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Phillips v. Bank of America, N.A.

California Court of Appeals, Second District, Fifth Division

April 27, 2015

JASMINE PHILLIPS, as trustee etc. et al., Plaintiffs and Appellants,
v.
BANK OF AMERICA, N.A., Defendant and Respondent.

APPEAL from a judgment of the Superior Court of the County No. BC492469 of Los Angeles, John Shepard Wiley, Jr., Judge.

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COUNSEL

Markun Zusman Freniere & Compton, David S. Markun and Daria Dub Carlson, for Plaintiffs and Appellants.

Reed Smith, James C. Martin, Marc A. Lackner and Peter J. Kennedy for Defendant and Respondent.

OPINION

MOSK, J.

INTRODUCTION

We hold that a bank may not for account service fees debit a so-called Coogan Trust Account—a statutorily required account to preserve 15 percent of a minor’s gross earnings for artistic or creative services for the benefit of the minor until the minor turns 18 or is emancipated (Fam. Code, § 6750 et seq.) (Coogan Law[1])—because of the statutory ban on withdrawals from a Coogan Trust Account without court approval (§ 6753, subd. (b)). Such a debit, without court approval, is a prohibited withdrawal under the applicable state statute, and that state law prohibition on a debit by a national bank is not preempted by federal law. We therefore reverse the judgment entered on a demurrer sustained without leave to amend.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs and appellants Jasmine Phillips, also known as Jasmine Gonzales (Phillips), as trustee for Alex Gonzales, and Anesha L. Colemen, as trustee for Jadon I. Monroe, filed a class action lawsuit on behalf of themselves and all others similarly situated against defendant and respondent Bank of America, N.A., a national bank association. Plaintiffs in their operative first amended complaint (FAC) alleged causes of action for breach of written contract, breach of the implied covenant of good faith and fair dealing, conversion, and unlawful and unfair business practices. Plaintiffs alleged that they were “the parents or guardians of unemancipated minors who have been paid for performing artistic or creative services.”

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Plaintiffs alleged that, as trustees for their minor children, they “opened accounts entitled ‘Coogan Trust’ Accounts for the[] minors at [defendant] in full compliance with... [section] 6750 et seq. [(the Coogan Law)]. From time to time, wages or other monies earned by the minors for performing artistic services were deposited into Plaintiffs’ Coogan Trust Accounts for the benefit of the minors.... [¶] During the four years preceding the filing of the initial Complaint in this action, defendant[] ha[s] made withdrawals from Plaintiffs’ Cogan Trust Accounts, including but not limited to withdrawals for monthly service fees, without court approval.”

In their causes of action for breach of contract and breach of the covenant of good faith and fair dealing, plaintiffs alleged that they entered into written agreements[2] with defendant “pursuant to which defendant[] agreed to open and maintain... Coogan Trust Account[s].... [¶] Notwithstanding these written agreements... defendant[] regularly and systematically breached [these agreements] by making withdrawals from [the] Coogan Trust Accounts, including but not limited to monthly service charges, without court approval.”

In plaintiffs’ cause of action for conversion, they alleged that “[d]espite defendant[’s] representations that defendant[] would open and maintain the subject accounts as Coogan Trust Accounts, defendant[] unlawfully took and converted monies from the Coogan Trust Accounts for defendant[’s] own use.” In their cause of action for unlawful and unfair business practices under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), plaintiffs alleged that “[n]otwithstanding applicable California Family Code sections as well as other provisions of California law, defendant[] regularly and systematically made withdrawals from the Coogan Trust Accounts..., including but not limited to ‘monthly service charges.’ [¶] In addition, defendant[] represented... that defendant[] would open and maintain the subject accounts as Coogan Trust Accounts. Despite these representations, defendant[] failed to maintain the accounts as Coogan Trust Accounts and instead regularly and systematically made withdrawals from these accounts, including but not limited to ‘monthly service charges.’” Plaintiffs sought as relief compensatory damages, issuance of a temporary restraining order and a preliminary and permanent injunction, disgorgement of all profits resulting, punitive damages, costs of suit, attorney fees, and such other and further relief as the trial court might deem just and proper.

The trial court sustained defendant’s demurrer to the FAC without leave to amend, finding that the term “withdrawal” as used in the Coogan Law did not include the debiting of ...


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