Odell v. Wallingford Municipal Federal Credit Union
Social Security funds can be exempt from setoff by a financial institution, pursuant to 42 United States Code §407 of the Social Security Act. Plaintiff Naomi Odell co-signed her husband's application for a loan from the Wallingford Municipal Federal Credit Union. The credit union sued the plaintiff and her husband, alleging that they defaulted on the loan, and obtained judgment in the amount of $18,443. The plaintiff closed her checking account. After the U.S. Treasury deposited $13,801 into the closed credit union account, as a lump sum payment of Social Security disability benefits, the credit union redirected the funds to an open share account, placed a hold on the funds and then took the funds, in partial satisfaction of the $18,443 judgment. The plaintiff had intended to use the funds to pay her mortgage. The plaintiff sued, alleging that the credit union violated 42 U.S.C. §407 and engaged in statutory theft. "[T]he defendant's conduct in seizing the plaintiff's exempt social security benefits," wrote the court, "demonstrated a reckless disregard of the plaintiff's rights." The defendant violated public policy that protects exempt funds. The plaintiff was financially vulnerable and in desperate need of benefits as a result of medical disability. The defendant's conduct merited a substantial penalty, and the court awarded punitive damages of $41,403. Attorney fees were appropriate to encourage the prosecution of Connecticut Unfair Trade Practices Act cases in the future and to deter credit unions from similar conduct. The legal issues were novel and complex. An issue of first impression existed concerning whether the Federal Credit Union Act pre-empted the Social Security Act. Damages were highly contested. Evidentiary issues and pre-trial motions required research and oral argument. The plaintiff prevailed on statutory theft, conversion and violation of CUTPA and did not prove consequential damages of $35,000, as the result of the foreclosure of her residence. The court awarded the plaintiff $41,403 for statutory theft; $41,403 for punitive damages; $93,319 in attorneys' fees to the plaintiff's attorneys, Joanne Faulkner and Timothy Pothin, who were experienced and competent; $21,443 in interest and $1,935 in costs, for a total of $200,505.