Opinion ID: 779698
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: 2 In October and November of 1999, the cities of Santa Monica and San Francisco enacted virtually identical ordinances prohibiting financial institutions from charging ATM fees to non-depositors. The Ordinances define financial institutions as any bank, savings association, savings bank, credit union, or industrial loan company, and target California's two largest banks, Bank of America and Wells Fargo Bank. 3 These Ordinances are enforced through private rights of action. Under the Ordinances, any consumer who pays an unlawful ATM fee may sue for actual damages of not less than $250 plus attorney fees and costs. In addition, punitive damages of up to $5,000 are allowed where the financial institution has engaged in a pattern of willful violations. The Ordinances also permit consumers and municipal officials to seek injunctive relief. 4 The Banks dispute the validity of the Ordinances and began litigating almost immediately after the Cities enacted the Ordinances. The following is a summary of the parties' allegations and the procedural history. 5 (1) The Cities' Allegations. 6 The Cities allege that ATM fees charged to non-depositors harm consumers. They point out that non-depositors are charged twice for using an ATM. 1 They insist that ATM fees unduly burden the elderly, the disabled, and the poor because of their lower mobility and [their] relative lack of choice over which ATMs to use. 7 The Cities also allege that ATM fees undermine competition in the local banking industry. The Cities argue that smaller banks and credit unions lose market share to larger banks because depositors seeking to avoid ATM fees transfer their accounts to banks that operate more ATMs in the Cities. 8 (2) The Banks' Allegations. 9 The Banks reject the Cities' characterization of the ATM market. They claim that ATMs are net cost centers for banks who on average lose between $8,000 and $11,000 annually per ATM. The Banks also dispute the Cities' contention that ATM fees have led to greater concentration in the local banking industry. 10 Additionally, the Banks argue that their ability to compete is impaired by the Ordinances. The Ordinances' definition of financial institution does not include all ATM operators. For instance, credit card companies are exempt from compliance because the Ordinances' limited definition of financial institution does not include them. This disparate treatment of ATM operators under the Ordinances would put the Banks at a competitive disadvantage. 11 (3) Procedural History. 12 Upon passage of the Ordinances, the Banks, not surprisingly, suspended ATM service to non-depositors. On November 3, 1999, the Banks filed a complaint against the Cities seeking a declaratory judgment that the Ordinances are preempted by the National Bank Act. On November 15, 1999, the district court preliminarily enjoined enforcement of the Ordinances pending resolution of this action. The Ninth Circuit affirmed, holding that the district court did not abuse its discretion in concluding that preliminary injunctive relief was appropriate under the circumstances. Bank of Am. v. City and County of San Francisco, 215 F.3d 1332 (9th Cir.2000). 13 On January 20, 2000, the district court granted California Federal Bank's (Cal Fed) motion to intervene as a plaintiff in this action. The following day, Cal Fed filed its complaint against the Cities seeking a declaratory judgment that the Ordinances are preempted by the Home Owners' Loan Act as applied to federal savings banks. Subsequently, the parties filed cross-motions for summary judgment. 14 On June 30, 2000, the district court denied the Cities' cross-motion for summary judgment and granted summary judgment in favor of Cal Fed and the Banks. The district court rejected the Cities' claim that the savings clause in the EFTA permits the Cities to regulate ATM fees as a consumer protection measure. It held that the EFTA's anti-preemption provision is specifically limited to the EFTA and does not grant additional authority to the Cities to regulate national banks. 15 The district court found that the HOLA and the Office of Thrift Supervision's (OTS) regulations occupy the entire field of ATM fees with respect to federal savings banks. It also found that the HOLA and OTS regulations authorize federal savings banks to charge ATM fees. Thus, the district court held that HOLA preempt the Ordinances. The district court also held that the National Bank Act and the regulations of the Office of Comptroller of Currency (OCC), which permit nationally chartered banks to charge ATM fees, preempt the Ordinances. 16 Because of these findings, the district court permanently enjoined the Cities from enforcing the Ordinances. The Cities appeal.