Wells Fargo charged excessive legal fees to a borrower who sought to pay off a commercial mortgage, wrongfully increasing the amount that he owed by $40,000, a Florida court ruled.
The San Francisco bank had told Vladimir Galkin that he needed to pay roughly $100,000 in legal fees to pay off his mortgage on a New Jersey warehouse. Galkin embarked on a nearly decadelong legal fight to overturn the charges, which culminated in a ruling by Judge Reemberto Diaz of the 11th Circuit Court late last week.
Diaz wrote that the bank duplicated legal work and charged an excessive number of hours for basic tasks. The judge also rebuked Wells for withholding billing records, which the bank said would justify the legal fees, for seven years.
"It is inexplicable to this court why the bank would refuse to provide these same redacted records to the borrower before his suit," Diaz wrote in his ruling.
Wells Fargo must pay the plaintiff to cover the unnecessary legal fees charged to pay off the mortgage, plus $22,960 in legal fees that the plaintiff incurred in his lawsuit against the bank.
The case dates back to 2013, when Galkin missed three mortgage payments and told Wells Fargo that he was interested in selling the property in a short sale.
A November 2013 letter from Wells Fargo said the payoff balance was $1.28 million, including principal, interest and relevant non-legal fees. The letter didn't mention attorneys' fees. But by the spring of 2014, the bank issued a letter requesting more than $100,000 in legal fees. Wells refused repeated requests for invoices proving the high legal fees, Galkin said.
The bank argued that the billing records were protected by attorney-client privilege, but experts for both sides testified against that argument during the trial.
Galkin ended up paying the full amount, but he sued the bank for what he saw as unreasonable legal fees.
Galkin requested that Wells cover the more than $575,000 he paid to his personal attorney, but the judge found that only $22,960 worth of fees were caused by Wells Fargo's actions. The judge denied Galkin's request for damages to compensate for the returns he could have made had he invested the money in the stock market.
The case was heard between Aug. 30 and Oct. 28 of this year in state court in Miami-Dade County.
Wells Fargo declined to comment on the judge's ruling.
