New Hampshire Supreme Court, Banaian v. Bascom, Docket No. 2020-0496

Internet Law

 

Tweeter

 

Defamation

 

Republishing Someone Else’s Content

 

Immunity?

 

Communications Decency Act, 47 U.S.C. § 230(c)(1) (2018) (CDA)

 

 

(…) Given that Congress declared that “‘no provider or user of an interactive computer service shall be treated as a publisher or speaker,’” the court found no basis “for concluding that Congress intended to treat service providers and users differently,” and that “the statute confers immunity on both.”

 

(…) Section 230 of the CDA abrogates the common law of defamation as applied to individual users.

 

 

 

 

The sole issue on appeal is whether the defendants, who retweeted a defamatory tweet (the retweeter defendants) initiated by another individual, are “users” within the meaning of the Communications Decency Act, 47 U.S.C. § 230(c)(1) (2018) (CDA), and therefore entitled to immunity from the plaintiff’s claims for defamation and reckless infliction of emotional distress.

 

 

(…) The retweeter defendants retweeted the original tweet. As a result, the plaintiff was subject to “school-wide ridicule,” was unable to work for approximately six months, and suffered financial, emotional, physical, and reputational harm.

 

 

The plaintiff sued a number of defendants for defamation and reckless infliction of emotional distress. These retweeter defendants moved to dismiss, arguing that the plaintiff’s claims against them were barred by section 230(c) of the CDA. The trial court agreed, determining that the retweeters’ actions of simply “clicking the. . . ‘retweet’ icon and republishing someone else’s content,” were shielded by section 230. Accordingly, the trial court dismissed the plaintiff’s case against these retweeter defendants.

 

 

The CDA provides in pertinent part that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”  47 U.S.C. § 230(c)(1). An “interactive computer service” is “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet.” 47 U.S.C. § 230(f)(2) (2018). An “information content provider” is “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.” 47 U.S.C. § 230(f)(3) (2018). “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with” section 230. 47 U.S.C. § 230(e)(3) (2018). The statute sets forth findings and a statement of policy. See 47 U.S.C. § 230(a) & (b) (2018). Congress recognized the Internet as a “forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity, ”and that the “Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation.” Id. § 230(a)(3)-(4). The stated policy of the United States includes the promotion of “the continued development of the Internet and other interactive computer services and other interactive media” and the preservation of “the vibrant and competitive free market” for such services, “unfettered by Federal or State regulation, ”as well as the encouragement of “the development of technologies which maximize user control over what information is received by individuals.” Id. §230(b)(1)-(3). Separated into its elements, section 230(c)(1) “only protects from liability (1) a provider or user of an interactive computer service (2) whom a plaintiff seeks to treat, under a State law cause of action, as a publisher or speaker (3) of information provided by another information content provider.” Teatotaller, LLC v. Facebook, Inc., 173 N.H. 442, 450 (2020) (quotation omitted); see Universal Communication Systems, Inc. v. Lycos, Inc., 478 F.3d 413, 418 (1st Cir. 2007). “Section 230 of the CDA provides broad immunity to entities that facilitate the speech of others on the Internet.” Teatotaller, LLC, 173 N.H. at 448 (quotation and ellipsis omitted); see Bennett v. Google, LLC, 882 F.3d 1163, 1166 (D.C.Cir.2018) (explaining that the intent of the CDA is “to promote rather than chill internet speech”). “There has been near-universal agreement that section 230 should not be construed grudgingly, but rather should be given broad construction.” Teatotaller, LLC, 173 N.H. at 449 (quotations omitted). The trial court found, and the plaintiff does not dispute, that Twitter falls within the definition of an “interactive computer service.” Twitter is a social media platform that “enables users to publish short messages to the general public called ‘tweets,’ to republish or respond to others’ tweets, and to interact with other users.” Campbell v. Reisch, 367 F. Supp. 3d 987, 989 (W.D. Mo. 2019). “A user ‘Retweets’ a Tweet when he or she elects to publish the original Tweet in full on his or her Twitter profile. A Retweet shows the original Tweet in full, including attribution to the person who initially published the Tweet.” McNeil v. Biaggi Productions, LLC, No. 3:15cv751, 2017 WL 2625069 at *3 n.13 (E.D. Va. June 16, 2017).

 

 

The meaning of “user” in the first element of section 230(c)(1) is the sole issue in this appeal.

