Supreme Court of California Justia
Citation 46 Cal. 4th 630, 207 P.3d 531, 94 Cal. Rptr. 3d 31

Miller v. Bank of America

Filed 6/1/09

IN THE SUPREME COURT OF CALIFORNIA

PAUL MILLER et al.,
Plaintiffs and Appellants,
S149178
v.
Ct.App. 1/3 A110137
BANK OF AMERICA, NT & SA,
San Francisco City and County
Defendant and Appellant.
Super. Ct. No. 301917

Relying upon our decision in Kruger v. Wells Fargo Bank (1974) 11 Cal.3d
352, 356 (Kruger), account holders who deposited Social Security or other public
benefit funds into checking or savings accounts and then overdrew those accounts
contend that Bank of America may not recoup the overdrawn amounts and charge
insufficient funds fees for each transaction that results in an overdraft. In Kruger,
we held that a bank may not satisfy a credit card debt by deducting the amount
owed from a separate checking account containing deposits that “derived from
unemployment and disability benefits” and, thus, were “protected from the claims
of creditors.” (Ibid.) One year later, the Legislature enacted Financial Code
section 864, which comprehensively governs the manner in which banks may
exercise the right to set off debts. Financial Code section 864, subdivision (a)(2)
expressly excludes overdrafts and bank charges from the statute‟s definition of
debt. We conclude that Bank of America‟s practice does not run afoul of our
holding in Kruger because the setoff of independent debt at issue in Kruger is not
1


implicated here. We further conclude that Bank of America‟s practice of
recouping overdrafts and charging insufficient funds fees is permissible in light of
the Legislature‟s unequivocal statement in Financial Code section 864 that
overdrafts and bank charges are not debts and are therefore not subject to the
limitations placed on a bank‟s right of setoff set forth in that statute. Because we
conclude that Bank of America‟s practices do not violate state law, we do not
reach the issue of federal preemption. Accordingly, we affirm the judgment of the
Court of Appeal.
I. BACKGROUND
Representative plaintiff Paul Miller (Miller) receives Supplemental
Security Income1 benefits via direct deposit into his checking account with
defendant Bank of America (the Bank). Miller has maintained an account with the
Bank since 1975, and he began receiving SSI in 1992. Miller testified that he
began having his SSI payments directly deposited into his checking account in
1994 after bank employees assured him that his deposits would be safe from debits
or charges absent his authorization.
In January 1998, the Bank erroneously credited $1,799.83 to Miller‟s
account. In April 1998, the Bank realized its error and reversed the credit to

1
During trial, an expert on the economics and politics of aging, including the
Social Security system, testified regarding two types of Social Security benefits:
Old Age, Survivors, and Disability Insurance (OASDI) and Supplemental Security
Income (SSI). The expert testified that OASDI “provides benefits to aged, retired,
. . . severely disabled persons, . . . some survivors, and also to some dependents
like children of a deceased worker,” and is available “based on [an individual‟s]
work contributions into the Social Security trust funds or on the contributions of a
family member through their work into the trust funds.” SSI is a separate
program, providing “benefits to very low income, aged, blind, [or] disabled
persons.”
2


Miller‟s account without obtaining Miller‟s authorization or providing him with
notice. The reversal caused a negative balance in Miller‟s account that depleted
his May 1998 SSI payment as soon as it was directly deposited. Miller
complained to the Bank that the reversal of the erroneous credit caused a negative
balance in his account, completely depleting his SSI deposit, and he would be
unable to pay rent and other living expenses that month.2 The Bank advised
Miller that he would be responsible for repaying the portion of the erroneous
credit that he had spent, but he could open a separate checking account for his SSI
deposits that would not be used for repayment. The Bank opened a new checking
account and deposited Miller‟s previously deducted May 1998 SSI benefit funds
into it. In June and July 1998, the Bank again used the SSI funds directly
deposited into Miller‟s new checking account to repay the negative credit in his
original account. Miller complained each time, and each time the funds were later
restored.
From time to time, Miller overdrew his account, and the Bank recouped
those overdrafts and associated insufficient funds (NSF) fees from his directly
deposited public benefit funds. Bank employees testified that the Bank
automatically deducted overdrafts and NSF fees from directly deposited funds,
regardless of the source of those funds. Social Security funds received no special
treatment or protection.3 As of 2004, the Bank‟s NSF fees ranged from $14 per

2
At the time of these incidents, Miller‟s sole source of regular income was
the $670.40 he received each month in SSI benefits.
3
The Bank executive responsible for business decisions concerning the
Bank‟s checking products testified that the Bank possessed or could develop the
capability to identify accounts into which public benefit funds are directly
deposited, and could bypass charging NSF fees to those accounts.
3


