A $4 million windfall granted to each of the five law schools within the University of California system in March has been whittled down to $30,000 per campus by a federal bankruptcy judge.

The schools were set to pocket $4 million each from Bank of America as part of a judgment against the financial institution for its years-long mismanagement of a California couple's mortgage. The collective $40 million in punitive damages awarded to the schools and two consumer protection groups—none of which were involved in the initial lawsuit—were intended to catch Bank of America's attention and prompt it to improve the way it treats customers, according to the March 2017 ruling by U.S. Bankruptcy Judge Christopher Klein of the Eastern District of California.

But Klein vacated the punitive damages award on Jan. 18 after the plaintiffs reached a settlement with Bank of America. The couple, Erik and Renee Sundquist, will now receive a payment from the bank in excess of the $6 million Klein initially awarded them, and will donate $30,000 to each of the law schools and $75,000 to the two consumer groups. (The exact amount the couple will receive is confidential under the settlement, although they said in court papers that they could prove upwards of $9 million in damages.)

“I'm not going to say I'm disappointed,” said Kevin Johnson, dean of the University of California, Davis School of Law. “I thought it was unlikely that it would remain intact. Of course, we would have put it to good use had we gotten it, but I can't say I put together a bunch of plans of how we would spend the money before we were certain we would get it.”

David Faigman, dean of the University of California, Hastings College of the Law, said he, too, was not counting on the full amount to materialize.

“My first reaction was that one should not count one's chickens before they're hatched,” he said. “Here, this turned out to be eggs for omelets rather than for young chicks. And that's OK. We will use the $30,000 for good outcomes, and we will devote the money to achieving what we can in the spirit of the Bank of America case and consumer protection.”

Now, the UC law deans are contemplating how to best utilize their significantly smaller awards. Hastings might create a scholarship for students interested in consumer protection and public interest law, Faigman said.

Johnson had initially envisioned using the funds to fund an endowed chair in consumer law, but has scaled back plans in light of the significantly smaller gift.

“It can probably fund a lecture series over the next five years on consumer protection law,” Johnson said. “It struck me that having someone come through and talk about the issue might affect more people in the community than a scholarship. That might be what the judge had in mind—the importance of educating people about the laws that protect consumers.”

The law schools intervened in the case after Klein's first order granting them the $4 million but are not planning to appeal his latest ruling, according to Rhonda Goldstein, an attorney in the University of California's Office of General Counsel, which represented UC Davis; the University of California, Berkeley School of Law; the University of California, Irvine School of Law; and the University of California, Los Angeles School of Law. (UC Hastings operates independently of the central UC system and had separate counsel in the matter.)

“From our perspective, we are pleased that the court has recognized the public value that our law schools provide and we're pleased that the Sundquists have agreed to make this voluntary contribution to our law schools,” Goldstein said.

Johnson said the initial $4 million award caught he and his fellow UC deans by surprise, given they weren't parties to the suit.

Klein defended the unusual provision granting punitive damages to the third-party law schools and consumer protection groups in his initial ruling, saying a large amount was necessary to prompt changes at the bank but that awarding such a high figure to the plaintiffs alone would be inappropriate. The law schools and consumer protection groups are well positioned to help prevent banks from taking advantage of consumers, he reasoned.

“By channeling to these public academic and consumer advocacy institutions the societal portion of legitimate punitive damages, to be earmarked for consumer law purposes, this court is able to fashion a punitive damages remedy that addresses the enormity of the situation,” Klein wrote.

The Sundquists sued Bank of America following a long struggle to secure a modification of the mortgage for their Sacramento-area home, which Klein called a “Kafkaesque nightmare” in his initial ruling. Bank of America foreclosed on the home in 2010 then rescinded the foreclosure without telling them. The home was looted in their absence and the Sundquists were fined $20,00 by their homeowners association for landscaping violations accrued while the bank had possession, among other problems.

The settlement with Bank of America allows the Sundquists to increase the amount they receive from the bank and get the funds faster than waiting years during the appeals process. It also decreases the total amount of damages paid by the bank.

“I think the original concept Judge Klein had was admirable, in that it would have served the greater California community to develop a cohort of consumer public advocates and lawyers,” Faigman said of the initial $4 million awards. “That amount of money would have done much in that regard.”