 

 

(…) The trial court “recognized that the vast majority of the reported cases that address whether a defendant is immune from suit under Section 230 involve internet service providers. . . , and not individual users. ”Nonetheless, cases that have addressed this issue have determined that the broad immunity in the statute extends to individual users. For example, in Barrett v. Rosenthal, 146 P.3d 510 (Cal. 2006), an individual who posted a copy of an article she had received via email on two newsgroup websites was sued for republishing defamatory information.  Barrett, 146 P.3d at 514.  The California Supreme Court addressed what “appeared to be the first published case in which section 230 immunity had been invoked by an individual who had no supervisory role in the operation of the Internet site where allegedly defamatory material appeared, and who thus was clearly not a provider of an ‘interactive computer service’ under the broad definition provided in the CDA.” Id. at 515. Employing “standard rules of statutory construction,” the court looked to the ordinary meaning of the word “user” to discern “legislative purpose. ”Id. at 526. In doing so, the court determined that the term “‘user’ plainly refers to someone who uses something, and the statutory context makes it clear that Congress simply meant someone who uses an interactive computer service.” Id. As the court reasoned, Section 230(c)(1) refers directly to the “user of an interactive computer service.” Section 230(f)(2) defines “interactive computer service” as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet.” Section 230(a)(2) notes that such services “offer users a great degree of control over the information that they receive,” and section 230(b)(3) expresses Congress’s intent “to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet and other interactive computer services.” Thus, Congress consistently referred to “users” of interactive computer services, specifically including “individuals” in section 230(b)(3). Id. (ellipsis omitted). Given that Congress declared that “‘no provider or user of an interactive computer service shall be treated as a publisher or speaker,’” the court found no basis “for concluding that Congress intended to treat service providers and users differently,” and that “the statute confers immunity on both.” Id. at 527. Thus, the court concluded, “Congress employed the term ‘user’ to refer simply to anyone using an interactive computer service,” id. at 515, and held that section 230(c)(1) immunizes such individual users, id. at 513.

 

 

Subsequently, the United States District Court for the Eastern District of Virginia, noting that the CDA does not contain a definition of “user,” turned to the plain meaning of the word. Directory Assistants, Inc. v. Supermedia, LLC, 884 F. Supp. 2d 446, 452 (E.D. Va. 2012). Citing the dictionary definition of “user” as “someone who uses,” and the verb “to use” as “putting into action or service; avail oneself of; carry out a purpose or actions by means of; utilize,” the court reasoned that the defendants’ “action of compiling information from a website and e-mailing that information to others clearly constitutes use of that website and its services.” Id. There was no allegation that the defendants “engaged in the traditional role of a publisher of content by soliciting the posts, creating them, or altering them,” or that the defendants “actually wrote, created, or developed the allegedly defamatory content.” Id. at 453. Rather, the defendants were “downstream users of content created by other people and posted” on the websites at issue. Id. The court determined that “there is no authority in the statute or case law that makes a user responsible for the creation or development of posts on a website that is an interactive computer service” and that “in enacting the CDA, Congress prohibited courts from entertaining claims that would place both a computer service provider and user in a publisher’s role. ”Id. Accordingly, the court found that “a person who creates or develops unlawful content may be held liable, but . . . a user of an interactive computer service who finds and forwards via e-mail that content posted online in an interactive computer service by others is immune from liability.” Id. at 451.

 

 

Despite the plaintiff’s assertion to the contrary, we conclude that it is evident that section 230 of the CDA abrogates the common law of defamation as applied to individual users. The CDA provides that “no cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. § 230(e)(3).  We agree with the trial court that the statute’s plain language confers immunity from suit upon users and that “Congress chose to immunize all users who repost the content of others.” That individual users are immunized from claims of defamation for retweeting content that they did not create is evident from the statutory language. See Zeran v. America Online, Inc., 129 F.3d 327, 334 (4th Cir. 1997) (explaining that the language of section 230 makes “plain that Congress’ desire to promote unfettered speech on the Internet must supersede conflicting common law causes of action”).

 

 

We hold that the retweeter defendants are “users of an interactive computer service” under section 230(c)(1) of the CDA, and thus the plaintiff’s claims against them are barred. See 47 U.S.C. § 230(e)(3). Accordingly, we uphold the trial court’s granting of the motions to dismiss because the facts pled in the plaintiff’s complaint do not constitute a basis for legal relief.

