Phillips v. Bank of America, N.A.

Filed 4/27/15
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

JASMINE PHILLIPS, as trustee etc. et al., B251836

Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC492469)
v.

BANK OF AMERICA,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of the County of Los Angeles,
John Shepard Wiley, Jr., Judge. Reversed.
Markun Zusman Freniere & Compton, David S. Markun, Daria Dub Carlson, for
Plaintiffs and Appellants.
Reed Smith, James C. Martin, Marc A. Lackner, Peter J. Kennedy for Defendant
and Respondent.
 INTRODUCTION

We hold that a bank may not for account service fees debit a so-called Coogan
Trust Account—a statutorily required account to preserve 15 percent of a minor‟s gross
earnings for artistic or creative services for the benefit of the minor until the minor turns
18 or is emancipated (Fam. Code, § 6750 et seq.) (Coogan Law1)—because of the
statutory ban on withdrawals from a Coogan Trust Account without court approval
(§ 6753, subd. (b)). Such a debit, without court approval, is a prohibited withdrawal
under the applicable state statute, and that state law prohibition on a debit by a national
bank is not preempted by federal law. We therefore reverse the judgment entered on a
demurrer sustained without leave to amend.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs and appellants Jasmine Phillips aka Jasmine Gonzales (Phillips), as
trustee for Alex Gonzales, and Anesha L. Colemen, as trustee for Jadon I. Monroe, filed a
class action lawsuit on behalf of themselves and all others similarly situated against
defendant and respondent Bank of America, N.A., a national bank association. Plaintiffs
in their operative first amended complaint (FAC) alleged causes of action for breach of
written contract, breach of the implied covenant of good faith and fair dealing,
conversion, and unlawful and unfair business practices. Plaintiffs alleged that they were
“the parents or guardians of unemancipated minors who have been paid for performing
artistic or creative services.”
Plaintiffs alleged that, as trustees for their minor children, they “opened accounts
entitled „Coogan Trust‟ Accounts for the[] minors at [defendant] in full compliance

1
All statutory citations are to the Family Code unless otherwise noted. We use the
section and subdivision numbers of the Coogan Law following the last amendment in
2013, which amendment did not change the wording relevant here or the section
numbers, but only renumbered subsections and subdivisions.

2
with . . . [section] 6750 et seq. [the Coogan Law]. From time to time, wages or other
monies earned by the minors for performing artistic services were deposited into
Plaintiffs‟ Coogan Trust Accounts for the benefit of the minors. . . . [¶] During the four
years preceding the filing of the initial Complaint in this action, defendant[] ha[s] made
withdrawals from Plaintiffs‟ Cogan Trust Accounts, including but not limited to
withdrawals for monthly service fees, without court approval.”
In their causes of action for breach of contract and breach of the covenant of good
faith and fair dealing, plaintiffs alleged that they entered into written agreements2 with
defendant “pursuant to which defendant[] agreed to open and maintain . . . Coogan Trust
Account[s] . . . . [¶] Notwithstanding these written agreements . . . defendant[] regularly
and systematically breached [these agreements] by making withdrawals from [the]
Coogan Trust Accounts, including but not limited to monthly service charges, without
court approval.”
In plaintiffs‟ cause of action for conversion, they alleged that “[d]espite
defendant[‟s] representations that defendant[] would open and maintain the subject
accounts as Coogan Trust Accounts, defendant[] unlawfully took and converted monies
from the Coogan Trust Accounts for defendant[‟s] own use.” In their cause of action for
unlawful and unfair business practices under the Unfair Competition Law (Bus. & Prof.
Code, § 17200 et seq.), plaintiffs alleged that “[n]otwithstanding applicable California
Family Code sections as well as other provisions of California law, defendant[] regularly
and systematically made withdrawals from the Coogan Trust Accounts . . . , including but
not limited to „monthly service charges.‟ [¶] In addition, defendant[] represented . . . that
defendant[] would open and maintain the subject accounts as Coogan Trust Accounts.
Despite these representations, defendant[] failed to maintain the accounts as Coogan
Trust Accounts and instead regularly and systematically made withdrawals from these
accounts, including but not limited to „monthly service charges.‟” Plaintiffs sought as
relief compensatory damages, issuance of a temporary restraining order and a preliminary