transaction to $32 per transaction, and up to five NSF fees could be levied in a
single day, for a total daily NSF fee of $160.
The Bank executive in charge of the Bank‟s checking products testified
that, in order to prohibit certain account holders from overdrawing their accounts
(which would eliminate the Bank‟s need to recoup overdrafts or charge NSF fees),
the Bank would have to “bounce” more checks, withhold check deposits for the
maximum allowable period of four days instead of one or two days before the
Bank would make the funds available for withdrawal, eliminate point-of-sale
purchases (but not personal identification number (PIN) or transactions), and
restrict automated teller machine (ATM) withdrawals from non-Bank ATM‟s.
The Bank posts checks, or processes transactions, each day in order of largest to
smallest based on its belief that larger transactions are more important, and
therefore should be cleared first. When an account contains insufficient funds to
cover the checks or point-of-sale transactions, the Bank‟s practice of processing
larger transactions before smaller ones results in the same total amount being
overdrawn from a particular account, but increases the number and amount of NSF
fees imposed.
Miller initiated the instant representative action, and in his first amended
complaint filed on August 13, 1998, alleged fraud, negligent misrepresentation,
and intentional infliction of emotional distress, as well as violations of Code of
Civil Procedure section 704.080; the Consumers Legal Remedies Act (CLRA),
Civil Code section 1750 et seq.; the unfair competition law (UCL), Business and
Professions Code section 17200 et seq., and the false advertising act, Business and
Professions Code section 17500 et seq.
On October 16, 2001, the trial court denied in part and granted in part the
Bank‟s motion for summary judgment and summary adjudication. The trial court
granted the Bank‟s motion for summary adjudication with respect to plaintiff‟s
4
claims for violation of Code of Civil Procedure section 704.080, and for
intentional infliction of emotional distress, and denied the Bank‟s motion for
summary judgment with respect to all other claims. The trial court found that
triable issues of fact remained regarding the fraud, negligent misrepresentation,
CLRA, UCL, and false advertising claims as to whether the Bank made false or
misleading statements concerning the availability of directly deposited funds,
whether the Bank had a practice of debiting benefit funds to collect overdrafts and
other charges, and whether the Bank‟s practices as applied to plaintiff violated the
UCL.
On the same day, the trial court also certified a class consisting of “[a]ll
California residents who have, have had or will have, at any time after August 13,
1994, a checking or savings deposit account with Bank of America into which
payments of Social Security benefits or other public benefits are or have been
directly deposited by the government or its agent.” As the Court of Appeal noted,
“[i]n 2003, the Bank had 1,079,414 such accounts. Each month more than $800
million in government benefits is electronically deposited into class members‟
accounts. Between January 1994 and May 2003, the Bank debited at least
$284,211,273 in NSF and other overdraft fees from accounts containing Social
Security direct deposits.” Although SSI benefits constituted Miller‟s primary
source of income, the class consisted of all Bank customers who received directly
deposited public benefit funds without regard to whether those class members had
available alternate sources of income to cover their basic living expenses.
On February 25, 2004, following a bifurcated trial in which the jury
considered CLRA issues and the trial court also considered CLRA issues, as well
as UCL and false advertising issues, the jury returned its verdict, finding that the
Bank violated the CLRA by “falsely represent[ing] that it ha[d] the right to use
Social Security funds from direct deposit accounts that receive government
5
benefits including Social Security funds to pay overdrafts, insufficient fund[s]
fees, . . . and money claims it has against class members.” The jury awarded
$75,077,836 in compensatory damages to the class, and awarded $1,000 in
statutory damages to each class member who suffered substantial economic or
emotional damage. The jury also found that Miller suffered emotional distress as
a result of the Bank‟s conduct, and awarded him individual damages in the amount
of $275,000.
On December 30, 2004, the trial court issued its statement of decision
following a bench trial regarding plaintiffs‟ CLRA, UCL, and false advertising
claims. Relying on Kruger, supra, 11 Cal.3d 352, the trial court found that the
Bank violated the CLRA, the UCL, and the false advertising act, and awarded
$284,385,741 in compensatory and restitutionary damages to class members,
concluded that each class member suffered substantial economic or emotional
damage meriting the $1,000 in statutory damages awarded by the jury to eligible
class members, enjoined the Bank from continuing to violate the CLRA, and
awarded attorney fees and costs to plaintiffs.
The Court of Appeal reversed the trial court‟s judgment, holding that
Kruger did not apply to the Bank‟s practice of debiting overdrafts and charging
NSF fees to account holders who deposited public benefit funds. We granted
review to consider whether the Bank‟s practice violated our holding in Kruger,
and, if so, whether federal law preempted application of a state law prohibiting the
setoff of overdrafts and NSF fees.
II. DISCUSSION
A. Setoff of Exempt Funds
Miller argues that the Bank‟s practice of recouping overdrafts from, and
charging NSF fees to, class members runs afoul of our holding in Kruger, supra,
6
11 Cal.3d 352, and is inconsistent with the strong public policy prohibiting the
setoff of exempt public benefit funds. The Bank argues, and the Court of Appeal
agreed, that the Bank‟s practice is nothing more than routine internal account
balancing, and is distinct from the setoff of independent debt prohibited in Kruger.
While the Bank‟s practice here implicates to some extent the policy considerations
at issue in Kruger, we are ultimately persuaded that the practice of recouping
overdrafts and charging NSF fees is not prohibited by our decision in Kruger. Our
conclusion is bolstered by Financial Code section 864, which limits the manner in
which banks may set off debts, but expressly excepts overdrafts and bank fees
from those limitations.
In Kruger, Jean Kruger maintained a checking account and a credit card
account with Wells Fargo Bank. (Kruger, supra, 11 Cal.3d at p. 356.) She
deposited into her checking account her unemployment compensation and state
disability benefits, which were her only sources of income. (Ibid.) Without
notifying Kruger in advance, Wells Fargo deducted $87.68 from her checking
account, which was the entire balance of the account, and applied it against a
delinquency in her credit card account. (Ibid.) Wells Fargo refused to honor
several checks that Kruger had written before the funds were deducted from her
account and billed her $44.00 in service charges for the dishonored checks. (Ibid.)
We held that the bank was prohibited by statute from using the funds in
Kruger‟s checking account to satisfy the delinquency in her credit card account,
because the funds consisted of exempt unemployment and disability benefits.
(Kruger, supra, 11 Cal.3d at p. 370.) We explained that a bank may not exercise
its right of setoff against deposits of state disability insurance and unemployment
compensation because “[f]unds derived from such sources are exempt from
attachment and execution” by statute. (Id. at p. 367.) Although a “banker‟s
setoff” is not the same as attachment and execution, which are expressly
7
prohibited by the statutes, we held that “there is no relevant difference between the
two procedures as to the state objective of protection of unemployment
compensation and disability benefits from claims of creditors. The assertion of a
banker‟s setoff has exactly the same effect as a third party‟s levy of execution on
the account—it deprives the depositor of the income which the state provided him
to meet subsistence expenses, compelling the state either to give him additional
money or leave him without means of physical survival.” (Id. at pp. 370-371, fn.
omitted.)
Our decision in Kruger recognized that public benefits such as
unemployment compensation and state disability insurance benefits exist to
provide subsistence income to a person who recently lost a job (in the case of
unemployment compensation) or to a person “whose unemployment stems from
an illness or injury not covered under workmen‟s compensation.” (Kruger, supra,
11 Cal.3d at p. 370.) The Legislature‟s objective in providing unemployment
compensation and disability insurance benefits would be thwarted if those funds
were subject to attachment or execution. (Ibid.) Permitting “a banker‟s setoff
against unemployment and disability benefits diverts money intended by the state
to pay the current living expenses of the unemployed and the disabled into
payment of past debts accumulated by the bank, leaving the intended beneficiaries
no alternative but to seek additional relief from the state.” (Id. at p. 367, italics
added.)
Here, unlike in Kruger, the Bank is not setting off independent, past debt.
Instead, the transaction occurs within a single account and is triggered by a
customer‟s overdraft, causing the Bank to recoup those funds from a subsequent
deposit, and charge an NSF fee. In Kruger, we concluded that the setoff of
exempt funds to satisfy debts external to the bank customer‟s checking or savings
account was unlawful. (Kruger, supra, 11 Cal.3d at p. 370.) Plaintiffs urge us to
8
view the fact that the Bank is balancing and charging fees within a single account
as indistinguishable from a bank‟s setoff of debt external to a customer‟s account,
and to extend Kruger to the present case. We do not agree with plaintiffs that
there is no meaningful difference between satisfying a debt external to an account
and recouping an overdraft of an account from funds later deposited into that same
account.
We are certainly mindful of the strong public policy reasons underlying our
decision in Kruger, and we recognize that the statutes at issue in Kruger are
similar to the statutes implicated here, exempting Social Security and other public
benefit funds from attachment. Indeed, just as Code of Civil Procedure former
section 690.1754 and Unemployment Insurance Code former section 1342 (the
statutes at issue in Kruger) prohibited the attachment or execution of exempt
public benefit funds, Code of Civil Procedure section 704.080 provides that an
account into which Social Security payments are directly deposited “is exempt to
the extent that it consists of payments of public benefits or social security
benefits” authorized by the Social Security Administration. (Code Civ. Proc.,
§ 704.080, subd. (c).)5