 

 

 

 

(New Hampshire Supreme Court, May 11, 2022, Banaian v. Bascom, Docket No. 2020-0496)

U.S. Court of Appeals for the District of Columbia, CSL Plasma Inc. v. U.S. Customs and Border Protection, Docket No. 21-5282

Customs (U.S.)

 

Change in Policy

 

Immigration Law

 

Business Visitor Visa (B-1)

 

Notion of International Business Visits

 

Administrative Procedure Act (APA)

 

Zone of Interests Test 

 

 

 

 

 

In June 2021, U.S. Customs and Border Protection (“CBP”) announced that aliens seeking to sell blood plasma could no longer enter the United States using “B‑1” business visitor visas. Before this policy went into effect, a significant amount of the plasma used for medical treatments and research in this country came from Mexican nationals selling their plasma on the U.S. side of the southern border. CSL Plasma Inc., as well as other companies (“plasma companies”), had invested substantial resources to develop plasma collection facilities near the border to take advantage of this market.

 

 

The plasma companies sued, alleging that CBP’s policy runs afoul of the Administrative Procedure Act (“APA”) and unlawfully cuts off a major source of plasma that they use to manufacture therapies to treat a range of diseases. The district court concluded the plasma companies were not within the “zone of interests” of the B-1 business visitor classification set out in the Immigration and Nationality Act (“INA”) and sua sponte dismissed the suit for lack of subject matter jurisdiction. We reverse. Whether the plasma companies are within the statutory zone of interests is a merits issue, not a jurisdictional one. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014). Moreover, the plasma companies’ claims easily fit within the zone of interests of the B‑1 classification, and therefore they have a cause of action under the APA.

 

 

According to their complaint, the plasma companies have long depended on donations by “many thousands” of paid Mexican donors, who contribute a substantial portion of the plasma collected by the companies and whose donations make up some five to ten percent of all plasma collected nationwide. Until June of last year, Mexican donors would enter the United States and sell plasma at dozens of border area facilities in exchange for roughly $50 per donation. They typically entered the country using “border crossing cards,” a combined B‑1/B-2 (business and pleasure) visa that permits an alien to enter the United States for multiple limited stays. See 22 C.F.R. § 41.32; 8 C.F.R. § 212.1(c)(1)(i).

 

 

For decades, CBP and its predecessor agencies allowed Mexicans with border crossing cards to enter the United States to sell plasma. Even at the peak of the COVID-19 pandemic, when B‑1 visa holders were generally prohibited from entering the United States, the Department of Homeland Security “designated plasma donors as ‘essential’ and plasma collection a ‘critical infrastructure industry.’” That changed in June 2021, when CBP instructed its border agents not to allow aliens to enter with B‑1 visas if they were planning to sell plasma.

 

 

(The term “B‑1” comes from the regulations describing categories of nonimmigrants by reference to the relevant INA provisions. See 22 C.F.R. § 41.12 (citing Immigration and Nationality Act, Pub. L. No. 82-414, § 101(a)(15)(B), 66 Stat. 163, 167 (1952) (codified at 8 U.S.C. § 1101(a)(15)(B))). Fn. 2).

 

 

CBP explained in a memorandum that “selling plasma constitutes labor for hire in violation of B‑1 nonimmigrant status, as both the labor (the taking of the plasma) and accrual of profits would occur in the U.S., with no principal place of business in the foreign country.” CBP said paid plasma donors were not proper B‑1 visitors because that category excludes anyone coming to engage in “labor” within the meaning of the INA’s B-1 classification.

 

 

(The INA’s B‑1 business visitor classification extends to an alien (other than one coming for the purpose of ... performing skilled or unskilled labor ...) having a residence in a foreign country which he has no intention of abandoning and who is visiting the United States temporarily for business. 8 U.S.C. § 1101(a)(15)(B).)