2
Copies of the written contracts were not attached to the FAC.

3
and permanent injunction, disgorgement of all profits resulting, punitive damages, costs
of suit, attorney fees, and such other and further relief as the trial court might deem just
and proper.
The trial court sustained defendant‟s demurrer to the FAC without leave to amend,
finding that the term “withdrawal” as used in the Coogan Law did not include the
debiting of an account by a financial institution for service charges. The trial court
thereafter entered a final judgment of dismissal, and plaintiffs filed a timely notice of
appeal.
The parties have confirmed that the issue on appeal is whether the Coogan Law
precludes defendant from debiting the Coogan Trust Accounts for account service fees,
including whether the debits by defendant are withdrawals under the Coogan Law and if
so whether the state law that has the effect of banning such debits by a national bank is
preempted by federal law. The parties agree that whether plaintiffs have alleged facts
sufficient to state the specific causes of action asserted in the FAC is not an issue in this
appeal.

DISCUSSION

A. Standard of Review and Rules of Interpretation
We review de novo a judgment based on an order sustaining a demurrer.
(Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48
Cal.4th 32, 42; Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219
Cal.App.4th 75, 81.) “As the Supreme Court has observed, „In reviewing the sufficiency
of a complaint against a general demurrer, we are guided by long-settled rules. “We treat
the demurrer as admitting all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law. [Citation.] We also consider matters which
may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context. [Citation.] When a
demurrer is sustained, we determine whether the complaint states facts sufficient to

4
constitute a cause of action. [Citation.] And when it is sustained without leave to amend,
we decide whether there is a reasonable possibility that the defect can be cured by
amendment: if it can be, the trial court has abused its discretion and we reverse; if not,
there has been no abuse of discretion and we affirm. [Citations.] The burden of proving
such reasonable possibility is squarely on the plaintiff. [Citation.]‟ [Citation.]” (Los
Angeles Memorial Coliseum Com. v. Insomniac, Inc. (2015) 233 Cal.App.4th 803, 819.)
In addition, “Whether a law is preempted is an issue of law, reviewed de novo. (Farm
Raised Salmon Cases (2008) 42 Cal.4th 1077, 1089, fn. 10 [72 Cal.Rptr.3d 112, 175 P.3d
1170] [„federal preemption presents a pure question of law‟] . . . .)” (Zubarau v. City of
Palmdale (2011) 192 Cal.App.4th 289, 305.)
The California Supreme Court stated the rules of statutory interpretation as
follows: “Our fundamental task . . . is to determine the Legislature‟s intent so as to
effectuate the law‟s purpose. We first examine the statutory language, giving it a plain
and commonsense meaning. We do not examine that language in isolation, but in the
context of the statutory framework as a whole in order to determine its scope and purpose
and to harmonize the various parts of the enactment. If the language is clear, courts must
generally follow its plain meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend. If the statutory language permits more than
one reasonable interpretation, courts may consider other aids, such as the statute‟s
purpose, legislative history, and public policy. [Citations.]” (Coalition of Concerned
Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.) The California
Supreme Court also has said “„we consider portions of a statute in the context of the
entire statute and the statutory scheme of which it is a part, giving significance to every
word, phrase, sentence, and part of an act in pursuance of the legislative purpose.‟
[Citation.]” (Sierra Club v. Superior Court (2013) 57 Cal.4th 157, 166.)

B. Applicable Law
The history of the Coogan Law has been summarized in Legislative documents.
“The Coogan Law was enacted [as former Civil Code sections 36.1 and 36.2] in 1938 in

