Baltimore Jury Hits First Union Bank With $276 Million Verdict in Steele Software Fraud Case

Scott Steele built Steele Software Systems Corp. around a single specialized idea: automated processing of appraisal and title transactions for residential mortgage loans. In November 1997, First Union National Bank signed a Service Agreement with Steele Software, committing to direct a minimum volume of loan transactions to the company each month. Steele upgraded his facilities and staffing in anticipation of a long-term partnership.

The relationship unraveled quickly. By spring 1999, First Union had effectively stopped sending business to Steele Software. What the litigation later revealed was more than a quiet contract termination: the bank had allegedly taken Steele's proprietary processing methods and used them to build its own competing system, called GreenLink, which was projected to generate $2.4 billion in profits. Steele argued that more than 650,000 mortgage transactions he was contractually entitled to process at roughly $80 each were diverted to that internal operation.

After a six-week trial in Baltimore City Circuit Court, a six-person jury sided with Steele Software in March 2002. The verdict totaled $276 million: $39.4 million in compensatory fraud damages, $37.4 million for breach of contract, and $200 million in punitive damages. It was one of the largest jury awards in Maryland history. William H. Murphy Jr. of Murphy Falcon and Murphy was among the attorneys who represented Steele, telling jurors during the trial that 'the worst thing in America is a cheating bank.'

First Union, by then operating as Wachovia Corp., appealed. In December 2003, the Court of Special Appeals of Maryland reversed the fraud-related awards, finding insufficient evidence to support the fraudulent-inducement claim. The court reasoned that the Service Agreement's 'best efforts' language, combined with a non-exclusive right of referral, did not obligate the bank to deliver any defined share of its loan volume to Steele Software. Without that clear obligation, the fraud claim could not stand.

The breach-of-contract judgment survived. The appellate court affirmed the $37.4 million award tied to First Union's failure to meet its contractual transaction-referral commitments during the period the agreement was in force. The punitive damages award of $200 million was reversed in full.