Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-01850/USCOURTS-caed-2_04-cv-01850-3/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 29:754 Discrimination

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

SERGEI PORTNOY, No. CIV.S-04-1850 DFL DAD PS

Plaintiff,

v. FINDINGS AND RECOMMENDATIONS

US BANK, et al.,

Defendants.

____________________________/

This matter came before the court on July 29, 2005, for

hearing on defendant’s motion for summary judgment, or in the

alternative summary adjudication. Plaintiff, proceeding pro se,

appeared on his own behalf. Christopher L. Humphreys appeared on

behalf of defendant. Having considered all written materials

submitted in connection with motion, and after hearing oral argument,

the undersigned will recommend that defendant’s motion be granted.

LEGAL STANDARDS

Summary judgment is appropriate when it is demonstrated

that there exists no genuine issue as to any material fact, and that

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the moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); see also Adickes v. S.H. Kress & Co., 398 U.S. 144,

157 (1970); Owen v. Local No. 169, 971 F.2d 347, 355 (9th Cir. 1992).

The party moving for summary judgment

always bears the initial responsibility of

informing the district court of the basis for its

motion, and identifying those portions of "the

pleadings, depositions, answers to

interrogatories, and admissions on file, together

with the affidavits, if any," which it believes

demonstrate the absence of a genuine issue of

material fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving

party meets its initial responsibility, the burden then shifts to the

opposing party to establish that a genuine issue as to any material

fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 586 (1986); see also First Nat'l Bank of

Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968); Ruffin v.

County of Los Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979), cert.

denied, 455 U.S. 951 (1980). The opposing party must demonstrate

that the fact in contention is material, i.e., a fact that might

affect the outcome of the suit under the governing law, and that the

dispute is genuine, i.e., the evidence is such that a reasonable jury

could return a verdict for the nonmoving party. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986); T.W. Elec. Serv., Inc. v.

Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

In resolving the summary judgment motion, the court

examines the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any. Rule

56(c); see also SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th

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Cir. 1982). The evidence of the opposing party is to be believed,

Anderson, 477 U.S. at 255, and all reasonable inferences that may be

drawn from the facts placed before the court must be drawn in favor

of the opposing party, Matsushita, 475 U.S. at 587 (citing United

States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); see

also United States v. First Nat’l Bank of Circle, 652 F.2d 882, 887

(9th Cir. 1981). Nevertheless, inferences are not drawn out of the

air, and it is the opposing party's obligation to produce a factual

predicate from which the inference may be drawn. See Richards v.

Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

aff'd, 810 F.2d 898, 902 (9th Cir. 1987).

ANALYSIS

This action stems from a dispute between plaintiff and

defendant U.S. Bank National Association (“U.S. Bank” or “bank”)

which resulted in the closing of plaintiff’s checking account at a

branch of U.S. Bank. The only remaining defendant is U.S. Bank.

Plaintiff’s second amended complaint contains a single

federal cause of action, the third cause of action, is brought under

the Expedited Funds Availability Act ("EFAA"), 12 U.S.C. § 4001 et

seq., and its implementing regulations, 12 C.F.R. pt. 229. See Bank

One Chicago, N.A. v. Midwest Bank & Trust Co., 516 U.S. 264, 268

(1996)(“The Federal Reserve Board has implemented the EFA Act through

Regulation CC, 12 C.F.R. pt. 229 (1995).”). The third cause of

action alleges that defendant failed to live up to its obligation to

make available to plaintiff the funds from deposited cash in a timely

fashion. More specifically, it alleges that defendant violated 12

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1 The complete title of the agreement between plaintiff and

defendant is “Your Deposit Account: Terms and Conditions, Electronic

Transfers, Funds Availability & Safe Deposit Box Lease Agreement,

Reserve Line Agreement.” A copy of the agreement is attached as an

exhibit to the declaration of Christopher L. Humphreys submitted in

support of the pending motion. The cited provision appears at page

30 of the agreement under the heading “Determining the Availability

of a Deposit -- All Accounts.”

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C.F.R. § 229.10, which is part of 12 C.F.R. Part 229, Subpart B, a

set of regulations governing when banks must make funds available

after they have been deposited. Because the cash deposit at issue

was made by plaintiff at an automated teller machine (ATM), the

precise regulation at issue is 12 C.F.R. § 229.10(a)(2). That

regulation provides as follows:

A bank shall make funds deposited in an account

by cash available for withdrawal not later than

the second business day after the banking day on

which the cash is deposited, if the deposit is

not made in person to an employee of the

depositary bank.

12 C.F.R. § 229.10(a)(2). In its motion for summary judgment,

defendant persuasively argues that plaintiff’s federal cause of

action alleging a violation of 12 C.F.R. § 229.10(a)(2) must fail.

The undisputed facts show that plaintiff wrote two $3,000

checks on his U.S. Bank checking account to his wife on Thursday,

March 11, 2004. Two days later on Saturday, March 13, 2004,

plaintiff made two $3,000 deposits in cash into his U.S. Bank

checking account at an ATM. Because that Saturday was not a business

day, pursuant to the terms of the deposit account agreement between

plaintiff and defendant those deposits were deemed to have been made

on Monday, March 15, 2004, the next business day the bank was open.1

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2 Plaintiff ultimately withdrew the full balance of his account

in the form of a cashier’s check on Friday, March 19, 2004. The

events of that day involved a verbal disagreement between plaintiff

and defendant’s staff and ended with the closing of plaintiff’s

checking account and plaintiff being escorted from defendant’s

property by local police.

