Class action appeal approved against Bank of America

By Angela Underwood | Mar 16, 2018

SAN FRANCISCO -- A U.S. Ninth District Court of Appeal justice has upturned a class action certification appeal brought by a major bank.

Judge Jacqueline Nguyen has reversed and remanded the case Donald Lusnak v. Bank of America (BOA) based on the National Bank Act (NBA) preempting the California’s state escrow interest law in a March 2 opinion.

Lusnak alleges the bank violated the California Unfair Competition Law (UCL) and committed breach of contract claims when not paying interest on his escrow account should be a class action according to the justice. 

Nguyen cited the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which “held the National Bank Act did not preempt California civil code because it did not prevent or significantly interfere with Bank of America’s exercise of its powers.” Her opinion added,  though the panel found that while Lusnak was not able to support his escrow argument by the act, “this did not preclude him from obtaining relief under the theory that the Bank violated the UCL by failing to comply with Cal. Civil Code.”


Basing the reversal off of Barnett Bank of Marian County, N.A. v. Nelson 1996 to assert that NBA does not forestall Lusnak from seeking class action against the bank for violating the UCL and breach of contract claims, Nguyen referred to the history of Dodd-Frank.

After detailing how Congress created certain provisions and language in order “to correct abusive and deceptive lending practices that contributed to the mortgage crisis," according to the opinion, Nguyen began the case summary, noting that Lusnak first filed suit in 2014 against BOA for violating the UCL and NBA based on a 2011 modified agreement for his Palmdale property.

“According to Lusnak, this section’s plain language—requiring creditors to pay interest on escrow fund accounts like his if prescribed by applicable” state law—made clear that Congress perceived no conflict between state laws like California Civil Code and the powers of national banks,” Nguyen wrote in the opinion. 

Before Dodd-Frank, the Supreme Court held in Barnett Bank that states are not “deprive[d] . . . of the power to regulate national banks, where . . . doing so does not prevent or significantly interfere with the national bank’s exercise of its powers,” Nguyen said referring back to the precedent base.

"In Dodd-Frank, Congress underscored that Barnett Bank continues to provide the preemption standard ... state consumer financial law is preempted only if it prevents or significantly interferes with the exercise by the national bank of its powers,” Nguyen wrote, adding the same standard should be applied to Lusnak.

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