 

 

For the plasma companies to sue under the APA, they must have been “adversely affected or aggrieved by agency action within the meaning of a relevant statute.” 5 U.S.C. § 702. To determine whether a plaintiff has a cause of action we consider whether a plaintiff’s claims fall within the relevant statute’s “zone of interests” by “using traditional tools of statutory interpretation.” Lexmark, 572 U.S. at 127. The Supreme Court has made clear that the zone of interests test is a merits issue because it addresses whether the plaintiff “has a cause of action under the statute.” Id. at 128. That inquiry “does not implicate subject-matter jurisdiction.” Id. at 128 n.4 (cleaned up); see also Bell v. Hood, 327 U.S. 678, 682 (1946) (failure to plead a cause of action is not a jurisdictional defect). Our cases have repeatedly recognized the non-jurisdictional nature of the zone of interests test since Lexmark was decided in 2014. See, e.g., Crossroads Grassroots Pol’y Strategies v. FEC, 788 F.3d 312, 319 (D.C. Cir. 2015) (explaining the zone of interests test is neither a component of “prudential standing” nor a jurisdictional question); Am. Inst. of Certified Pub. Accts. v. IRS, 804 F.3d 1193, 1199 (D.C. Cir. 2015) (same).

 

 

(…) The district court erred in dismissing for lack of subject matter jurisdiction.

 

 

The substantive question of whether the plasma companies fall within the B‑1 classification’s zone of interests is a purely legal question squarely before this court. We thus address the zone of interests question and hold that the plasma companies are within the statute’s zone of interests and therefore they have a cause of action to challenge the plasma policy. Cf. Mendoza v. Perez, 754 F.3d 1002, 1020 (D.C. Cir. 2014) (reaching a merits issue despite erroneous jurisdictional holding below because the issue was “purely legal” and “fully briefed” by both sides).

 

 

To determine whether the plasma companies have a cause of action, we consider whether their alleged injuries are “arguably within the zone of interests to be protected or regulated by the statute.” Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 224 (2012) (cleaned up). The zone of interests test does not require that the statute directly regulate the plaintiff, nor does it require specific congressional intent to benefit the plaintiff. See Amgen Inc. v. Smith, 357 F.3d 103, 108 (D.C. Cir. 2004). Instead “the salient consideration ... is whether the challenger’s interests are such that they in practice can be expected to police the interests that the statute protects.” Id. at 109 (cleaned up). Under this “lenient” test, “the benefit of any doubt goes to the plaintiff,” and “the test forecloses suit only when a plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.” Lexmark, 572 U.S. at 130 (cleaned up). When a claim arises under the APA, the zone of interests test requires considering the “substantive provisions” of the underlying statute, the “alleged violations of which serve as the gravamen of the complaint.” Bennett v. Spear, 520 U.S. 154, 175 (1997). The gravamen of the plasma companies’ complaint is that CBP adopted an overly restrictive interpretation of the B-1 statutory classification in its plasma policy. The question we must answer is whether the plasma companies’ injuries are within the zone of interests of the INA’s B-1 business visitor classification. The INA creates a category of “nonimmigrant” temporary visitor that includes an alien (other than one coming for the purpose of ... performing skilled or unskilled labor ...) having a residence in a foreign country which he has no intention of abandoning and who is visiting the United States temporarily for business. 8 U.S.C. § 1101(a)(15)(B). To ascertain the interests this classification protects, “we must consider its context and purpose” within the INA’s larger scheme. Indian River Cnty. v. U.S. Dep’t of Transp., 945 F.3d 515, 530 (D.C. Cir. 2019) (cleaned up). The B‑1 provision creates a classification of nonimmigrant temporary visitors who may enter the United States in order to transact business. This business visitor classification imposes a lower barrier to enter the country than other nonimmigrant classifications, particularly the temporary worker classifications. With narrow exceptions, any alien coming to the United States to perform labor is presumptively inadmissible and must secure an affirmative determination from the Department of Labor that there are no Americans available to perform the same work. 8 U.S.C. § 1182(a)(5)(A). B‑1 business visitors face no comparable burden. By regulation, an alien who meets the definition of a B‑1 “nonimmigrant” presumptively can enter the country and, if he is a Mexican seeking to enter only the border area, can do so using a border crossing card. See 22 C.F.R. § 41.121 (“Nonimmigrant visa refusals must be based on legal grounds.”); id. § 41.32 (describing eligibility for border crossing cards).

 

 

In its plasma policy memorandum, CBP maintains that donors from Mexico who are “selling plasma” are engaged in “labor for hire” and therefore cannot use a B‑1 nonimmigrant visa to enter the United States for that purpose. Because the plasma companies rely on Mexican plasma donors who enter this country using B‑1 visas, the companies maintain that their interests are such that “in practice they can be expected to police the interests that the statute protects.” Amgen, 357 F.3d at 109 (cleaned up). We agree.