4
Code of Civil Procedure, former section 690.175, provided, “State
unemployment compensation [and other enumerated state] benefits . . . shall be
exempt without filing a claim of exemption, as provided in Section 690.50 [setting
forth exemption proceedings].” (As amended by Stats. 1982, ch. 1072, § 2,
p. 3856; repealed by Stats. 1982, ch. 1364, § 1, p. 5070.)
5
Code of Civil Procedure sections 704.110 and 704.120 also exempt from
attachment — with certain limitations for child and spousal support payments —
public retirement benefits and unemployment insurance and compensation
benefits. Code of Civil Procedure section 704.170 exempts social services aid
payments from attachment, without limitation. As noted in the text, just as Code
of Civil Procedure, former sections 690.175, 690.18, 690.30, and Unemployment
Insurance Code former section 1342 exempted the public benefit funds at issue in

(footnote continued on next page)
9



Plaintiffs emphasize the policy concerns addressed in Kruger, namely, that
the “objective in providing [public] . . . benefits — to furnish the
[recipient] . . . and his [or her] family with a stream of income to defray the cost of
their subsistence — would obviously fail if creditors could seize that income and
apply it to past debts. Consequently, the Legislature provided that
[public] . . . benefits cannot be subjected to attachment or execution.” (Kruger,
supra, 11 Cal.3d at p. 370, italics added.) By concluding that banks may recoup
overdrafts and charge NSF fees from public benefit recipients, we do not intend to
diminish the significance of preserving public benefit funds for “defray[ing] the
cost of . . . subsistence.” (Ibid.) However, it is far from clear that this policy is
undermined when banks recoup overdrawn balances from subsequently deposited
public benefit funds. Indeed, an overdraft may be the result of the bank honoring,
rather than bouncing, a rent or utility payment made prior to the deposit of benefit
funds. Requiring banks to dishonor checks can harm the customer‟s credit rating,
result in the customer‟s incurring fees, and affect the customer‟s relationship with
merchants. In this case, policy concerns about the setoff of independent debt — at
issue in Kruger — are not present here, where the credits and debits occur in a
single account.
The Legislature recognized the distinction between the setoff of
independent debt and the recoupment of overdrafts and bank charges in Financial
Code section 864, which comprehensively regulates the manner in which banks
may exercise their right of setoff. Financial Code section 864 limits a bank “in

(footnote continued from previous page)

Kruger from attachment, Code of Civil Procedure sections 703.010, 704.080,
704.110, 704,120, and 704.170 exempt the funds at issue here from attachment.
10


exercising any setoff for a debt claimed to be owed to the bank by a customer in
that a setoff shall not result in an aggregate balance of less than one thousand
dollars,” and describes the notice and opportunity to object that a bank must
provide a customer prior to setting off debt. (Fin. Code, § 864, subds. (b), (c).)
Debt is defined in the statute to exclude “a charge for bank services or a debit for
uncollected funds or for an overdraft of an account imposed by a bank on a deposit
account.” (Fin. Code, § 864, subd. (a)(2).)
Plaintiffs argue that Financial Code section 864 serves two purposes — it
ensures that banks provide notice to customers prior to exercising a setoff, and it
prohibits the setoff of funds resulting in a balance of less than $1,000. Plaintiffs
argue that the Legislature excluded NSF fees and overdrafts from Financial Code
section 864‟s definition of debt because the Legislature intended that funds
exempt from setoff would never be subject to the recoupment of overdrafts and
charge of NSF fees, and the Legislature therefore never intended that banks would
give notice prior to setting off exempt funds. Plaintiffs also suggest that because
the statute prohibits the setoff of funds resulting in a balance under $1,000, the
exclusion of bank charges and overdrafts from the definition of debt has no impact
on the present case because the setoff of overdrafts and NSF fees necessarily
would apply only to a balance of less than $1,000.
The Court of Appeal reasoned that Financial Code section 864‟s “different
treatment for overdrafts and bank charges signals the Legislature‟s view that
internal account balancing is different from the practice of setting off separate debt
against a deposit account, does not implicate the same considerations, and does not
warrant the same legal treatment.” The Bank similarly contends that because
Financial Code, section 864 “expressly excludes internal overdraft and fee
balancing from its restrictive scheme, . . . a bank need not provide the statutory
11
notice when it balances fees or overdrafts, and customers cannot assert an
exemption under the statute from those practices.”
To determine the Legislature‟s intent, we begin by analyzing the statutory
language. (Olson v. Automobile Club of Southern California (2007) 42 Cal.4th
1142, 1147 (Olson).) The language of Financial Code section 864 is plain: “For
the purposes of this section: [¶] . . . [¶] . . . „[d]ebt‟ . . . does not mean a charge for
bank services or a debit for uncollected funds or for an overdraft of an account
imposed by a bank on a deposit account.” (Fin. Code, § 864, subd. (a)(2).) The
statute proscribes a bank‟s ability to set off “debt” if the customer‟s balance would
be reduced to less than $1,000, and requires that a bank provide a customer with
notice when it exercises its right to set off a “debt.” (Fin. Code, § 864, subds. (b),
(c).) Thus, the statute expressly provides that the types of funds at issue here —
overdrafts and NSF fees — do not constitute debt. Accordingly, without regard to
whether a customer‟s balance would fall below $1,000, and without having to
notify a customer prior to exercising its right of setoff, a bank may recoup
overdrafts and charge NSF fees pursuant to Financial Code section 864.
Plaintiffs also argue that a plain reading of the statute reveals that its
purpose was not “to overrule this Court‟s decision in Kruger.” While that appears
to be true, it does not follow that the Legislature intended that overdrafts and NSF
fees could not be recouped from public benefit funds. Although we need not look
to extrinsic sources to discern legislative intent when the statutory language is
susceptible of only one reasonable interpretation (see Olson, supra, 42 Cal.4th at
p. 1147), an examination of the legislative history supports our conclusion that
Financial Code section 864 was aimed at protecting customers from a bank‟s
potentially unlawful or unfair exercise of its right of setoff while simultaneously
excluding overdrafts and NSF fees from the statute‟s reach.
12

