According to a one-paragraph letter filed late last week with U.S. District Court, Middle District of Georgia, a California title insurance company has “resolved” its lawsuit against Columbus Bank & Trust stemming from the 2010 issues with attorney Michael Eddings’ trust account.
There were no additional details available and phone calls to attorneys representing First American Title Insurance Company and CB&T were not immediately returned Monday.
A spokesman for CB&T’s parent company, Columbus-based Synovus, would only say the matter has been resolved. Kirsten Stevenson, a Page, Scrantom, Sprouse, Tucker & Ford attorney representing CB&T, alerted the court of the pending settlement.
First American filed suit against Eddings, his then wife Sonya Eddings, and CB&T in an attempt to recover nearly $2 million in losses and legal fees after an Eddings’ trust account was shut down by CB&T in October 2010. That breaks down to more than $1.55 million in title insurance claims and more than $425,000 in legal fees and expenses.
In its fourth-quarter earnings report, Synovus included “a $10 million charge for loss contingency accruals with respect to outstanding legal matters which reduced earnings per share by one cent,” according to a statement read by Kessel Stelling, Synovus chairman and CEO, during a conference call with financial analysts following the earnings release.
“Every quarter we review legal matters and other contingencies, and adjust accruals as required under the accounting rules,” the company said in a statement. “We cannot comment further on pending legal matters, but refer you to our SEC filings for more details on pending lawsuits and other contingencies.”
As of Monday, there was no mention of the First American settlement in U.S. Securities and Exchange filings. Eddings, who is still practicing law in Columbus, was a prominent real estate closing attorney. He faces a Georgia Bar disciplinary hearing later this month.
Michael Eddings and Sonya Eddings are still in the civil suit, and there appears to be an ongoing federal criminal investigation. FBI agents have contacted and interviewed people who claim to have been defrauded by Eddings.
On Friday, First American asked the federal court to enter a default judgment against Sonya Eddings, who has not responded to any of the suits, but admitted to misappropriating the money in a hand-written statement when First American began investigating the situation in October 2010.
The First American settlement with CB&T comes on the heels of a ruling less than two weeks ago by U.S. District Court Judge Clay Land that left CB&T in the suit after the bank had filed a motion requesting to be dismissed.
From 2007 through October 2011 — when the trust account was finally closed by CB&T — the trust account ran a negative balance 50 times, First American claims.
“According to First American, CB&T’s negligence caused unauthorized payments to be made from the trust account which ultimately caused damage to First American,” Land wrote in his 13-page ruling.
CB&T had asserted in court documents that it was unaware of the misappropriation until all of the damage had been done and that it acted reasonably when it learned of the fraudulent conduct, according to the ruling.
In its suit, First American outlined what it claims is a four-year pattern of overdrafts and other actions that should have caused CB&T to know there was fraudulent activity in Eddings’ trust account.
First American’s claims include:
In 2007, the trust account had negative balances 17 times, including one for $120,794.80.
In 2008, the trust account ran negative balances 18 times, including one for $224,335.91.
In March 2009, CB&T learned that the Eddings Law Firm regularly attempted to “re-deposit” duplicate checks in its trust account using a special on-site deposit device. CB&T found the activity was “more than just an error” — it sent up “Red Flags” and resulted in CB&T shutting down the on-site deposit practice.
In 2009, the trust account ran a negative balance 10 times, including one for $250,861.22.
“Though these negative balances alone are not necessarily sufficient to put CB&T on notice that the Eddings Law Firm was misappropriating trust funds from the account, this evidence cannot be ignored in determining whether CB&T had knowledge of the breach of trust,” Land wrote.
First American also claims that on Aug. 29, 2011, almost two months before it went to the Muscogee County Superior Court and raised questions about Eddings’ trust account, CB&T knew that Eddings had failed to make a timely payoff for a loan closing and manufactured a fake wire transfer confirmation to cover the shortfall.
“Notwithstanding these circumstances, the record could be construed to support the finding that CB&T took no action to address the fraudulent activity,” Land wrote.