5
response to the childhood star Jackie Coogan‟s plight. Even though he earned millions as
a child, Coogan was surprised to find out when he reached adulthood that he was flat
broke, because his mother and stepfather spent all his money—legally. . . . Thus, the
Coogan Law was passed in order to preserve a portion of the minor‟s earnings for the
minor‟s use when he or she reaches the age of majority.” (Sen. Rules Com., Off. of Sen.
Floor Analyses, Analysis of Sen. Bill No. 1162 (1999-2000 Reg. Sess.) as amended Aug.
18, 1999, pp. 6-7.) Inadequacies in the statutory scheme, however, resulted in additional
abuses of the finances of such child-actors as Shirley Temple, Macauly Culkin, Lee
Aaker, and Gary Coleman—whose parents left the minors with at best only a small
percentage of what they earned during their careers. (Sen. Floor, 3d reading of Sen. Bill
No. 1162 (1999-2000 Reg. Sess.) as amended Aug. 18, 1999, p. 3.) The Legislature
amended the Coogan Law in 1999, 2003, and 2013. (Stats 1999, ch 940, §§ 2, 3, 5 (SB
1162); Stats 2003, ch 667, §§ 1-3 (SB 210); Stats 2013, ch 102, § 1 (AB 533); see
generally Din, Chapter 667: Instituting Proper Trust Funds and Safeguarding the
Earnings of Child Performers from Dissipation by Parents, Guardians and Trustees
(2004) 35 McGeorge L.Rev. 473.)
As relevant to this case, the Coogan Law3 provides that for a contract pursuant to
which a minor is employed or agrees to render artistic or creative services, the minor‟s
employer must set aside 15 percent “of the minor‟s gross earnings pursuant to the
contract” in trust “in an account or other savings plan, and preserved for the benefit of the
minor.” (§ 6752, subds. (a), (b)(1), (b)(4).) At least one of the minor‟s parents or legal
guardians must “be appointed as trustee of the funds,” unless the superior court
determines that the appointment “of a different individual, individuals, entity, or entities”
is required in the best interests of the minor. (§ 6752, subds. (b)(2), (c)(1).)

3
Because plaintiffs alleged in the FAC that defendant made withdrawals from the
Coogan Trust Accounts during the four years preceding the filing of the initial complaint
in this action, we refer to the Coogan Law in effect from four years preceding the filing
of the complaint to the date of the filing of that complaint—September 20, 2012—except,
as noted, we use the numbers of the subsections and subdivisions as they presently exist
because the wording, as relevant here, was not changed by the 2013 amendment.

6
 The Coogan Law provides that within seven business days after execution of the
contract, the trustee must establish a trust account, “known as a Coogan Trust Account,”
at a “bank, savings and loan institution, credit union, brokerage firm, or company
registered under the Investment Company Act of 1940, that is located in the State of
California.” (§ 6753, subds. (a), (d).) Within 10 business days after commencement of
employment, the trustee must “provide the minor‟s employer with a true and accurate
photocopy of the trustee‟s statement pursuant to Section 6753.” (§§ 6752, subds. (b)(3),
(c)(2), 6753, subd. (c).) The trustee must also include identifying information of the
financial institution and account, and any “additional information needed by the minor‟s
employer to deposit” the set-aside funds into the account. (§§ 6752, subds. (b)(3), 6753,
subd. (c).) The trustee must also attach to the statement a copy “of any information
received from the financial institution confirming the creation of the account.” (§ 6753,
subd. (c).) Within 15 business days after receiving, inter alia, the trustee‟s statement, the
minor‟s employer must deposit into the Coogan Trust Account “15 percent of the minor‟s
gross earnings pursuant to the contract.” (§ 6752, subds. (b)(4), (c)(3).) The parent or
guardian “acting in his or her fiduciary relationship, shall, with the earnings and
accumulations of the minor under the contract, pay all liabilities incurred by the minor
under the contract, including, but not limited to, payments for taxes on all earnings,
including taxes on the amounts set aside under subdivisions (b) and (c) of this
section . . . .” (§ 6752, subd. (d).) As 15 percent of the gross earnings is deposited in the
Coogan Trust Account, it follows that these liabilities would be payable out of the
remaining 85 percent of the earnings.
The Coogan Law also specifies that “upon petition of the parent or legal guardian,
the minor . . . or the trustee or trustees, on good cause shown,” the superior court may
“order the trust be amended or terminated.” (§ 6752, subds. (b)(7), (c)(5).) Until the
minor becomes 18 years old, or a declaration of emancipation of the minor is issued, “no
withdrawal by the beneficiary or any other individual, individuals, entity, or entities may
be made of funds on deposit in trust without written order of the superior court . . . .” (§

7
6753, subd. (b).) It is the Coogan Law and specifically section 6753, subdivision (b), that
are at issue in this appeal.

C. Analysis
Plaintiffs assert that defendant, without written orders of the superior court,
debited Coogan Trust Accounts for account service fees, thereby violating the prohibition
against withdrawals from Coogan Trust Accounts. Defendant contends that such debits
are not withdrawals and that even if they were, any state law that prohibits such debits is
preempted by federal law, which permits the imposition of account service fees and
precludes the application of state law that prevents or significantly interferes with a
national bank‟s exercise of its powers.

