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Earlier this year, talk about the big class action against Bank of America was all about money — the billion dollars or so in statutory damages, the $284 million in compensatory damages, and of course the correspondingly large contingency fee due the plaintiffs lawyers. That all changed Monday when California’s 1st District Court of Appeal struck down a trial court’s ruling that the bank may not withdraw Social Security funds from customer accounts to pay for overdrafts and overdraft penalties. In a trial presided over by San Francisco Superior Court Judge Anne Bouliane, plaintiffs lawyers James Sturdevant and Thomas Brandi had successfully argued that Bank of America’s practice of debiting government benefit fees was illegal. Central to their arguments — and to Bouliane’s jury instructions — was a 1974 case that said a bank couldn’t take public benefit money out of an account to cover a credit card debt. They said the case, Kruger v. Wells Fargo Bank, 11 Cal 3d 352, presented an analogous situation to that of lead plaintiff Paul Miller. In 1998, after Miller had spent money that Bank of America mistakenly credited to his account, the bank withdrew money from Social Security benefits to cover the overdraft. While the bank eventually returned the money, it repeated the pattern on two other occasions. Miller eventually sued, arguing that government-directed deposits shouldn’t be subject to such seizures. In a unanimous, 14-page opinion Monday, Justice Peter Siggins disagreed with verve. Siggins — joined by Justices Joanne Parrilli and William McGuiness — said the verdict in the case was based entirely on Kruger, an opinion that prohibits using government benefits to pay debts from a separate account. In Miller, he wrote, the issue was different because overdraft fees had to do with balancing a single account. “This is a complex and heavily regulated area more suited to legislative than judicial action, so we conclude the trial court erred by finding Kruger governs this significantly different situation,” Siggins wrote. “I think the court absolutely got it wrong,” Sturdevant said. He said Kruger clearly applies to overdraft fees, since they are treated as debts, and dismissed the notion that handling the fees was a legislative issue, since the Kruger court had no qualms about ruling on the matter. Sturdevant also chafed at Siggins’ reference to a defense expert’s trial testimony on the consequences a plaintiff verdict would have for the banking industry. “It’s improper fact-finding,” he said. “That’s the province of the trial judge, not the province of the Court of Appeal.” Walter Dellinger, the O’Melveny & Myers partner who argued the appeal for Bank of America, couldn’t be reached before press time. But judging by Sturdevant’s plans, it seems likely that he’ll have a chance to speak about the case in the future. “The Supreme Court is the place where this case ultimately has to be decided, because Kruger is the basis of decision for both the trial court and the Court of Appeal,” Sturdevant said.

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