 million senior citizens, saying the bank did not unlawfully raid their accounts.
After a six-week trial in 2004, Bank of America was ordered to pay $296 million in damages. It was assessed an additional $1,000 in special damages for each customer who could prove emotional or economic harm. In all, the bank was on the legal hook for more than $1.5 billion.
But the 1st District Court of Appeal in San Francisco ruled that the bank did not breach state banking laws affecting seniors.
The class-action case centered on Bank of America collecting some check overdraft and other fees by taking money from direct deposit accounts set up to receive Social Security benefits.
A jury found that Bank of America's actions violated California laws prohibiting banks from taking Social Security benefits to recover customer debts.
Bank spokeswoman Shirley Norton said: "Bank of America maintained all along that it acted lawfully and followed standard banking practice maintaining and balancing customer accounts."
The appeals court agreed, saying the lawsuit misapplied a 1974 California Supreme Court decision outlawing banks from using deposited public benefits to pay the account holder's separate credit card account.
The court ruled that it was not illegal for a bank to apply "Social Security benefits and other public benefit payments directly deposited to its customers' checking accounts to cover debits for overdrafts and overdraft fees."
The plaintiffs' attorney, James Sturdevant, said he would appeal the case to the California Supreme Court.