1. Debiting the Account as a Withdrawal
Section 6753, subdivision (b) prohibits the “withdrawal” of funds on deposit in a
Coogan Trust Account by the beneficiary “or any other individual, individuals, entity, or
entities,” without court approval. Defendant contends that its “debit” of a Coogan Trust
Account for account service fees is not a “withdrawal” of funds, and the use of the phrase
“any other individual, individuals, entity, or entities” shows that ban on withdrawals is
meant only “to reach trustees—a parent or guardian or other individual or entity—who
are responsible for managing and controlling a child-actors‟ earnings.” The parties rely
on dictionary definitions of “debit” and “withdrawal” to support their positions. But,
when a bank debits an account, it necessarily withdraws money from that account. (See
Black‟s Law Dictionary (10th ed. 2014) p. 487, Col. 1 [defines “debit” as “1. A sum
charged as due or owing; esp., a decrease in the amount of money in a bank account, as
because one has withdrawn money from it.” (Italics added.)4

4
Debiting an account means to create a record of a transaction and does not
necessarily require a withdrawal. (GWIN, Inc. v. Don Best Sports (E.D. Tex. 2008) 548
F.Supp.2d 342, 351.) But here, a bank‟s debiting of the accounts for its own fee
necessarily means to withdraw money from the account and transfer it to the bank. A

8
 Moreover, courts have used the word “withdrawal” to include a bank‟s debiting an
account for, or charging, a service fee or charge. Thus, in Arlington Video Productions,
Inc. v. Fifth Third Bancorp (6th Cir. 2014) 569 Fed.Appx. 379, the court said, “The
parties agreed in their contract that the Bank could collect service charges, with Arlington
giving the Bank a security interest in its business checking account to permit the Bank to
withdraw any debt Arlington owed to the Bank.” (Id. at p. 386, italics added.) The court
added, “The Bank did not disclose to Arlington all of the facts relating to the deposit
adjustment fee or the increase in the returned item fee before automatically withdrawing
those fees from Arlington‟s account and listing unexplained „service charges‟ on the
monthly bank statements.” (Id. at p. 389, italics added; see In re Moffitt, Zwerling &
Kemler, P.C. (E.D. Va. 1995) 875 F.Supp. 1152, 1168 [“Second, $15 was withdrawn
automatically by the bank from the Law Firm‟s account as a service charge to maintain
the account of Zwerling‟s predecessor firm” (italics added)], aff’d in part, vacated in part
on other grounds, U.S. v. Moffitt, Zwerling & Kemler, P.C. (4th Cir. 1996) 83 F.3d 660;
H.G. Whittenberg, Sr. v. Commissioner of Internal Revenue (1944 Tax Ct.) 1944 WL
7224 [“Other withdrawals were for bank service charges and bank tax” (italics added)];
In re 604 Columbus Avenue Realty Trust v. Capitol Bank and Trust Company (Bkrtcy D.
Mass. 1990) 119 B.R. 350, 361-362 [“the Bank automatically withdrew and paid to itself
$21.75 (in three withdrawals of $7.25 on July 31, August 29, and September 30, 1986)
for service charges . . . . [¶] . . . [¶] [Appendix A] identifies the deposits, the checks
written and processed against the account, and the automatic withdrawals for interest, tax
escrow, and service charges” (italics added)], aff’d in part, vacated in part on other
grounds, In re 604 Columbus Ave. Realty Trust (1st Cir. 1992) 968 F.2d 1332.)
The purpose of the Coogan Trust Account is for the “preserving for the benefit of
the minor [15 percent] of the minor‟s gross earnings” until the minor reaches majority.

“debit card” is used to withdraw or transfer monies from an account. (See In re Visa
Check/MasterMoney Antitrust Litigation (E.D. N.Y. 2000) 192 F.R.D. 68, 72, aff’d In re
Visa Check/MasterMoney Antitrust Litigation (2d Cir. 2001) 280 F.3d 124, superseded by
statute on other grounds as stated in Attenborough v. Const. and General Bldg. Laborer’s
(S.D. N.Y 2006) 238 F.R.D. 82, 100.)

