Tuesday, August 7, 2012

Bad Faith Negotiations = $200K Exemplary Damages Principal Reduction

In Bank of America v. Lucido, Justice Spinner, Supreme Court, Suffolk County found in his equitable powers that the bank's bad faith misrepresentations on their appraisal, ability to offer a principal reduction pursuant to the pooling and servicing agreement in the face of their denial of the same, inability to have an individual with settlement authority appear at the conference, prior counsel's inappropriate conduct, and 34 months of bad faith negotiations should result in punitive damages.

The decision is particularly interesting because Justice Spinner had previously been reversed on appeal when he cancelled a mortgage following similar conduct in Indymac Bank v. Yano-Horoski. It appears the Judge is  testing the authority of the Supreme Court to impact settlement conferences pursuant to CPLR 3408. This is a very important measure for all settlement conferences in the macro because it gives practitioners a clearer idea of what the ramifications for bad faith negotiations can be. Now lets see if the decision is modified on appeal.

To read the Lucido decision, click here.