The Legislature‟s concern in passing Assembly Bill No. 711, codified as
Financial Code section 864, was that bank accounts were “often [being] wiped out
by the banks‟ taking their [customers‟] assets to pay outstanding credit card
balances owed. The customer deserves to have some protection from this
practice.” (Sen. Democratic Caucus, analysis of Assem. Bill No. 711 (1975-1976
Reg. Sess.) as amended June 5, 1975.) The bill proposed to “solve[] the problem
of the hostage bank account by denying a bank an equitable right of setoff with
respect to funds of a customer held in a deposit account and by requiring banks to
invoke orthodox judicial proceedings to attach bank deposits.” (Assem. Com. on
Finance, Insurance and Commerce, Analysis of Assem. Bill No. 711 (1975-1976
Reg. Sess.) as amended Apr. 16, 1975, p. 2.)
Indeed, the Governor was advised to sign the bill, in a document
acknowledging that it was a “small step in [the] right direction.” (Dept. Consumer
Affairs, Enrolled Bill Rep. on Assem. Bill No. 711 (1975-1976 Reg. Sess.) Sept.
11, 1975, p. 1.) Financial Code section 864 was enacted to prohibit a bank from
using setoff as “nothing more than a form of nonstatutory, nonjudicial
prejudgment attachment applied on a continuing basis to what may be considered
a „necessity of life,‟ without even the minimal protection of subsequent
adjudication. Seizure of funds in deposit accounts should be limited. Consumers
should, at a minimum, be provided notice and a chance to contest such seizure.”
(Id. at p. 2.)
Protecting consumers, including public benefit recipients, from unfair or
unlawful setoff does not mean, as plaintiffs suggest, that banks must be prohibited
from recouping overdrafts and charging NSF fees under Financial Code section
864. Plaintiffs criticize the Court of Appeal‟s conclusion that excluding overdrafts
and bank charges from the statute‟s definition of debt “signals the Legislature‟s
view that internal account balancing is different from the practice of setting off
13
separate debt against a deposit account” as “illogical and unsupported by any
evidence of legislative intent.” However, the plain language and the history of the
statute compel a contrary conclusion.
The bill was twice amended in 1975 before the definition of debt currently
found in the statute was added to the proposed language. (Assem. Bill No. 711
(1975-1976 Reg. Sess.) as amended May 29, 1975.) In April 1975, when the
amendment containing the current definition of debt was proposed, the bill was
opposed by the California Bankers‟ Association and the California Credit Union
League. (Assem. Com. on Finance, Insurance and Commerce, Analysis of Assem.
Bill No. 711 (1975-1976 Reg. Sess.) as amended Apr. 16, 1975, p. 3.) However,
by September 11, 1975, the bill had “no opposition as the sponsor, author, and
financial institutions have worked closely together.” (Dept. Consumer Affairs,
Enrolled Bill Rep. on Assem. Bill No. 711 (1975-1976 Reg. Sess.) Sept. 11, 1975,
p. 1.) It is reasonable to conclude that the former opponents of the bill
successfully sought to amend the language to exclude internal account balancing
from the statute‟s reach, particularly in light of the documents suggesting that
financial institutions “worked closely” with the bill‟s authors and sponsors. In any
event, while the materials do not reveal precisely why, or at the behest of whom,
the definition of debt was amended to exclude overdrafts and bank charges, it is
clear from the statutory language that the Legislature intended to treat charges for
overdrafts and NSF fees differently from the setoff of independent debt by limiting
a bank‟s ability to engage in the latter while expressly permitting the former.
Our interpretation of Financial Code section 864, as well as our conclusion
that Kruger does not prohibit the Bank‟s internal balancing practices, are
consistent with the Office of the Comptroller of the Currency‟s (OCC)
interpretation of analogous federal law. Following our grant of review in this
case, the OCC issued Interpretive Letter No. 1082 (June 2007) (Letter), upon
14
which the Bank relies. The Letter responds to two inquiries posed by a bank to the
OCC: first, “with respect to deposit accounts [a bank] maintains for its customers
in California,” whether the bank “is authorized under the National Bank Act and
regulations of the OCC” to permit customers to overdraw their accounts, recoup
overdrafts, and charge NSF fees where the bank‟s agreements with its customers
permit such activity; and second, whether a bank‟s “overdraft practices . . .
constitute an exercise of a „right to collect debts‟ for purposes of the OCC‟s
regulations concerning the applicability of state law to a national bank‟s deposit-
taking activities.” 6 (Letter, at p. 1.) The OCC notes that the bank in question
“does not differentiate based on the source of funds — such as the deposit of
Social Security benefits or other public benefits payments — held in the
depositor‟s account.” (Id. at p. 2.)
The OCC concluded that a national bank may “honor items for which there
are insufficient funds in depositors‟ accounts and recover the resulting overdraft
amounts as part of the [b]ank‟s routine maintenance of these accounts; and . . .

6
We note that in Lopez v. Washington Mut. Bank, FA (9th Cir. 2002) 302
F.3d 900, the Ninth Circuit also addressed the distinction between internal account
reconciliation and the setoff of independent debt, and reached a conclusion, in line
with ours here, that Kruger‟s prohibition of the setoff of independent debt does not
apply to the Bank‟s practice of recouping overdrafts and charging NSF fees. In
Lopez, the court concluded that because depositors voluntarily consented to
Washington Mutual‟s overdraft practices, analogous to the Bank‟s practices here,
no violation of the federal statutes prohibiting the attachment of exempt Social
Security and SSI funds occurred. (Lopez, supra, 302 F.3d at p. 904.) While the
decision in Lopez ultimately rested on depositors‟ consent to the bank‟s
recoupment of overdrafts, the court distinguished a Tenth Circuit case prohibiting
the setoff of public benefit funds because, in that case, the bank “used the Social
Security deposits to satisfy a separate, pre-existing debt unrelated to the operation
of the depositor‟s checking account.” (Lopez, supra, 302 F.3d at p. 906, analyzing
Tom v. First American Credit Union (10th Cir. 1998) 151 F.3d 1289, 1293.)
15


establish, charge and recover overdraft fees from depositors‟ accounts for doing
so” (Letter, at p. 1) without running afoul of 12 United States Code section 24
(Seventh), or 12 Code of Federal Regulations part 7.4002 or 7.4007. (Letter, at
p. 7.)7 The OCC explained that “the processing of an overdraft and recovery of an
overdraft fee by balancing debits and credits on a deposit account are activities
directly connected with the maintenance of a deposit account. Fundamentally, the
[b]ank is not creating a „debt‟ that it then „collects‟ by recovering the overdraft and
the overdraft fee from the account.” (Letter, at p. 6.)

7
The parties dispute the deference owed to the position espoused by the
OCC in the Letter. As a general matter, we owe deference to reasonable agency
interpretations of agency-promulgated regulations, including the OCC‟s
interpretations of its regulations interpreting federal banking law. (See
NationsBank of N.C., N.A. v. Variable Life Ins. Co. (1995) 513 U.S. 251, 256;
Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 821.) The underlying
interpretative regulation, however, is entitled only “to consideration and weight,
but would not be binding on the courts.” (Perdue, 38 Cal.3d 913, 936.)
Moreover, we here “confront an interpretation contained in an opinion letter, not
one arrived at after, for example, a formal adjudication or notice-and-comment
rulemaking. Interpretations such as those in opinion letters — like interpretations
contained in policy statements, agency manuals, and enforcement guidelines, all of
which lack the force of law — do not warrant . . . deference.” (Christensen v.
Harris County
(2000) 529 U.S. 576, 587.) We need not decide the level of
deference owed to the OCC‟s opinion letter because the agency‟s interpretation
expressly does not address “the applicability of any state law to national banks,”
and is consistent with, but does not alter, our conclusion that the Bank‟s practice is
not prohibited by our holding in Kruger or by Financial Code section 864.
16


III. DISPOSITION
8
The judgment of the Court of Appeal is affirmed.
MORENO, J.

WE CONCUR: GEORGE, C. J.