9
(§ 6753, subd. (a), italics added.) Preserving the gross amount of earnings contemplates
no deductions for taxes or fees of any kind without court approval.
Defendant reads the statute to mean that its prohibition on withdrawals applies
only to the minor and his or her parents, guardians, and trustees and not to others, such as
banks. Under this reading, as defendant concedes, others could execute on the amounts
in the Coogan Trust Account or otherwise lawfully obtain portions of what is supposed to
be protected monies, which actions are inconsistent with the purpose of a Coogan Trust
Account. (See Prob. Code, §§ 15300, 15301 [if the trust instrument provides that a
beneficiary‟s interest in the trust funds is not subject to transfer, the beneficiary‟s interest
in those funds is not subject to enforcement of a money judgment until paid to the
beneficiary].)
Section 6753, subdivision (b) specifies that prior to the time the minor becomes 18
years old or is emancipated, “no withdrawal by the beneficiary or any other individual,
individuals, entity, or entities may be made of funds on deposit in trust without written
order of the superior court.” (Italics added.) Thus, the statute explicitly provides that the
withdrawal prohibition is not limited to the beneficiary, parent, or trustee.
Defendant argues that the phrase “any other individual, individuals, entity or
entities” is used elsewhere in the statute as referring to the responsibilities of account
trustees (§ 6752, subds. (b)(2), (b)(6), (c)(1), (c)(4); § 6753, subd. (d)) and should
therefore be so limited in the provision in question. But in each of the instances referred
to by defendant, the individual or entity refers specifically to a parent or trustee. In the
phrase at issue here, the words “trustee” or “parent” are not used and there is no language
limiting the scope of the words “any other individual, individuals, entity, or entities” to
parents or trustees.
Also, in three of defendant‟s examples, the phrase “individual, individuals, entity
or entities” refers to a broader group than just those included within the phrase “trustee or
trustees.” Defendant refers to section 6752, subdivisions (b)(6) and (c)(4), which
subdivisions both provide, “The trustee or trustees of the trust shall be the only
individual, individuals, entity, or entities with the obligation or duty to monitor and

10
account for those funds once they have been deposited by the minor‟s employer.”
Defendant also cites section 6753, subdivision (d), which provides that “[t]he trustee or
trustees of the trust shall be the only individual, individuals, entity, or entities with the
obligation or duty to ensure that the funds remain in trust . . . .” In each of these
examples, the phrase “individual, individuals, entity or entities” is not limited to “trustee
or trustees.” The phrase suggests there are individuals and entities that are not trustees
under the Coogan Law.
Defendant argues that as only beneficiaries (minors through their guardians),
trustees, parents, and guardians can petition for an order amending or terminating the
trust (§ 6752, subds. (b)(7), (c)(5)), they are the only ones who can seek an order
permitting a withdrawal from the Coogan Trust Account and thus the restriction on
withdrawals only applies to them—not to third parties. That those with a fiduciary duty
can seek to amend or terminate the trust does not mean that a third party without such a
fiduciary duty cannot seek court approval to withdraw funds from the trust or that the
restriction on withdrawals does not apply to such third parties.
In addition, defendant cites to Assembly Bill 533, as originally drafted (Assem.
Bill No. 533 (2013-2014 Reg. Sess.) as introduced Feb. 20, 2013) (AB 533), as seeking
to amend section 6753, subsection (b) to extend “its prohibition on withdrawals [without
court approval] to [include] „the financial institution or company in which the trust is
held, for purposes of collecting fees or service charges assessed for maintenance of the
trust.‟”5 (Italics added.) The Legislature failed to enact that version of AB 533, but its
failure to enact proposed legislation has little or no value in determining the legislative
intent of a previously enacted statute. (See Carter v. California Dept. of Veterans Affairs
(2006) 38 Cal.4th 914, 927.) Moreover, we note that in making this argument, defendant
essentially concedes that AB 533, as originally drafted, deemed its collection of account

5
The original draft was amended to remove this reference. (Assem. Amend. to
Assem. Bill No. 533 (2013-2014 Reg. Sess.) Apr. 18, 2013; Sen. Amend. to Assem. Bill
No. 533 (2013-2014 Reg. Sess.) June 3, 2013.)