 

 

The B‑1 business visitor classification is designed to protect at least two classes of interests: American workers facing competition from immigrant labor and American businesses benefitting from transactions with B‑1 business visitors. American workers are protected because the classification specifically excludes aliens coming “for the purpose of ... performing skilled or unskilled labor.” 8 U.S.C. § 1101(a)(15)(B). The advantages of the B‑1 business visitor classification are denied to aliens coming for employment in competition with American workers. This court has held that labor unions, for instance, can sue to enjoin expansive readings of the B‑1 classification to protect the interests of domestic workers. See Int’l Union of Bricklayers & Allied Craftsmen v. Meese, 761 F.2d 798, 804–05 (D.C. Cir. 1985). An overly expansive reading of the B‑1 classification would allow an end run around the requirements for a work visa, and thus workers and their unions can fall within the statutory zone of interests. The B‑1 classification also affirmatively promotes American business interests. Congress provided a path for aliens to enter the United States for temporary business purposes, presumably because those visits would benefit the people and companies that do business with them. An excessively strict interpretation of the B‑1 classification could therefore undermine the congressional policy of permitting temporary border crossings to facilitate business transactions. Here, the plasma companies easily clear the low hurdle of pleading injuries within the zone of interests protected by the B‑1 classification. The plasma companies depend heavily on B‑1 visitors in the border region. They have invested hundreds of millions of dollars to construct and staff dozens of facilities geared toward collecting plasma from Mexican donors. The plasma companies made these investments in reliance on the large number of Mexicans who cross the border to sell plasma: they allege Mexican B‑1 visitors “comprise the majority of donors at most of the border centers” and that the domestic population of the border areas could not support the substantial plasma collection activities of these facilities. By denying plasma donors the benefit of the B‑1 classification, CBP’s policy directly harms the companies’ businesses by depriving them of plasma they need to manufacture and develop their therapeutic products. Therefore, the companies may sue to vindicate the interests protected by the INA’s B-1 classification.

 

 

(…) The government’s limitation of the B‑1 classification is found in neither the text of the statute nor longstanding judicial and agency interpretations. There is no international nexus requirement in the B‑1 classification. The statutory definition simply includes aliens “visiting the United States temporarily for business” and specifically excludes aliens “coming for the purpose of study or of performing skilled or unskilled labor or as a representative of foreign press, radio, film, or other foreign information media coming to engage in such vocation.” 8 U.S.C. § 1101(a)(15)(B). These are the only statutory carve outs from the general “business” category, and nowhere does the B‑1 classification use the term “international” or otherwise suggest that the “business” must be of a particular type.

 

 

The distinction between local and international activity emerged in cases that defined the “labor” exception to “business” visits. These decisions addressed the practical reality that if business visitors could not engage in literally any work or “labor” while in the United States, the “business” classification would be an empty set. See Garavito v. INS, 901 F.2d 173, 175 (1st Cir. 1990) (noting that at least some work activities must be permissible under a B‑1 visa in order to conduct “business”). The Third Circuit, for example, has explained that the Executive reasonably distinguishes between “local employment” that is outside the B‑1 classification and “activities that are a necessary incident to international trade or commerce” and therefore permissible “business.”Mwongera v. INS, 187 F.3d 323, 329 (3d Cir. 1999) (cleaned up).

 

 

The cases from the Board of Immigration Appeals (“BIA”) cited by the government also rely on an international connection to distinguish business activity from “labor” within the meaning of the INA. See, e.g., Matter of Camilleri, 17 I. & N. Dec. 441, 444 (BIA 1980) (a truck driver crossing from Canada to the United States to deliver commodities was a business visitor); Mwongera, 187 F.3d at 329 (upholding the BIA’s determination that “extending a retail sales business that was incorporated in the United States” was “labor” and not proper B‑1 “business”).

 

 

Although this decision on the zone of interests necessarily implicates the merits and although both parties ask us to resolve the underlying merits, we decline to reach issues not decided by the district court. See Capitol Servs. Mgmt., Inc. v. Vesta Corp., 933 F.3d 784, 789 (D.C. Cir. 2019) (“We are a court of review, not of first view.”) (cleaned up).

 

 

The zone of interests test is a lenient one, not to be conflated with either the court’s subject matter jurisdiction or the underlying merits of the case. The B‑1 classification protects the interests of American businesses such as the plasma companies, so they have a cause of action under the APA to challenge CBP’s plasma policy. We therefore reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion.