KENNARD, J.
BAXTER, J.
WERDEGAR, J.
CORRIGAN, J.
NARES, J.

8
Because we conclude that the Bank‟s practice of recouping overdrafts and
charging NSF fees is not inconsistent with our decision in Kruger, and is
permissible under Financial Code section 864, we need not reach the preemption
question.

Associate Justice, Court of Appeal, Fourth Appellate District, Division
One, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
17


See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Miller v. Bank of America, NT & SA
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 144 Cal.App.4th 1301
Rehearing Granted
__________________________________________________________________________________

Opinion No.

S149178
Date Filed: June 1, 2009
__________________________________________________________________________________

Court:

Superior
County: San Francisco
Judge: Anne E. Bouliane
__________________________________________________________________________________

Attorneys for Plaintiff and Appellant:

The Sturdevant Law Firm, James C. Sturdevant, Mark T. Johnson, Monique Olivier; Law Offices of
Thomas J. Brandi, Thomas J. Brandi and Brian J. Malloy for Plaintiffs and Appellants.

Barbara Jones, Rochelle Bobroff, Michael Schuster; Deanne Loonin, Lauren Saunders, Margot Saunders;
Gerald McIntyre; and Richard Rothschild for AARP Foundation Litigation, National Consumer Law
Center, National Senior Citizens Law Center, Congress of California Seniors and Western Center on Law
and Poverty as Amici Curiae on behalf of Plaintiffs and Appellants.

Eric Halperin, Kathleen Keest, Amanda Quester, Melissa Briggs and Daniel Mosteller for Center for
Responsible Lending as Amicus Curiae on behalf of Plaintiffs and Appellants.

Bramson, Plutzik, Mahler & Birkhaeuser and Robert M. Bramson for National Association of Consumer
Advocates as Amicus Curiae on behalf of Plaintiffs and Appellants.

Levy, Ram & Olson and Arthur D. Levy for The California Reinvestment Coalition as Amicus Curiae on
behalf of Plaintiffs and Appellants.

Thomas J. Miller, Attorney General (Iowa); Fazio Micheletti and Jeffrey L. Fazio as Amici Curiae on
behalf of Plaintiffs and Appellants.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Deputy, Legal Affairs, Tom Greene, Chief
Assistant Attorney General, and Herschel T. Elkins, Special Assistant Attorney General, as Amici Curiae
on behalf of Plaintiffs and Appellants.

__________________________________________________________________________________

Attorneys for Defendant and Appellant:

Marc A. Lackner; O‟Melveny & Myers, Walter Dellinger, Debra S. Belaga, Jonathan D. Hacker, Matthew
D. Roberts; Morrison & Foerster, Arne D. Wagner, Arturo J. Gonzalez and Heather A. Moser for
Defendant and Appellant.


Page 2 – S149178 – counsel continued

Attorneys for Defendant and Appellant:

Coblentz, Patch, Duffy & Bass, Jonathan R. Bass and Susan K. Jamison for California Bankers Association
and California Credit Union League as Amici Curiae on behalf of Defendant and Appellant.

Arnold & Porter, Laurence J. Hutt, Howard N. Cayne and Nancy L. Perkins for American Bankers
Association, America‟s Community Bankers, Consumer Bankers Association, Credit Union National
Association, Financial Services Roundtable and Independent Community Bankers of America as Amici
Curiae on behalf of Defendant and Appellant.

Peter D. Keisler, Assistant Attorney General, Jeffrey S. Bucholtz and Michael F. Hertz, Acting Assistant
Attorneys General, Kevin V. Ryan, Scott N. Schools and Joseph P. Russoniello, United States Attorneys,
William Kanter, Howard S. Scher and Thomas M. Bondy for The United States of America as Amicus
Curiae on behalf of Defendant and Appellant.


Counsel who argued in Supreme Court (not intended for publication with opinion):

James C. Sturdevant
The Sturdevant Law Firm
345 Pine Street, Fourth Floor
San Francisco, CA 94104
(415) 477-2410

Walter Dellinger
O‟Melveny & Myers
275 Battery Street
San Francisco, CA 94111
(415) 984-8700

Howard S. Scher
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
(202) 514-4814

Petition for review after the Court of Appeal reversed the judgment in a civil action. This case includes the following issue: Does California law, which provides that a bank account into which public benefit funds or Social Security payments have been electronically deposited is exempt from attachment and execution, prohibit a bank from exercising its right to setoff as to charges - such as overdraft fees and insufficient fund fees - arising out of use of that same account?

Opinion Information
Date:Citation:Docket Number:Category:Status:Cross Referenced Cases:
Mon, 06/01/200946 Cal. 4th 630, 207 P.3d 531, 94 Cal. Rptr. 3d 31S149178Review - Civil Appealclosed; remittitur issued

BANK OF AMERICA v. S.C. (MILLER) (S117958)


Parties
1Miller, Paul (Plaintiff and Appellant)
Represented by James C. Sturdevant
The Sturdevant Law Firm
354 Pine Street, 4th Floor
San Francisco, CA

2Miller, Paul (Plaintiff and Appellant)
Represented by Brian James Malloy
Law Offices of Thomas J. Brandi
354 Pine Street, 3rd Floor
San Francisco, CA

3Bank Of America, Nt & Sa (Defendant and Appellant)
Represented by Walter Dellinger
O'Melveny & Myers, LLP
1625 Eye Street, N.W.
Washington, DC

4Bank Of America, Nt & Sa (Defendant and Appellant)
Represented by Arturo J. Gonzalez
Morrison & Foerster, LLP
425 Market Street
San Francisco, CA

5Bank Of America, Nt & Sa (Defendant and Appellant)
Represented by Jonathan D. Hacker
O'Melveny & Myers, LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA

6Bank Of America, Nt & Sa (Defendant and Appellant)
Represented by Arne D. Wagner
Calvo & Clark
One Lombard Street
San Francisco, CA

7Bank Of America, Nt & Sa (Defendant and Appellant)
Represented by Debra S. Belaga
O'Melveny & Myers, LLP
Two Embarcadero Center, 28th Floor
San Francisco, CA

8United States Of America (Amicus curiae)
Represented by Thomas Mark Bondy
Attorney at Law
3540 Cumberland Street N.W.
Washington, DC

9United States Of America (Amicus curiae)
Represented by Howard S. Sher
United States Department of Justice/Civil
950 Pennsylvania Avenue N.W., Room 7239
Washington, DC