11
service fees from a Coogan Trust Account to be a “withdrawal.” (Assem. Bill No. 533
(2013-2014 Reg. Sess.) as introduced Feb. 20, 2013.)
If a parent, guardian, or trustee does not timely supply the employers with a copy
of a trustee‟s statement establishing the Coogan Trust Account, the minor‟s employer
must forward to the Actor‟s Fund of America the 15 percent of the minor‟s gross
earnings. (§ 6752, subds. (b)(9)(A), (c)(7)(A).) The Actor‟s Fund of American then
becomes the trustee of such funds. (Ibid.) The Legislature specifically provided that the
Actor‟s Fund of America “may assess and deduct from the balance of the beneficiary‟s
account reasonable management, administrative, and investment expenses.” (§ 6752,
subd. (f)(2).) Thus, when a withdrawal for charges from a minor‟s trust account is
permissible, the Legislature specifically provided for it. No such authorization is given to
a depository bank. For all of these reasons, by debiting the Coogan Trust Accounts,
defendants have made impermissible withdrawals from those accounts.

2. Preemption
Plaintiffs alleged that although defendant entered into contracts and otherwise
represented “that the subject accounts would be opened and maintained as „Coogan Trust
Accounts,‟” it “failed to maintain the accounts as Coogan Trust Accounts and
instead . . . made withdrawals from these accounts, including but not limited to „monthly
service charges,‟ without court approval.” Defendant asserts that the application of the
Coogan Law (specifically, section 6753, subdivision (b)) to prevent its debits is
preempted by federal law. We disagree.
The California Supreme Court in Parks v. MBNA America Bank, N.A. (2012) 54
Cal.4th 376 (Parks) held that the National Bank Act (NBA), 12 U.S.C. § 1 et seq.
preempted a California law requiring certain disclosures that accompany preprinted
checks provided by credit card issuers to cardholders for use as credit. In so holding, the
court summarized the preemption principles as follows: “A preemption „question is one
of congressional intent. Did Congress, in enacting the Federal Statute, intend to exercise
its constitutionally delegated authority to set aside the laws of a State? If so, the

12
Supremacy Clause requires courts to follow federal, not state, law.‟ (Barnett Bank [of
Marion Cty. v. Nelson (1996)] 517 U.S. [25,] 30 [(Barnett Bank), citing U.S. Const., art.
VI, cl. 2] . . . . [¶] This court has recognized „four species of federal preemption:
express, conflict, obstacle, and field.‟ [Citation.] „First, express preemption arises when
Congress “define[s] explicitly the extent to which its enactments pre-empt state law.
[Citation.] . . . .” [Citations.] Second, conflict preemption will be found when
simultaneous compliance with both state and federal directives is impossible. [Citations.]
Third, obstacle preemption arises when “„under the circumstances of [a] particular case,
[the challenged state law] stands as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress.”‟ [Citations.] Finally, field preemption,
i.e., “Congress‟ intent to pre-empt all state law in a particular area,” applies “where the
scheme of federal regulation is sufficiently comprehensive to make reasonable the
inference that Congress „left no room‟ for supplementary state regulation.” [Citation.]‟
[Citations.]” (Parks, supra, 54 Cal.4th at pp. 382-383; see also Oneok, Inc. et al. v.
Learjet, Inc. et al. (April 21, 2015) 575 U.S. __, 2015 U.S. LEXIS 2808, *5-6.) As in
Parks, supra, 54 Cal.4th 376, the issue here is whether state law “prevent[s] or
significantly interfere[s] with the national bank‟s exercise of its powers.” (Barnett Bank,
supra, 517 U.S. at p. 33; see generally 7A Michie on Banks and Banking (2013) ch. 15,
§§ 1-6, pp. 5-93.)
The court in Parks, supra, 54 Cal.4th at pages 384-385 added that the United
States Supreme Court “observed that a federal grant of power to national banks does not
preempt state law where there is „an explicit statement that the exercise of that power is
subject to state law‟ (Barnett Bank, supra, 517 U.S. at p. 34) or where the state law „does
not prevent or significantly interfere with the national bank‟s exercise of its powers‟ (id.
at p. 33). Although „normally Congress would not want States to forbid, or to impair
significantly, the exercise of a power that Congress explicitly granted,‟ federal banking
laws do not preempt state laws that do not significantly impair a national bank‟s exercise
of its congressionally authorized powers. (Ibid.) In 2010, the Dodd-Frank Act codified
the significant impairment test articulated in Barnett Bank. (See 12 U.S.C. §

