Just last week, a federal court in California, using terms like gouging and profiteering, made national headlines by issuing a stinging indictment of the business practices of Wells Fargo Bank. The court found that Wells Fargo's method of paying off checks for the highest dollar purchases first (so-called high-to-low posting), which was intended to exhaust the customer's account so that future checks would incur overdraft fees, was an unfair business practice. Congratulations, Judge Alsup.
However, an even more shocking revelation in the opinion has gone unnoticed by the media. That is, Judge Alsup's reference to another class action lawsuit, Smith v. Wells Fargo Bank. In Smith, Wells Fargo was sued for an alleged unlawful business practice regarding the handling of debit card transactions. The opinion disclosed that Wells Fargo settled the case, agreeing to pay up to $3 million in class member claims and $2.2 million to the plaintiff's class action lawyers for fees and costs. Judge Alsup repeatedly excused (see pages 48 and 81 of the opinion) the judge's performance in Smith noting that he did not know that only 166 class members in that case filed claims for a total of $2080. That's right, instead of $3 million, Wells Fargo barely paid out $2000 to the entire class, while the lawyers got $2.2 million! And the judge in Smith didn't even know?! But why didn't he know? Or rather, why didn't he care enough to know? (Haven't we heard this excuse before? Didn't the Enron gang, Jeffrey Skilling and Kenneth Lay, and Lehman Brothers CEO Richard Fuld claim they didn't know what was going on?)
The class action lawyers and the judge, rightly accused Wells Fargo of unfair and fraudulent business practices, gouging and profiteering, giving phony disclosures, misleading and deceiving their customers, manipulation, and obfuscating the truth. But what about the unfair and fraudulent business practices of the plaintiff's class action bar? Shouldn't getting over $2 million in attorneys fees while claiming to the court that the settlement is worth $3 million, when in fact the class received only $2080, be considered an unfair and fraudulent practice? A manipulation of the judicial process? Misleading and deceiving? An obfuscation of the truth? What other motivation could there be for such a sham settlement other than gouging and profiteering? Is this starting to sound familiar?
Let's be clear that by no means am I whitewashing the despicable behavior of Wells Fargo Bank. (In fact I am thinking of withdrawing my accounts.) But I ask, how much different is the bank's behavior from the schemes of the class action lawyers with regard to the millions of dollars in fees they take out of class action settlements while their own clients receive so little? (Excuse me, tens of millions of dollars in attorney's fees! Remember the Ford Explorer class action settlement where the lawyers got $25 million in fees for claiming the class was getting $500 million, except that only 148 class members filed claims for a total payout of $74,000?!) Why is it that the judiciary is willing to find fault with the unfair and fraudulent practices of America's businesses, but cannot see what seems to me to be an unfair business practice being perpetrated by class action lawyers right under their noses?