5

See 12 C.F.R. § 229.19(a)(5)(i)(indicating that “funds may be

considered deposited on the next banking day, in the case of funds

that are deposited ... [o]n a day that is not a banking day for the

depositary bank”). Further, since the deposits were made at an ATM,

pursuant to 12 C.F.R. § 229.10(a)(2) defendant was not required to

make the funds available to plaintiff for withdrawal until Wednesday,

March 17, 2004, the second business day after the banking day on

which the cash was deemed deposited. Thus, when defendant made the

funds available to plaintiff on Tuesday, March 16, 2004, it did so in

compliance with the EFAA and its accompanying regulations. Indeed,

as defendant accurately points out, it made the necessary funds

available to plaintiff a day earlier than required under the law.2

The crux of plaintiff’s argument is that the funds he

deposited on Saturday, March 13, 2004, should have been available on

Monday, March 15, 2004, the date on which the two $3,000 checks

plaintiff had written to his wife were presented for payment to

defendant. In this regard, plaintiff appears to have misread the

deposit account agreement between himself and the bank as well as the

provisions of the applicable regulations. As explained above,

defendant was under no obligation to make the funds deposited at the

ATM available to plaintiff on Monday, March 15, 2004.

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3 As one court has explained:

Check kiting involves the knowing drafting and

depositing of a series of overdraft checks

between two or more federally insured banks with

the purpose of artificially inflating bank

balances so that checks can be drawn on accounts

that actually have negative funds. If timed

correctly, the bank will be prevented from

discovering that the accounts are overdrawn and

will be tricked into honoring checks drawn on

accounts with insufficient funds. By repeating

this scheme over a period of time a person in

essence may obtain an interest-free loan. 

United States v. LeDonne, 21 F.3d 1418, 1425 n.2 (7th Cir. 1994)

(citations omitted).

4 These hold provisions appear at page 31 of the agreement

under the heading “Longer Delays May Apply.”

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Plaintiff also complains that defendant put a temporary

“hold” on his checking account. Defendant explains that it indeed

put a temporary hold on plaintiff’s account on March 13, 2004,

following his two $3,000 deposits in order to verify the availability

of the funds. Defendant explains that its decision to take this

action was prompted by the somewhat unusual history of plaintiff and

plaintiff’s wife depositing cash and writing checks on their checking

accounts at U.S. Bank and Bank of America, respectively. Defendant

contends that bank personnel suspected that the couple’s practices

were indicative of “check kiting.”3 In any event, plaintiff’s

argument in this regard does not save his action. The temporary hold

was authorized by the terms of the deposit account agreement between

plaintiff and defendant.4 Further, on Tuesday, March 16, 2004, the

temporary hold was released after the deposited funds were verified

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5 The precise details regarding plaintiff’s history of

deposits; defendant’s decision to put a hold on plaintiff’s account;

and the bank’s decision to release that hold on Tuesday, March 16,

2004 -- as opposed to Monday, March 15, 2004, when the bank

presumably learned that plaintiff’s recent deposits were in cash and

thus could not be part of a check-kiting scheme -- are unclear. 

Nevertheless, plaintiff’s sole federal claim is based on an alleged

violation of the EFAA and its accompanying regulations, and as

explained above, no such violation occurred under the undisputed

facts.

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and defendant made the necessary funds available to plaintiff in

compliance with the EFAA and its accompanying regulations.5

For all of these reasons, the court will recommend that

defendant’s motion for summary judgment be granted as to the second

amended complaint’s third cause of action.

If the above recommendation is adopted, only plaintiff’s

fourth, fifth, sixth and seventh causes of action will remain. Those

causes of action are state law claims for breach of implied contract,

breach of the covenant of good faith and fair dealing, intentional

infliction of emotion distress and negligent infliction of emotional

distress, respectively. “Under 28 U.S.C. § 1367(c)(3) a district

court may elect, in its discretion, not to exercise supplemental

jurisdiction over state claims if it has dismissed the original

jurisdiction federal claims.” Binder v. Gillespie, 184 F.3d 1059,

1066 (9th Cir. 1999), cert. denied, 528 U.S. 1154 (2000) (citing Fang

v. United States, 140 F.3d 1238, 1241 (9th Cir. 1998) and Voight v.

Savell, 70 F.3d 1552, 1565 (9th Cir. 1995)). Where, as here, all

federal claims are dismissed before trial, the balance of relevant

factors points toward declining to exercise jurisdiction over the

remaining state law claims. Gini v. Las Vegas Metropolitan Police

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Department, 40 F.3d 1041, 1046 (9th Cir. 1994); Imagineering, Inc. v.

Kiewit Pac. Co., 976 F.2d 1303, 1309 (9th Cir. 1992). Under these

circumstances, the undersigned will further recommend that the

district court decline to exercise its supplemental jurisdiction to

adjudicate plaintiff’s state law claims and that those claims be

dismissed without prejudice.

For the reasons set forth above, the undersigned HEREBY

RECOMMENDS that defendant’s motion for summary judgment be granted as

to plaintiff’s sole remaining federal cause of action and that the

state law claims be dismissed without prejudice for lack of federal

jurisdiction.

These findings and recommendations are submitted to the

United States District Judge assigned to the case pursuant to the

provisions of 28 U.S.C. § 636(b)(l). Within ten (10) days after

being served with these findings and recommendations, any party may

file written objections with the court and serve a copy on all

parties. Such a document should be captioned “Objections to Findings

and Recommendations.” The parties are advised that failure to file

objections within the specified time may waive the right to appeal

the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th

Cir. 1991).

DATED: August 3, 2005.

DAD:th

Ddadl\orders.prose\portnoy1850.f&r.msj

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