13
25b(b)(1)(B) [declaring state consumer financial laws preempted if „in accordance with
the legal standard for preemption in the decision of the Supreme Court of the United
States in [Barnett Bank], the State consumer financial law prevents or significantly
interferes with the exercise by the national bank of its powers‟].)”6
“The term „State consumer financial law‟ means a State law that does not directly
or indirectly discriminate against national banks and that directly and specifically
regulates the manner, content, or terms and conditions of any financial transaction (as
may be authorized for national banks to engage in), or any account related thereto, with
respect to a consumer.” (12 U.S.C. § 25b(a)(2).) The Coogan Law is a “State consumer
financial law.” It does not discriminate against national banks; it provides that a
withdrawal from a Coogan Trust Account may not be made by anyone. (§6753, subd.
(b); see 7A Michie on Banks and Banking, supra, ch. 15, § 5, at p. 52 [“The application
of state law to bank service charges is not preempted by the comprehensive federal
statutory scheme which occupies the field”].)
The Dodd-Frank Act specifically provides that the preemption determination
under 12 U.S.C. section 25b(b)(1)(B) may be made by a court or by regulation or order of
the Office of the Comptroller of the Currency (OCC) on a “case-by-case basis.” (12
U.S.C. § 25b(b)(3),(5); see generally Horvath Preemption Analysis Under the National
Bank Act: Then and Now (2013) 67 Consumer Fin. L.Q. Rep. 5). The term “case-by-
case basis” refers to a determination on preemption made by the OCC based on various
factors and after consultation with the Bureau of Consumer Financial Protection. (12
U.S.C. § 25b(b)(3)(A), (B).) The Dodd-Frank Act restricts the ability of the OCC to
preempt state consumer financial laws as they apply to banks by providing specific
procedural standards to be followed. (12 U.S.C. § 25b(b)(3)(A), (B); see Carpenter, The
Dodd-Frank Wall Street Reform and Consumer Protection Act, Title X: The Consumer

6
One authority has stated, “Federal preemption in the consumer protection area is
not dead, but it‟s certainly weaker than it was before the Dodd-Frank Wall Street Reform
and Consumer Act.” (19-7 Clark and Clark, Clarks‟ Bank Deposits and Payments
Monthly (July 2010), 1, 10.)

14
Financial Protection Bureau (Congressional Research Service) (July 21, 2010) 14.) A
court reviewing determinations by the OCC regarding preemption of state law “shall
assess the validity of such determinations, depending upon the thoroughness evident in
the consideration of the agency, the validity of the reasoning of the agency, the
consistency with other valid determinations made by the agency, and other factors which
the court finds persuasive and relevant to its decision.” (12 U.S.C. § 25b(b)(5)(A).)
There has been no determination of preemption by the OCC under 12 U.S.C.
§ 25b(5) of the state law involved here.7 Thus, we do not have to review any OCC
determination under the standards set forth in the Dodd-Frank Act. Instead we determine
if preemption is required under Barnett Bank, supra, 517 U.S. 25. In holding the state of
Florida‟s law that prevented banks from selling insurance was preempted, the United
States Supreme Court in Barnett, supra, 517 U.S. at page 33, said that to be preempted by
federal law, a state law that affects national banks must “prevent or significantly interfere
with the national bank‟s exercise of its powers.”8
“Business activities of national banks are controlled by the [NBA], and regulations
promulgated thereunder by [the OCC].” (Watters v. Wachovia Bank, N.A. (2007) 550
U.S. 1, 6, superseded by statute on other grounds as stated in Dept. of Revenue v. Pikco
Finance, Inc. (Miss. 2012) 97 So.3d 1203, 1209, fn. 7.) The NBA “vest[s] in nationally
chartered banks enumerated powers and „all such incidental powers as shall be necessary

7
Defendant cites to an OCC Interpretive Letter stating that a bank “is authorized by
section 24(Seventh) and 12 C.F.R. section 7.4002 to debit overdraft fees from depositors‟
accounts.” (Office of the Comptroller of the Currency, Interpretive Letter No. 1082 (May
17, 2007) 2007 WL 5393636, at p. 1, fn. omitted, italics added.) Overdraft fees,
however, are not the equivalent of account service fees.
8
One authority, in commenting on the application of Barnett Bank, supra, 517 U.S.
25 to national banks on the passage of the Dodd-Frank Act said, “Does that mean that the
OCC will now be unable to show any „significant interference‟ by a state law unless that
law flatly prohibits something that a federal statute expressly allows? Or should that term
be read more broadly?” (19-7 Clark and Clark, Clarks‟ Bank Deposits and Payments
Monthly, supra, at p. 12.)