10Center For Responsible Lending (Amicus curiae)
Represented by Eric Ian Halperin
U.S. Department of Justice/HCE
P.O. Box 65998
Washington, DC

11Aarp Foundation Litigation (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

12Congress Of California Seniors (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

13National Consumer Law Center (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

14National Senior Citizen'S Law Center (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

15Western Center On Law & Poverty (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

16California Bankers Association (Amicus curiae)
Represented by Jonathan R. Bass
Coblentz Patch et al., LLP
One Ferry Building, Suite 200
San Francisco, CA

17California Reinvestment Coalition (Amicus curiae)
Represented by Arthur D. Levy
Levy Ram & Olson, LLP
639 Front Street, 4th Floor
San Francisco, CA

18American Bankers Association (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

19Americas Community Bankers (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

20Consumer Bankers Association (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

21Credit Union National Associaiton (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

22Financial Services Roundtable (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

23Independent Community Bankers Of America (Amicus curiae)
Represented by Laurence J. Hutt
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

24National Association Of Consumer Advocates (Amicus curiae)
Represented by Robert M. Bramson
Farrow Bramson et al.
2125 Oak Grove Road, Suite 120
Walnut Creek, CA

25Miller, Thomas J. (Amicus curiae)
Represented by Jeffrey L. Fazio
Fazio Micheletti, LLP
2410 Camino Ramon, Suite 315
San Ramon, CA

26California Credit Union League (Amicus curiae)
Represented by Jonathan R. Bass
Coblentz Patch et al., LLP
One Ferry Building, Suite 200
San Francisco, CA


Opinion Authors
OpinionJustice Carlos R. Moreno
ConcurChief Justice Ronald M. George, Justice Carol A. Corrigan, Justice Joyce L. Kennard, Justice Kathryn M. Werdegar, Justice Marvin R. Baxter

