In Rose v. Bank of America (--- P.3d ----, Cal., August 1, 2013), the California Supreme Court considered whether a consumer could bring an action for unlawful business practices under state law, for violations of federal law, even though Congress repealed the section of the federal law allowing for civil actions for damages. The court ruled that because the state law has its own remedies for unlawful practices, and uses the other laws only to define what is unlawful, such a lawsuit could proceed.
This Legal Alert updates our previous Legal Alert on this case.
Harold Rose and a group of depositors (“Depositors”) at Bank of America (“Bank”) brought a lawsuit under California’s Unfair Competition Law (“UCL”) against the Bank for alleged violations of the federal Truth in Savings Act (“TISA”). The Depositors alleged that the Bank failed to properly notify them about fee increases to their accounts and inconspicuous written notices in their bank statements were inadequate warning. Further, they maintained that the Bank’s inadequate notification violated TISA. They brought an action under the UCL alleging the federal TISA violation constituted unfair business practices under the UCL. The Bank demurred and the trial court sustained the demurrer, finding the repeal of TISA’s private enforcement provision reflected Congress’s intent to bar any state private action to enforce TISA. A California Court of Appeal affirmed the ruling and the Depositors appealed to the California Supreme Court.
The Court reviewed the legal history of TISA. Congress enacted the statute in 1991 to require “clear and uniform” disclosure from financial institutions to customers about interest rates paid and fees assessed so that consumers could make informed decisions about depositing money into their accounts. Originally, TISA provided for a private right of action against an institution that failed to comply with disclosure requirements. In 1996, Congress amended TISA to repeal the private right of action effective in 2001.
The question before the Court was whether that repeal barred actions based on other laws to enforce violations of TISA. The Court noted that when it repealed the private right of action, Congress left intact the clause which preserves the authority of states to regulate bank disclosures as long as state law is consistent with TISA. By leaving that clause in place, Congress explicitly approved of language that allows for the enforcement of state laws “relating to the disclosure of yields payable or terms for accounts.” Here, the Court said, the UCL is such a law.
The Court stated that the UCL borrows violations of other laws and treats them as unlawful practices that the UCL makes independently actionable. The UCL does not serve as a mere enforcement mechanism. Rather, it provides its own distinct and limited equitable remedies for unlawful business practices. A plaintiff is enforcing the UCL, not the statute underlying the UCL claim. It is settled, the court added, that a UCL action is not precluded “merely because some other statute on the subject does not, itself, provide for the action or prohibit the challenged conduct.” The portions of TISA that Congress did not repeal, allowing states to maintain laws consistent with TISA, demonstrates the intent to permit state law remedies. Therefore, TISA poses no impediment to Depositors’ UCL claim of unlawful business practice.
The Court of Appeal’s judgment barring the action was reversed.