Matter of HSBC Bank U.S.A., N.A., Checking Account Overdraft Litig., Index No. 650562/2011 (Bransten, J.)

Class action; class action settlement; preliminary approval of class action settlement

By Krisdy Portugal | Staff Writer

Plaintiffs, Defendants’ customers allege that as a practice, Defendant, a bank, allowed customers to use their debit cards to make purchases when their checking accounts contained insufficient funds so that it could charge a $35.00 overdraft fee. Further, Plaintiffs allege that Defendants manipulated and reordered debits from highest to lowest during the course of a day to maximize overdraft fees. Lastly, Plaintiffs argue that Defendents engaged in this practice even though it could have declined the transaction or warned customers that the fee would apply.

Plaintiffs filed the class action complaint against Defendents in both state and federal court. The complaint was amended to provide for the national and New York sub-class falling within the applicable statute of limitations.

Plaintiffs and Defendents then entered into a settlement agreement which provided that Defendents would establish a settlement fund of $30 million for the present case. Further, Defendents agreed to provide notice to the settlement class of the settlement agreement.

Plaintiffs moved for preliminary approval of the settlement agreement, arguing that the $30 million settlement is favorable to the class compared to other settlement agreements regarding similar circumstances. Plaintiffs argue that preliminary approval is thus easily warranted. Defendent supported Plaintiffs’ motion.

The Court explained that to grant the motion, it must: (1) conditionally certify the settlement class; (2) find the settlement terms fair and reasonable; and (3) find the notice provisions adequate.

The Court granted Plaintiffs’ motion for preliminary approval of the proposed class action settlement. First, it reasoned that the settlement class was conditionally certified after meeting CPLR § 901(a) and CPLR § 902 requirements. CPLR § 901(a) lists five prerequisites to class certification: (1) the class is so numerous that joinder of all members is impracticable; (2) questions of law or fact common to the class predominate over questions of law or fact affecting individual class members; (3) the claims or defenses of the class representatives are typical of those in the class; (4) the class representatives will fairly and adequately protect the interests of the class; and, (5) a class action represents the superior method of adjudicating the controversy. CPLR § 902 requirements asks the court to consider: (1) the interest of class members in individually controlling the prosecution; (2) the impracticability or inefficiency of prosecuting or defending separate actions; (3) the extent and nature of any litigation concerning the controversy commenced by or against members of the class; (4) the desirability or undesirability of concentrating the litigation of the claim in the particular forum; and (5) the difficulties likely to be encountered in the management of a class action. Second, the court noted the settlement terms were deemed fair and reasonable because the award amount reflected 50% of the actual damages and the parties engaged in good faith bargaining over four years. Lastly, the notice provisions were adequate because the settlement agreement provided for several forms of notice to the settlement class.

Matter of HSBC Bank U.S.A., N.A., Checking Account Overdraft Litig., Index No. 650562/2011 (Bransten, J.).

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