A California bankruptcy judge handed down a $45 million penalty against
Bank of America Corp. (“BofA” or “Bank of America”),
decrying the manner in which the bank treated a California couple who
attempted to save their property from foreclosure.
Judge Christopher Klein, a federal bankruptcy judge for the United States
bankruptcy court, Eastern District, stated the financial institution’s
mortgage modification protocol and errant foreclosure on Erik and Renee
Sundquist's home rendered them emotionally distressed. The case sheds
light on how the mortgage industry’s inadequate loan servicing transactions
negatively affect some borrowers. Judge Klein referenced internal procedural
failures, claiming that Bank of America had scant incentive to change
the loan terms in such a way that would preclude the 6% interest rate
the bank was collecting from the Sundquists' loan.
The couple’s problems started in 2008 when the couple’s construction
firm went out of business because of the economic collapse, and they purchased
a less expensive house outside of Sacramento. They borrowed approximately
$590,000 from a financial firm, later acquired by Bank of America, with
promises from a loan officer that they could request a reduction in their
The couple ceased making payments in March 2009 following Bank of America’s
refusal to consider modifying loan terms for customers who were current
on their payment schedules. According to the court’s ruling, the
Sundquists’ “sole reason for defaulting was acquiescence in
Bank of America’s demand that they default as a precondition for
loan modification discussions with Bank of America.” Over the course
of the next few years, the plaintiffs submitted around twenty separate
requests to modify their loan terms, which Bank of America either lost,
deemed inadequate, or denied without explanation all the while repeatedly
The Sundquists filed for bankruptcy in June 2010. Doing so precluded a
foreclosure sale on their property because of the automatic stay, but
Judge Klein’s ruling claimed the bank, while knowing of the bankruptcy,
unjustly reclaimed the home and issued the couple a three-day eviction
deadline. According to the ruling, Bank of America even “staked
out the premises, tailed the Sundquists, knocked on doors, knocked on
windows, and rang doorbells, all to the terror of the Sundquist family."
Eventually, the couple vacated the property, and Ms. Sundquist subsequently
suffered stress-related heart attack symptoms that required hospitalization.
Bank of America representatives eventually reversed the sale and transferred
title back into the Sundquists’ name without notifying the Sundquists
or their attorney of the change. The couple eventually moved back in after
several months only to discover that they were charged $20,000 during
their absence by the homeowner association for neglected landscaping and
Judge Klein’s 107-page ruling incorporated entries from Renee Sundquist’s
personal journal that highlighted harassing encounters with Bank of America
loan officers, and Mr. Sundquist’s suicide attempt following the
couple’s frustrated discussion regarding their mortgage issues.
Judge Klein awarded the Sundquists nearly $1.1 million, verified the remaining
amount they owe on their loan, and fined Bank of America $45 million.
The $45 million penalty, which will be dispersed via grants to law schools
and consumer advocacy groups, is intended to be substantial enough that
it will deter future misconduct on behalf of Bank of America. Rick Simon,
a spokesperson for Bank of America, claimed the Sundquists' issues
originated before the implementation of the new loan procedures and criticized
Judge Klien’s ruling for being unsubstantiated and breaking established
precedent. Mr. Simon refused to comment when asked if Bank of America
will seek an appeal.
However, in April, Bank of America filed papers requesting Judge Klein
to reconsider his $45 million fine calling the amount “unprecedented
in its magnitude.” In court papers, bank officials asked Judge Klein
to amend his 107-page ruling against the bank, arguing that his “excessive”
fine amount violates guidance from Supreme Court justices in 2008 meant
to prevent outsized awards. The fine stands as the largest punitive damages
award for violations of bankruptcy law’s automatic stay rules.