By Victoria McKenzie

Law360 (May 19, 2021, 6:07 PM EDT) -- A federal judge has ordered Bank of America to provide preliminary relief to a class of California public benefits recipients suing the bank for freezing their accounts after failing to protect them from fraud, finding the plaintiffs have a "strong likelihood of success" on their claims.

The parties will work out terms and scope of relief in front of a magistrate judge next week, according to Judge Vincent Chhabria's Monday order. For the purpose of granting injunctive relief, the judge extended provisional class certification to all benefits cardholders who call the bank to report suspected fraudulent activity.

"The harm being suffered by class members is irreparable," Judge Chhabria wrote, underscoring the plaintiffs' urgent need to access pandemic relief funds for food, housing and medical care.

"Continued denial of these benefits will seriously hinder the ability of many class members to feed their families and keep a roof over their heads," the judge said.

The judge also spurned the bank's argument that the plaintiffs are "categorically barred" from obtaining relief due to lack of standing, saying they have Article III standing because the named plaintiffs were being injured by the bank's conduct when they filed suit, and some are still being injured today.

California's Employment Development Department, or EDD, issues payments via prepaid Bank of America debit cards instead of direct deposits.

As California's unemployment benefits administrator, Bank of America issued over 8.2 million prepaid debit cards during the height of the COVID-19 pandemic. When benefits recipients began to notice unauthorized charges on what they call the "antiquated" cards, they say the bank froze their access to funds instead of conducting a proper investigation.

In January, benefits recipient Jennifer Yick filed a proposed class action against the bank for being "unwilling or unable" to prevent criminals from breaching cardholders' accounts and draining the desperately needed benefits.

Benefits recipients spent hours trying to get through to customer service, according to the amended complaint, and when they did, "the bank then violates their statutory, common law, and constitutional rights by denying their fraud claims without investigation or explanation and freezing their EDD debit card accounts indefinitely," and "depriving them of access to their past and future EDD benefits without any prior notice or an opportunity to be heard."

Yick argued that the bank's policies and practices violate California's Electronic Funds Transfers Act and Unfair Competition Law.

The class made its bid for injunctive relief last month, saying the plaintiffs were suffering continued harm as a result of their accounts being frozen despite being victims of fraud.

In his order, Judge Chhabria said the class had made a strong argument that Bank of America violated statutes "by failing to conduct an adequate, good faith investigation when cardholders report unauthorized charges, and often simply freezing cardholder accounts based on a faulty screening process."

According to Brian Danitz of Cotchett Pitre & McCarthey LLP, co-lead counsel for the plaintiffs, the injunction ordered Monday "will protect tens of thousands of Californians who are receiving unemployment benefits from the irreparable harm caused by Bank of America's practices."

"We look forward to engaging in that process and to the result which will provide immediate relief to the class," he told Law360.

In a statement, Bank of America said it appreciates "the judge's recognition of the difficult situation that EDD and Bank of America have faced given the pandemic," including "unprecedented criminal fraud," adding that it welcomes "the opportunity to discuss this further with plaintiffs and the magistrate judge."

The court has scheduled a hearing in August to discuss Bank of America's motion to dismiss the case.

The instant case was consolidated with nine other lawsuits in March. On May 27, the Judicial Panel on Multidistrict Litigation will hear Yick's motion to centralize the cases in the U.S. District Court for the Northern District of California.

According to Danitz there are at least 13 additional lawsuits pending throughout the state.

Lead counsel for the plaintiffs are Cotchett Pitre & McCarthy LLP and Altshuler Berzon LLP.

Bank of America is represented by Goodwin Proctor LLP and Manatt Phelps & Phillips LLP.

The case is Jennifer Yick et al. v. Bank of America, case number 3:21-cv-00376, in the U.S. District Court for the Northern District of California.

--Editing by Marygrace Murphy.

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