Disposition
Jun 1 2009Opinion: Affirmed

Dockets
Dec 29 2006Petition for review filed
Paul Miller, Plaintiff and Appellant by James C. Sturdevant, counsel
Jan 3 2007Record requested
Jan 5 2007Request for extension of time filed
to February 1, 2007 to file respondents - Bank of America, NT & SA answer to petition for review.
Jan 8 2007Received Court of Appeal record
file jacket/briefs/loose papers/four boxes
Jan 10 2007Extension of time granted
On application of respondent, Bank of America, N.A. and good cause appearing, it is ordered that the time to serve and file the answer to the petition for review is extended to and including January 26, 2007.
Jan 24 2007Received:
amended proof of service for respondent's amicus letter.
Jan 26 2007Answer to petition for review filed
Bank of America, NT & SA, respondents by Debra S, Belaga, counsel
Feb 5 2007Reply to answer to petition filed
Paul Miller, appellant by James C. Sturdevant, counsel
Feb 15 2007Time extended to grant or deny review
The time for granting or denying review in the above-entitled matter is hereby extended to and including March 29, 2007, or the date upon which review is either granted or denied.
Mar 21 2007Petition for review granted (civil case)
The applications to appear as counsel pro hac vice are granted. The petition for review is GRANTED. Chin, J., was recused and did not participate. Votes: George, C. J., Kennard, Baxter, Werdegar, Moreno and Corrigan, JJ.
Mar 21 2007Letter sent to:
counsels
Apr 5 2007Certification of interested entities or persons filed
Debra S. Belaga, O'Melveny & Myers LLP for appellants Bank of America
Apr 5 2007Request for extension of time filed
to June 1, 2007 to file appellants opening brief on the merits by James C. Sturdevants, counsel
Apr 11 2007Certification of interested entities or persons filed
Paul Miller, appellant James C. Sturdevant, counsel
Apr 13 2007Extension of time granted
On application of appellant, Paul Miller, and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including June 1, 2007.
Jun 1 2007Opening brief on the merits filed
counsel for plf. and aplt. (Miller)
Jun 15 2007Request for extension of time filed
Respsondent, Bank of America requesting 43 days to August 13, 2007 to file answering brief on the merits. by Jonathan D. Hacker, counsel
Jun 20 2007Extension of time granted
to August 13, 2007 to file appellant (Bank of America, NT & SA.) answer brief on the merits.
Jul 19 2007Request for extension of time filed
Appellant (Bank of America) requesting an additional 30 day to September 12, 2007 to file answerw brief on the merits. by Johnathan D. Hacker, counsel
Jul 24 2007Extension of time granted
to September 12, 2007 to file appellant (Bank of America) answer brief on the merits.
Sep 13 2007Request for judicial notice filed (granted case)
Bank of America, defendant and appellant by Walter Dellinger, counsel
Sep 13 2007Answer brief on the merits filed
Bank fo America, defendant and appellant by Walter Dellinger, counsel crc.8.25(b)
Sep 19 2007Request for extension of time filed
Appellant (Paul Miller) requesting extension till October 22, 2007 to file reply brief on the merits. by James C. Sturdevant, counsel
Sep 25 2007Extension of time granted
On application of appellants and good cause appearing, it is ordered that the time to serve and file the reply brief on the merits is extended to and including October 22, 2007.
Sep 26 2007Request for extension of time filed
Appellant requesting extension till October 22, 207 to file opposition to Bank of America's request for judicial notice. by James C. Sturdevant, counsel
Oct 1 2007Extension of time granted
On application of appellants (Paul Miller) and good cause appearing, it is ordered that the time to serve and file the opposition to Bank of America's request for Judicial Notice is extended to and including October 22, 2007.
Oct 9 2007Request for extension of time filed
Paul Miller - respondents and cross-appellants requesting extension of time till November 16, 2007, to file reply brief on the merits and opposition to Bank of America's request for Judicial Notice by James C. Sturdevant, counsel
Oct 15 2007Extension of time granted
On application of plaintiffs and appellants and good cause apearing, it is ordered that the time to serve and file the reply brief on the mertis and opposition to defendant and appellant's request for judicial notice is extended to and including November 16, 2007.
Nov 16 2007Application to file over-length brief filed
Paul Miller, respondents and cross-appellants by James C. Sturdevant, counsel
Nov 16 2007Opposition filed
respondent and cross-appellant - Paul Miller's oppostition to Bank of America's request for judicial by James C. Sturdevant, counsel
Nov 16 2007Filed:
Declaration of James C. Sturdevant in support of respondent Paul Miller's opposition to Bank of america's request for Judicial Notice. by James C. Sturdevant, counsel
Nov 19 2007Reply brief filed (case fully briefed)
Paul Miller, respondent and cross-appellants by James C. Sturdevant, counsel with permissioin
Nov 19 2007Opposition filed
Bank of America, appellants and cross-respondents by Jonathan D. Hacker
Dec 17 2007Received application to file Amicus Curiae Brief
California Bankers Association in support of appellants and cross-respondents Bank of America. by Jonathan R. Bass, counsel
Dec 17 2007Received application to file Amicus Curiae Brief
AARP, Congress of California Seniors, National Consumer Law Center, National Senior Citizen's Law Center and Western Center on Law & Poverty in support of respondent and cross-appellant - Paul Miller. by Barbara Jones, counsel
Dec 17 2007Received application to file Amicus Curiae Brief
American Bankers Assn, Consumer Bankers Assn, Credit Union National Assn, Financial Services Roundtable & Independent Community Bankers of America Attorney Laurence J. Hutt [in support of aplt Bank of America]
Dec 17 2007Received application to file Amicus Curiae Brief
The United State of America in support of appellants and cross-respondents Bank of America. by Thomas M. Bondy, counsel
Dec 17 2007Received application to file Amicus Curiae Brief
Center for Responsible Lending in support of respondent and cross-appellant - Paul Miller by Eric Halperin, counsel
Dec 18 2007Received application to file Amicus Curiae Brief
The California Reinvestment Coalitioin in support of resopndent and cross-appellant Paul Miller. by Arthur D. Levy, counsel
Dec 20 2007Received application to file Amicus Curiae Brief
National Association of Consumer Advocates in support of appellant - Paul Miller. by Robert M. Bramson, counsel crc.8.25(b)
Dec 24 2007Received application to file Amicus Curiae Brief
Iowa Attorney General Thomas A. Miller in support of appellant Paul Miller. by Jeffrey L. Fazio, counsel
Dec 24 2007Received:
application to file late filing of applicaiton of Iowa Attorney General Thomas A. Miller in support of appellant Paul Miller. by Jeffrey L. Fazio, counsel
Dec 27 2007Request for extension of time filed
Joint application for extension of time to respond to briefs submitted by amici curiae . Defendant and Appellant - Bank of American and Plaintiff and Appellant - Paul Miller jointly request an additional twenty-two days to and including January 29, 2008 to file and serve their respective replies to any amicus curiae briefs . by Jonathan D. Hacker and James Sturdeveant, counsels
Dec 27 2007Permission to file amicus curiae brief granted
California Bankers Association by Jonathan R. Bass
Dec 27 2007Amicus curiae brief filed
The applicaiton of California Bankers Associaiton for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 27 2007Permission to file amicus curiae brief granted
AARP, NCLC, NSCLC, CCS and Western Center on Law & Poverty. by Barbara Jones, counsel
Dec 27 2007Amicus curiae brief filed
The application of AARP, NCLC, NSCLC, CCS and Western Center on Law & Poverty for permission to file an amicus curiae brief in support of appelants Paul Miller, et al., is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 27 2007Permission to file amicus curiae brief granted
American Bankers Associaiton, Consumer Bankers Association, Credit Union National Association, Financial Services Rountable, Independent Community Bankers of America. by Laurence J. Hutt, counsel
Dec 27 2007Amicus curiae brief filed
The application of American Bankers Association, Consumer Bankers Association, Credit Union National Association, financial Services Roundtable, Independant Community Bankers of America for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 27 2007Permission to file amicus curiae brief granted
The United States of America. by Thomas Bondy.
Dec 27 2007Amicus curiae brief filed
The application of The United State of America for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 27 2007Permission to file amicus curiae brief granted
Center for Responsible Lending. by Eric Halperin, counsel
Dec 27 2007Amicus curiae brief filed
The application of Center for Responsible Lending for permissiont o file an amicus curiae brief in support of appellants Paul Miller, et al., is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 27 2007Permission to file amicus curiae brief granted
California Reinvestment Coalition. by Arthur D. Levy, counsel
Dec 27 2007Amicus curiae brief filed
The application of California Reinvestment Coalition for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer there to may be served and filed by any party within twenty days of the filing of the briefs.
Dec 27 2007Permission to file amicus curiae brief granted
National Association of Consumer Advocates. by Robert M. Bramson, counsel
Dec 27 2007Amicus curiae brief filed
The application of National Association of Consumer Advocates for permission to file an amicus curiae breif in support of appellants Paul Miller, et al., is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 28 2007Received:
Application by California Credit Union League to join amicus Curiae brief of California Bankers Association. by Jonathan R. Bass, counsel
Jan 2 2008Permission to file amicus curiae brief granted
California Credit Union League to join amicus curiae brief of California Banks Association. by Jonathan R. Bass, counsel with permission
Jan 2 2008Amicus curiae brief filed
California Credit Union League by Jonathan R. Bass, counsel with permission
Jan 2 2008Permission to file amicus curiae brief granted
Thomas A. Miller in support of appellant - Paul Miller. by Jeffrey L. Fazio, counsel
Jan 2 2008Amicus curiae brief filed
The application of Thomas A. Miller for permision to file an amicus curiae brief in support of plaintiff and appellant Paul Miller is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. With permission
Jan 2 2008Extension of time granted
On application of plaintiff and appellant - Paul Miller and defendant and appellant - Bank of America, NT & SA, and good cause apearing, it is ordered that the time to serve and file the reply briefs filed in this case is extended to and including January 29, 2008.
Jan 4 2008Note: Mail returned (unable to forward)
Jeffrey L. Fazio
Jan 14 2008Note: Mail returned (unable to forward)
Jseffrey L. Fazio, counsel
Jan 15 2008Change of contact information filed for:
James C. sturdevant, counsel for plaintiff and appellant.
Jan 29 2008Response to amicus curiae brief filed
Paul Miller, plaintiff and appellant by James C. Sturdevant, counsel
Jan 30 2008Response to amicus curiae brief filed
Appellant Bank of America's Consolidated Response to Briefs of Amici Curiae Briefs by Walter Dellinger, O'Melveny & Myers LLP, counsel CRC 8.25(b)
Jan 31 2008Received:
respondent's corrected table of authorities to answer brief to the amicus curiae briefs by James C. Sturdevant, counsel for appellant
Apr 7 2008Received additional record
one full box ( 29 transcript)
Jan 6 2009Filed:
Letter from Walter Dellinger, counsel for appellant Bank of American, requesting that the case not be set for argument the first week of February 2009.
Feb 13 2009Request for judicial notice granted
Appellant Bank of America's request for judicial notice, filed September 13, 2007 is granted.
Mar 11 2009Case ordered on calendar
to be argued on Tuesday, April 7, 2009, at 9:00 a.m., in Los Angeles
Mar 20 2009Application to appear as counsel pro hac vice (granted case)
The application of Howard S. Scher for permission to appear as counsel pro hac vice. by Thomas M. Bondy, counsel
Mar 24 2009Filed:
Lettert from Walter Dellinger, counsel for Bank of America, requesting to share 10 minutes of oral argument time with amicus curiae United States Department of Justice.
Mar 25 2009Application to appear as counsel pro hac vice granted
The application to appear as counsel pro hac vice, filed on March 20, 2009, is granted. (Cal. Rules of Court, rule 9.40(a).) Chin, J., was recused and did not participate.
Mar 25 2009Order filed
The request of counsel for appellant Bank of America in the above-referenced cause to allow two counsel to argue on behalf of appellant at oral argument is hereby granted. The request of appellant to allocate to amicus curiae United States of America 10 minutes of appellant's 30-minute allotted time for oral argument is granted.
Mar 27 2009Note: Mail returned and re-sent
calendar resent to Jeffrey L. Fazio, per State Bar address now noted within case previous (incorrect) address: Hancock, Rothert & Bunshoft, LLP, Four Embarcadero Center, Third Floor, San Francisco, CA 941111.
Mar 30 2009Note: Mail returned and re-sent
as to Jeffrey L. Fazio: two orders filed 3-25-09. Re sent to San Ramon address
Mar 27 2009Filed:
supplemental authorities by respondent, Paul Miller by counsel, James C. Sturdevant
Mar 30 2009Received:
additional authorities by respondent, Paul Miller. by counsel, Paul Sturdevant
Apr 6 2009Received:
letter dated 04/06/09 from Bank of America, NT & SA, defendant and appellant by Walter Dellinger, counsel
Apr 7 2009Cause argued and submitted
May 21 2009Received:
letter dated May 21, 2009 from respondents - Paul Miller by James C. Sturdevant, counsel
May 29 2009Notice of forthcoming opinion posted
Jun 1 2009Opinion filed: Judgment affirmed in full
The judgment of the Court of Appeal is affirmed. Opinion by Moreno, J. -----joined by George, CJ., Kennard, J., Baxter, J., Werdegar, J., Corrigan, Nares, JJ.* *Associate Justice, Court of Appeal, Fourth Appellate District, Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Jun 29 2009Request for modification of opinion filed
Appellant, Paul Miller by counsel, James C. Sturdevant
Jun 30 2009Time extended to consider modification or rehearing
The finality of the opinion in the above-entitled case is hereby extended to and including July 31, 2009, or until further order of this court.
Jun 30 2009Filed:
letter dated June 30, 2009, from Bank of America, respondent,requesting that court allow the opinion to become final on the date it is scheduled to become final, by Walter Dellinger, counsel.
Jul 10 2009Opposition filed
Bank of America, respondent,in response to request for modification of opinion, by Walter Dellinger, counsel.
Jul 15 2009Filed:
Appellant - Paul Miller's reply to Bank of America's opposition to request for modificiation of opinion. by James C. Sturdevant, counsel
Jul 22 2009Request for modification denied
Chin, J., was recused and did not participate. George, C.J., was absent and did not participate.
Jul 24 2009Remittitur issued
Jul 28 2009Received:
Receipt for Remittitur from Court of Appeal, First Appellate District - Division Three

