Monday, January 28, 2013
Court Denies Class Certification in Suit Against Bank of America
By a MetNews Staff Writer
The First District Court of Appeal yesterday upheld the denial of class certification to a group of senior citizens and disabled persons in their second attempt in a case against Bank of America.
Div. Three said San Francisco Superior Court Judge Curtis A.E. Karnow properly denied certification where the putative class included not only bank customers whose accounts had allegedly been unlawfully debited to pay fees and overdraft charges, but customers whose accounts were lawfully debited with set-offs.
The plaintiff’s original lawsuit, filed in 1998, challenged Bank of America’s practice of setting off direct deposits of Social Security and other public benefit payments legally exempt from levy against overdrafts and bank fees against the account into which such funds had been deposited.
The case went to trial and resulted in a jury verdict in favor of the class, but the Court of Appeal reversed, holding that the practice of deducting overdrafts and bank fees within single deposit accounts containing exempt funds was functionally and legally different than the two-account scenario addressed in Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, the case relied on by the plaintiff.
The high court distinguished satisfaction of a debt from an external account, the practice held improper in Kruger, from recoupment of an overdraft from funds later deposited into that same account.
On remand, the plaintiff sought to amend the complaint to add a new claim on behalf of a class of all individuals “who had at least two accounts with the Bank, one of which received electronically deposited exempt funds, and from which the Bank seized exempt funds to collect sums allegedly owed from a separate account.”
Karnow allowed the plaintiff to amend his complaint to pursue his two-account theory, but eventually ruled that he had not established the requirements for class certification.
On appeal, Justice Martin Jenkins, who wrote the opinion for the unanimous panel, said that Karnow properly denied class certification because the plaintiff failed to define an identifiable class of bank customers whose accounts were unlawfully debited.
Pointing to Financial Code then-Sec. 864, now Sec. 1411, which the Legislature enacted one year after Kruger, Jenkins said that the plaintiff’s proposed class encompassed a far broader range of transactions than the consumer debt setoffs Sec. 864 was intended to prohibit. Jenkins agreed with Karnow’s assessment that “[t]he proposed description pulls into the class whole categories of legal setoffs.”
It was not enough, Jenkins wrote, for the plaintiff to identify accounts that received exempt funds and were subjected to setoffs for obligations arising in a separate account; he must also be able to show which of those setoffs were in violation of Sec. 864, which he failed to do despite an extended discovery period. In fact, Jenkins said, the plaintiff had failed even to show that any means existed to identify such a class. Accordingly, class certification was properly denied.
The plaintiff further claimed that the bank was judicially estopped from asserting that not all two-account seizures are unlawful because, in oral argument before the state’s high court, counsel for the bank had said that taking fees from one account to cover an overdraft or fee for insufficient funds in a second, independent account would be an illegal setoff for an “unrelated debt” within the meaning of Kruger.
Viewed in context, however, Jenkins said, such statements could not fairly be said to represent the bank’s position in the earlier litigation, since at that point the bank “had no dog in any fight over whether there might also be scenarios in which two-account setoffs are permissible, notwithstanding Kruger, because the only question then at issue was whether Kruger extended to one-account balancing.”
Jenkins said that although the bank’s counsel “fumbled” the distinction between one- and two- account situations, the panel found no reason to believe counsel’s misstatements had anything to do with the bank’s victory, nor were such statements the “egregious attempt to manipulate the legal system” that would warrant application of the judicial estoppel doctrine.
Justices Peter Siggins and Mark Simons concurred in the opinion.
The case is Miller v. Bank of America, N.A.; 13 S.O.S. 389
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