A federal judge has refused Cook County's request to sanction Bank of America's attorneys for representing former bank employees, who allegedly had information the bank engaged in discriminatory lending, saying the county's request has needlessly complicated an already drawn-out case.
Magistrate Judge Sunil Harjani, of U.S. District Court for the Northern District of Illinois, issued the ruling Aug. 25. The ruling pertained to a 2014 action by Cook County, which claims Bank of America's alleged discrimination in making loans, cost the county tax money because of foreclosed properties and depressed house values. The bank, which is headquartered in Charlotte, N.C., is being sued along with its subsidiaries, Countrywide and Merrill Lynch.
Specifically, the county alleged Bank of America violated the federal Fair Housing Act, by lending to minorities with rates and terms more burdensome than those imposed on whites. Bank of America has denied the allegation and maintains the county cannot show the bank's lending practices, even if discriminatory, cost the county money.
Last autumn, Cook County said one of the law firms defending the bank, Goodwin Procter, of Boston and Washington, D.C., told the county the firm was now representing nine of 11 former bank employees, whom the county relied on to lodge its lawsuit. At the same time, the bank provided sworn declarations from the nine ex-employees that partially or entirely recanted statements they gave the county, according to court papers.
The county turned around and said Goodwin's representation of the ex-employees was a conflict of interest, asking District Judge Elaine Bucklo to disqualify the firm from handling the nine former employees. Goodwin opposed the request, but then stopped representing the ex-employees, rendering the matter moot.
The county then sought sanctions because it said it had to bring a motion to disqualify Goodwin, and paid expert fees to support the motion. The county alleged more of its resources were expended and the case was prolonged even more, because Goodwin acted in bad faith, knowing there was a conflict of interest.
Magistrate Judge Harjani did not buy the county's arguments.
"It is not clear that Defendants unreasonably or vexatiously multiplied any proceedings. Indeed, it was Plaintiff that brought the disqualification motion, Plaintiff who hired an expert witness and expended $88,278 for its expert declaration, and it is Plaintiff that is continuing to litigate this issue through this sanctions motion when the issue has been resolved," Harjani pointed out.
Harjani added, "Goodwin could have continued to fight the issue through advocating for a ruling by the district judge, but sought to conserve additional resources by voluntarily choosing to withdraw from the representation. Goodwin’s conduct appears to be reducing, not multiplying, the proceedings."
Harjani further noted Goodwin found new attorneys for the ex-employees, to "avoid protracted litigation on the issue" and a "distraction from the merits of the case." Goodwin elected to "compromise and move forward," Harjani determined.
In addition, Harjani said Goodwin's arguments, that there was no conflict of interest, were not "unreasonable, frivolous, reckless, or made in bad faith."
The magistrate judge pointed out that if either side went too far with its arguments, it was the county, whose expert witness alleged "evidence exists that Goodwin Procter suborned perjury" from the ex-employees. Harjani said it was "hard to accept such a bold statement," with such a "minimal" factual record on the conflict-of-interest issue.
Bank of America has also been represented by Winston & Strawn, of Chicago.
Cook County has been represented by Evangelista Worley LLC, of Atlanta, Georgia; Milberg, Tadler, Phillips, Grossman LLP and Milberg LLP, both of New York City; and James D. Montgomery & Associates, of Chicago.
The county also filed similar lawsuits against Wells Fargo and HSBC.