Briefs
Jun 1 2007Opening brief on the merits filed
counsel for plf. and aplt. (Miller)
Sep 13 2007Answer brief on the merits filed
Bank fo America, defendant and appellant by Walter Dellinger, counsel
Nov 19 2007Reply brief filed (case fully briefed)
Paul Miller, respondent and cross-appellants by James C. Sturdevant, counsel
Dec 27 2007Amicus curiae brief filed
The applicaiton of California Bankers Associaiton for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer thereto may be served and filed
Dec 27 2007Amicus curiae brief filed
The application of AARP, NCLC, NSCLC, CCS and Western Center on Law & Poverty for permission to file an amicus curiae brief in support of appelants Paul Miller, et al., is hereby granted.
Dec 27 2007Amicus curiae brief filed
The application of American Bankers Association, Consumer Bankers Association, Credit Union National Association, financial Services Roundtable, Independant Community Bankers of America for permission
Dec 27 2007Amicus curiae brief filed
The application of The United State of America for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted. An answer thereto may be served and filed by
Dec 27 2007Amicus curiae brief filed
The application of Center for Responsible Lending for permissiont o file an amicus curiae brief in support of appellants Paul Miller, et al., is hereby granted. An answer thereto may be served and
Dec 27 2007Amicus curiae brief filed
The application of California Reinvestment Coalition for permission to file an amicus curiae brief in support of appellant Bank of America is hereby granted.
Dec 27 2007Amicus curiae brief filed
The application of National Association of Consumer Advocates for permission to file an amicus curiae breif in support of appellants Paul Miller, et al., is hereby granted.
Jan 2 2008Amicus curiae brief filed
California Credit Union League by Jonathan R. Bass, counsel
Jan 2 2008Amicus curiae brief filed
The application of Thomas A. Miller for permision to file an amicus curiae brief in support of plaintiff and appellant Paul Miller is hereby granted.
Jan 29 2008Response to amicus curiae brief filed
Paul Miller, plaintiff and appellant by James C. Sturdevant, counsel
Jan 30 2008Response to amicus curiae brief filed
Appellant Bank of America's Consolidated Response to Briefs of Amici Curiae Briefs
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Nov 10, 2009
Annotated by Monica Hernandez

FACTS:
Paul Miller, the representative plaintiff, has maintained an account with Bank of America (the Bank), the defendant, since 1975. In 1992, he began receiving Supplemental Security Income (SSI) benefits, a form of public benefit fund, via direct deposit into his checking account. In 1998, Miller opened a separate checking account with the Bank for his SSI deposits.

On various occasions Miller overdrew his original account, and the Bank recouped those overdrafts and associated insufficient funds (NSF) fees from his directly deposited SSI funds. It is the Bank’s practice to automatically deduce overdrafts and NSF fees from directly deposited funds, regardless of the source of those funds. Miller initiated the instant representative action challenging the Bank's practice of recouping overdrafts and insufficient funds (NSF) fees from customers' Social Security and other public benefit funds.

ISSUE:
Does California law, which provides that a bank account into which public benefit funds or Social Security payments have been deposited is exempt from attachment and execution, prohibit a bank from exercising its right to recoup overdrafts and insufficient funds (NSF) fees that arise out of the use of that same account?

HOLDING:
“Bank of America’s practice of recouping overdrafts and charging insufficient funds fees is permissible in light of the Legislature’s unequivocal statement in Financial Code section 864 that overdrafts and bank charges are not debts and are therefore not subject to the limitations placed on a bank’s right of setoff set forth in that statute.”

REASONING:
The court reasons that there is a meaningful difference between satisfying a debt external to an account and recouping an overdraft of an account from funds later deposited into the same account. In the case at hand, Bank of America did not setoff independent, past debt. Instead, the transaction occurred within a single account that was trigged by a customer’s overdraft, causing the Bank to exercise its right to setoff those charges. The Bank’s practice of recouping overdrafts and charging insufficient funds (NSF) fees is permissible as a routine internal account balancing that is distinct from the setoff of independent debt prohibited by the Financial Code § 864. The Legislature enacted this statute to govern the manner in which banks may setoff debts. Financial Code § 864(a)(2) expressly excepts overdrafts and bank fees from the statute’s definition of debt. Accordingly, the Bank’s practice of recouping overdrafts and NSF fees from Social Security and other public benefit funds in customers’ accounts does not violate the statute limiting a bank’s ability to setoff debt.