 

 

 

 

(U.S. Court of Appeals for the District of Columbia, May 10, 2022, CSL Plasma Inc. v. U.S. Customs and Border Protection, Docket No. 21-5282)

California Court of Appeal, Crystal Bergstrom v. Zions Bancorporation, Docket No. B309154

 

Enforcement of Judgments

 

Judgment Creditor

 

Writ of Execution

 

Notice of Levy

 

Service of Process

 

Motion for a Court Order Imposing Third Party Liability

 

Garnishee’s Memorandum

 

When Account in the Name of Someone Other Than Judgment Debtor

 

Execution Lien

 

Oral Argument

 

California Law

 

 

 

 

A judgment creditor seeking to seize funds in bank accounts held by the judgment debtor’s spouse served a notice of levy on the bank’s agent for service of process.  Although the notice of levy form unambiguously listed the bank as the party to be served, the agent misread the form and rejected it.  By the time the agent informed the bank of its mistake and the bank then froze the funds, the spouse had all but drained the accounts. The Enforcement of Judgments Law (Code Civ. Proc., § 680.010 et seq.) provides that a third person’s “failure or refusal” to deliver property subject to a levy “without good cause” renders the third person “liable to the judgment creditor” for the amounts withdrawn and covered by the levy. (§ 701.020, subd. (a).) In deciding whether the bank is liable to the judgment creditor for the agent’s mistake in this case, we must answer two questions: (1) When does an agent’s mistake constitute “good cause” that therefore excuses its principal’s failure to deliver property subject to a levy, and (2) was the agent negligent in this case for misreading the form?  Because “good cause” exists if a third party does “not know or have reason to know of the levy” (§ 701.010, subd. (c)), because the “reason to know” standard looks to what “a reasonable person . . .  would have inferred” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 547 (Doe)), and because an agent’s knowledge is imputed to its principal (Civ. Code, § 2332), we hold that “good cause” exists only when the agent’s mistake that causes the agent (and, hence, the principal) to not have reason to know of the levy is a mistake that a reasonable person would make—in other words, when the agent’s mistake does not amount to negligence. Further, because the agent in this case was negligent in misreading the standardized form it was served with, the agent for service of process—and hence its principal, the bank—had reason to know of the levy, such that the bank is liable to the judgment creditor for some (though not all) of the funds withdrawn. Accordingly, we reverse the trial court’s ruling in the bank’s favor and remand for further proceedings.

 

 

(…) Corporation Service Company (CSC) was acting as Zions’s agent for service of process for California-based matters. On March 29, plaintiff obtained a writ of execution in the amount of $4,944,759.25 from the Los Angeles Superior Court.

 

 

On April 2, plaintiff had a process server serve CSC with (1) the writ of execution, (2) a notice of levy on “all accounts standing in the name of” North american, Michaels, or Pitcock, (3) a spousal affidavit attesting that Pitcock was Michaels’s spouse, and (4) a blank memorandum of garnishee form listing “ZB, National Association” as the “garnishee.” The notice of levy is a one-page standardized form that in this case had the following information filled in:

 

•Among a series of boxes in the top third of the form, the notice of levy had a box that listed the “PLAINTIFF” as “Judicial Judgment Enforcement Services” (which is plaintiff’s company) and the “DEFENDANT” as “North american Sureties, Ltd., and Robert S. Michaels.”

 

•Immediately under the boxes, the notice of levy stated: “TO THE PERSON NOTIFIED (name):  ZB, NATIONAL ASSOCIATION.”

 

•Beneath that notification, the notice of levy stated that “the property to be levied upon is described . . . as . . . all accounts in the name of North american, and/or Michaels, and/or his spouse Pitcock . . ..”

 

 

(…) In January 2020, plaintiff filed a motion for a court order imposing third party liability on Zions for its noncompliance with the April 2 notice of levy. Plaintiff sought to hold Zions liable for the $117,815.97 Pitcock was able to withdraw on April 3 and April 10 due to Zions’s delay in freezing the funds in the accounts plaintiff controlled.

