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Paul Miller v. Bank of America

January 25, 2013


Trial Court: Superior Court, San Francisco County Trial Judge: Judge Curtis A.E. Karnow (San Francisco County Super. Ct. No. CGC-99-301917)

The opinion of the court was delivered by: Jenkins, Acting P. J.


In this most recent iteration of this action, plaintiff Paul Miller appeals from the denial of his motion for class certification. We find the trial court correctly ruled that the proposed class fails to satisfy the requirements for class action certification. We further find no merit in Miller's claims that the Bank is estopped from challenging his proposed class, that the court improperly made a premature ruling on the merits, and that the case should have been remanded to allow additional discovery. Accordingly, we affirm.


I. From The Trial Court To The Supreme Court

We start with a brief history of how this case arrived here in its present configuration. The original lawsuit, filed in 1998 on behalf of a proposed statewide class, challenged the Bank of America's (the Bank's) allegedly unlawful practice of setting off funds from accounts into which Social Security and other public benefit payments had been directly deposited against overdrafts and bank fees. In 2001, the trial court certified a class defined as "All 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."

The case went to trial and resulted in a jury verdict in favor of the class. This court reversed. We held that all of the various statutory and common law offenses embodied in the judgment turned on an erroneous application of Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352 (Kruger) to the Bank's practice of internally setting off overdrafts and bank fees against funds within checking accounts that received directly deposited government benefits (e.g., social security payments and other public benefits that are statutorily exempt from execution and attachment). Generally speaking, our analysis turned on the difference between such intra-account setoffs and the practice of debiting exempt funds to collect balances owed on a separate credit card account. While Kruger made clear that the latter was prohibited, we held 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. Kruger, therefore, did not govern Miller's claims against the Bank. (Miller et al. v. Bank of America, NT & SA (Nov. 20, 2006, A110137) [nonpub. opn.].)

The Supreme Court granted review and affirmed. In Miller et al. v. Bank of America, NT & SA (2009) 46 Cal.4th 630 (Miller I), it held that Kruger does not prohibit the practice of recouping overdrafts and bank fees within a single account. It explained: "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 [insufficient funds] fee. In Kruger, we concluded that the setoff of exempt funds to satisfy debts external to the bank customer's checking or savings was unlawful. [Citation.] Plaintiffs urge us to 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." (Id. at p. 639.)

Miller asked the Supreme Court to modify its opinion and restore his individual damages award, contending his claims encompassed balancing activity between different accounts, specifically as to his own individual circumstances and those of several other class members, as well as internal balancing within a single account. This request was denied.

II. And Back To The Trial Court

Following remand to the trial court, the parties staked out very different views of what should happen next. Miller argued he was entitled to amend his complaint to add a new claim on behalf of a class of individuals "who have more than one deposit account with Bank of America and from which the bank seizes exempt funds from one account to pay a debt and/or fee in another account." The Bank, on the other hand, said this was merely an after-the-horse-is-stolen attempt to add theories Miller had already raised and lost or had made the tactical decision not to bring. Enough being enough, said the Bank, and nothing being left to retry after Miller I, it asked for entry of judgment in its favor. Presented with cross-motions to amend the complaint and for entry of judgment, the trial court allowed Miller to amend his complaint to pursue his two-account theory.

Miller's third amended complaint alleged, inter alia, that the Bank's "two account seizure policy and practices" violated Kruger, Miller I, and provisions of the Financial and Civil Codes. He proposed a new class comprised of "all California residents who maintain a deposit account at [the Bank] within four years preceding the filing of this lawsuit and who receive exempt funds electronically in a deposit account from which [the Bank] seizes exempt sums to collect sums allegedly owed from a separate [Bank] account that is also maintained by the individual." He alleged on information and belief that the class exceeded a million members and that its exact size and the identity of its members could readily be obtained from the Bank's business records.

After a three-month stipulated extension of time for Miller to conduct additional discovery on the membership of his proposed "two-account" class, he moved to certify a class of "hundreds of thousands" of Bank customers affected by its alleged "cross-account collection activities." In opposition, the Bank argued the proposed class was fatally overbroad in that it included (and arguably consisted primarily of) accounts as to which the alleged setoff transactions were entirely legal. It also argued Miller had failed to show the proposed class members could be readily identified without unreasonable expense or time and offered evidence that there was no feasible way to distinguish between two-account setoff transactions that were lawful and those that were not. Finally, the Bank asserted that Miller had failed to prove the purported class was large enough to warrant a class action or that common questions of law and fact predominated over individualized issues.

The trial court issued a tentative ruling denying class certification three days before the hearing. Miller asked for a last-minute continuance to conduct discovery addressing deficiencies in his evidence noted in the tentative ruling. The court denied the request, because "Miller has had all the opportunity he desired for additional discovery related to the certification motion, having entered into a stipulation for the time period he thought appropriate; and I must note that it appears he did not conduct discovery during that period in any event. Indeed, Miller's counsel told me at the hearing that he thought he had conducted enough discovery by the time of the 2004 trial. The years of litigation from 1998 to date have provided Miller enough time to produce evidence on ...

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