15
to carry on the business of banking.‟ 12 U.S.C. § 24 Seventh.” (Watters v. Wachovia
Bank, N.A., supra, 550 U.S. at p. 11.) The OCC is the agency responsible for regulating
national banks. (Id. at p. 6; In re HSBC Bank, USA, N.A., Debit Card Overdraft (E.D.
N.Y. 2014) 1 F.Supp.3d 34, 44.)
“A national bank may receive deposits and engage in any activity incidental to
receiving deposits.” (12 C.F.R. § 7.4007(a).) National banks are authorized under
federal regulations to “charge [their] customers non-interest charges and fees, including
deposit account service charges.”9 (12 C.F.R. § 7.4002(a).) Notwithstanding its broad
language, 12 C.F.R. section 7.4002(a) specifically provides, “The OCC applies
preemption principles derived from the United States Constitution, as interpreted through
judicial precedent, when determining whether State laws apply that purport to limit or
prohibit charges and fees described in this section.” (12 C.F.R. § 7.4002(d).) Thus,
under 12 C.F.R. section 7.4002(d), preemption concerning fees and charges is to be
determined not by the regulation itself but by general preemption principles established
by judicial precedent.10
Moreover, the regulation authorizing account service charges does not purport to
preempt any state restriction on the method of obtaining bank fees for accounts such as
Coogan Trust Accounts. National banks are authorized to “charge” their customers non-
interest fees, including deposit account service charges. (12 C.F.R. § 7.4002(a).) The

9
“State laws purporting to regulate national bank fees and charges are addressed in
12 C.F.R. section 7.4002.” (12 C.F.R. § 7.4007(b), n. 4.)
10
An authority has written that “federal preemption has become a major factor in
courts‟ upholding a wide variety of deposit-side service fees, as well as closely related
products and procedures. In many of these situations, the most important tool is 12
C.F.R. section 7.4002.” (1 Clark and Clark, The Law of Bank Deposits, Collections and
Credit Cards (3d ed. 2014) § 3.01[4][i], p. 3-98.) The examples of preemption included
ATM surcharges, check-cashing fees, credit card interest rates and fees, overdraft fees as
interest, high-to-low check posting, and setting off against social security direct deposits.
(Id. at pp. 3-98 to 3-99; see Gutierrez v. Wells Fargo Bank (9th Cir. 2012) 704 F.3d 712
[preemption of Unfair Competition Law application to order of posting but not as to
fraudulent or misleading practices as to posting methods].)

16
OCC regulation (12 C.F.R. § 7.4002(a)) does not provide that the account service fees
must be taken from a trust account or any specific account. The regulation merely
provides that a bank is authorized to “charge” for the fees.
Plaintiffs‟ claims are premised on the theory that withdrawing account service fees
from the Coogan Trust Accounts without court approval is inconsistent with the accounts
being Coogan Trust Accounts. Plaintiffs do not challenge defendant‟s right to “charge”
the fee. The account service fees may be charged to the parent or guardian, at least one
of whom must be the trustee (§ 6752, subds. (b)(1), (b)(2)), and may be paid from the
non-trust fund assets that are the source from which all other liabilities incurred by the
minors under the employment contracts, including taxes, are paid. (§ 6752, subd. (d).) If
a trustee prefers that the fee be taken out of the Coogan Trust Account, or defendant
federal bank desires to debit the Coogan Trust Account, either may seek court approval
for such a withdrawal. (§ 6753, subd. (b)).
As noted, by contrast, in the case of the Actors‟ Fund of America acting as trustee
for the funds because the trustee failed to provide timely the minor‟s employer with a
copy of the trustee‟s statement pursuant to section 6753 (§ 6752, subds. (b)(9)(A),
(c)(7)(A)), the State Legislature specifically stated that the Actors‟ Fund of America
“may assess and deduct from the balance of the beneficiary‟s account reasonable
management, administrative, and investment expenses . . . .” (§ 6752, subd. (f)(2).)
Here, the Coogan Law‟s restriction on withdrawals does not “prevent or significantly
interfere with” the exercise by a national bank of its power. Accordingly, section 6753,
subdivision (b) is not preempted by federal law.

17
 DISPOSITION

The judgment is reversed. Plaintiffs are awarded their costs on appeal.
CERTIFIED FOR PUBLICATION

MOSK, J.

We concur:

TURNER, P. J.

GOODMAN, J.


Judge of the Superior Court of the County of Los Angeles, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

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