 

 

(…) When a creditor has a judgment in its favor against a debtor, the creditor seeking to enforce that judgment against the debtor’s property must (1) obtain a writ of execution from the trial court, which is directed to the sheriff or other levying officer and authorizes them to enforce the judgment (§§ 699.510, subd. (a), 699.520), and (2) complete and serve a notice of levy, which is directed to the judgment debtor or third person holding the debtor’s property and notifies them of their duties and rights (§ 699.540). (See Meyer v. Sheh (2022) 74 Cal.App.5th 830, 837-838.) When the debtor’s property is in the possession of a third person (such as a financial institution), the judgment creditor may serve the writ of execution and the notice of levy upon the third person.

 

 

(…) Within 10 days after service, the third person must also complete a garnishee’s memorandum. (§ 701.030.)

 

 

(…) When the third person is a “financial institution” and the property to be levied is a deposit account with that institution, the procedures to be followed turn on whose name is on the account. When the account is in the judgment debtor’s name, the judgment creditor must follow the procedures applicable to any levy served on a third person and must also serve the judgment debtor with notice of the levy. (§§ 700.140, subd. (a), 699.550.) When the account is in the name of someone other than the judgment debtor, the judgment creditor must not only follow the procedures applicable to any levy served on a third person and serve the judgment debtor with notice of the levy, but must also (1) obtain “a court order authorizing the levy” unless, as pertinent here, the account is in the name of the “judgment debtor’s spouse or registered domestic partner,” in which case an “affidavit” attesting to the relationship will suffice, and (2) serve the account holder with notice of the levy. (§ 700.160, subds. (a), (b)(2).)

 

 

(…) Once the financial institution is properly served as detailed above, an execution lien “arises” as to the “amounts in the deposit account at the time of service on the financial institution.” (§ 700.140, subds. (b) & (c).) While this lien is in effect, the financial institution is not to “honor a withdrawal request or a check or other order for the payment of money from the deposit account” unless there still will be “sufficient funds... available to cover the levy” (id., subd. (d)), and the institution cannot be held liable to the depositor for doing so (id., subd. (e)). This limitation on the financial institution’s discretion is an express statutory exception to the usual duty of a financial institution to honor its contractual relationship with its depositor even when third parties might make a claim against funds in a depositor’s account. (Grover v. Bay View Bank (2001) 87 Cal.App.4th 452, 456 [noting bank’s obligations to depositor except when the Law applies]; Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 537, 539, 542; Fin. Code, § 1450, subd. (b) [obligating banks to honor depositor’s checks absent an “appropriate order against the bank from a court”].)

 

 

(…) If the financial institution (as a third person) “fails or refuses” to “deliver property to the levying officer” “without good cause to do so,” the financial institution “is liable to the judgment creditor for” the amount of the levy. (§ 701.020, subd. (a).)

 

 

(…) (E.g., Jespersen v. Zubiate-Beauchamp(2003) 114 Cal.App.4th 624, 633 [“a judge’s comments in oral argument may never be used to impeach the final order”].)

 

 

Section 701.020 entitles the judgment creditor to “the value of the judgment debtor’s interest in the property,” but only to the extent that the third person “fails or refuses without good cause” to deliver property to the levying officer. (§ 701.020, subd. (a).) Although the execution lien comes into being upon service of the notice of levy (§ 700.140, subd. (b)), the third person’s duty to deliver comes into being “at the time of the levy or promptly thereafter.” (§ 701.010, subd. (a).) Zions explained its internal policy of responding to notices of levy by freezing the affected funds by 4:00 p.m. on the business day after the notice of levy is served. Because CSC (and hence Zions) had “reason to know” of the levy on April 2, Zions is responsible for any withdrawals after 4:00 p.m. the next day—on April 3. Thus, Zions is not liable for the $15,000 withdrawn by Pitcock prior to 4:00 p.m. on April 3, but is liable for all of the withdrawals thereafter because Zions thereafter “failed or refused without good cause” to freeze the assets. This makes Zions liable for Pitcock’s two withdrawals on April 10, which total $102,610.97. Zions may also be liable for costs and reasonable attorney fees incurred by the judgment creditor in establishing the liability. (§ 701.020, subd. (c).)

 

 

DISPOSITION

 

The order is reversed with directions. The trial court is directed to enter an order awarding plaintiff $102,610.97, and to conduct a further hearing on whether to award costs and reasonable attorney fees. Each party is to bear its own costs on appeal.

 

 

 

 

(California Court of Appeal, Crystal Bergstrom v. Zions Bancorporation, May 5, 2022, Docket No. B309154, Certified for Publication)

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