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Humility in the Courtroom for Bankers


It is an understatement that the past few years have been a challenging time for banking institutions. Even as profits begin to rebound, it’s safe to say that the industry faces its most challenging public perception crisis since the savings and loan crisis and, perhaps, even the Great Depression. The Dodd-Frank rationale that banks need to be controlled is now a part of our daily dialog, affecting all aspects of the industry.

The industry’s public perception crisis is underscored by the popular view that banks have continued to act arrogantly and with little concern about the fairness to those injured, such as troubled underwater homeowners or local businesses seeking financing. While these issues present critical strategic challenges for banks on the public relations and business fronts, the same populist sentiment also exerts a palpable influence on legal proceedings. It is little wonder that banks have been on the losing end of some eye-popping jury awards. Fear over such scrutiny, as well as the urgent need to get back to more positive ventures, has led to an even greater number of settlements – some at near extortionate pricing – or even outright abandonment of claims against debtors.

The Fairness Argument

In a recent case attracting national attention, a Ponzi scheme victim successfully sued a bank for aiding in the fraud of one of its customers. The jury’s verdict included not only a multimillion-dollar award to compensate the victim’s actual loss, but more than doubled that amount in punitive damages. Settlements to other victims reportedly followed in short order for even greater amounts.

Was this bank a victim of the current populist climate, at least to some extent? That certainly seems likely. But what most caught my attention was the use of the word “arrogant” by the victim’s counsel in characterizing the attitude and demeanor of the bank’s representatives during the trial. It was reported that the victim’s attorney began his argument to the jury saying that the bank “lied. It acted and continues to act with arrogant and reckless indifference ….” Whether fair or not, this characterization of ongoing arrogance stuck and was apparently adopted by the jury in issuing their punitive award. In the courtroom, perception often becomes reality.

So, what steps can banks take to mitigate against current populist sentiment and its influence in the courtroom? The most important ones involve humility, a measure of empathy and a little reflection on the rules that we all learned on the playground. Before beginning a lawsuit, and certainly before entering the courtroom, all members of the bank team ought to reflect upon the aspects of their transaction which made it fair.

Everyone knows what a promise is. No one likes people who don’t keep their promises. The banking industry is based upon enforceable exchanges of promises – some simple and others complex – between the bank and its customers or counter-parties. When a loan is made, it is based on the customer’s promise to repay it. The essence of the transaction really turns on the rule from the playground: If you make a promise to do something, you have an obligation to fulfill it. Adult life is considerably more complicated, but problems (e.g., lawsuits) arise when we stray from this very simple rule.

Granted, the kinds of deals that end up in a courtroom often are very complicated in nature, but whether the case is being decided by a judge or a jury, it’s incumbent on the bank to identify and explain the essential fairness of the deal in question. If an arrangement can’t be explained in terms of fairness, it probably isn’t. In presenting the essential fairness of a deal, there is never room for arrogance. Rather, the attitude must be one of measured empathy and humility.

Banks face an uphill battle these days within the legal system. While people in any industry naturally tend to become immersed in their own culture, language and shared institutional goals, litigation takes them out of that environment and puts them in front of other people who are scrutinizing their behavior from a completely different perspective. However, there is a common denominator – the principles of fairness that we together learned on the playground. In these times, it is essential that any bank present its case in accordance with this basic rule and fortify the perception that the bank’s team constitutes the most reasonable persons in the courtroom as they project simplicity, humility and understatement without the slightest hint of arrogance.

Mr. Hamer is a senior trial attorney in the Boston office of national law firm LeClairRyan, focusing his practice on issues pertaining to the financial services industry and commercial creditors in state, federal and bankruptcy courts. He can be reached at [email protected].