586 F.2d 107 (9th Cir. 1978), 75-3763, Usery v. First Nat. Bank of Arizona

Docket Nº:75-3763.
Citation:586 F.2d 107
Party Name:W. J. USERY, Jr., Secretary of Labor, United States Department of Labor, Appellant, v. FIRST NATIONAL BANK OF ARIZONA, a National Banking Association, Appellee.
Case Date:November 03, 1978
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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586 F.2d 107 (9th Cir. 1978)

W. J. USERY, Jr., Secretary of Labor, United States

Department of Labor, Appellant,



Association, Appellee.

No. 75-3763.

United States Court of Appeals, Ninth Circuit

November 3, 1978

Ronald G. Whiting (argued), Washington, D. C., for appellant.

Robert E. B. Allen (argued), of Streich, Lang, Weeks, Cardon & French, Phoenix, Ariz., for appellee.

Appeal from the United States District Court for the District of Arizona.

Before SNEED and KENNEDY, Circuit Judges, and HALL, [*] District Judge.

KENNEDY, Circuit Judge:

This case involves the enforcement and administration of the Consumer Credit Protection Act (Act), 15 U.S.C. § 1671 Et seq. The question presented is whether a bank served with a garnishment directed at a depositor's account is required to determine the depositor's right to a wage earner's

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exemption under the Act, and, if so, whether the bank is required to calculate the amount of that exemption before honoring the garnishment. Contrary to the position urged by the Secretary of Labor, we hold that a bank is not required to make such determinations, and we affirm the judgment of the district court.

The Secretary of Labor instituted the action pursuant to his authority to enforce the Act. 15 U.S.C. § 1676. The initial complaint alleged that the First National Bank of Arizona violated the Act by paying a garnishment attaching sums in the checking account of a depositor, a Mr. Hill, without first applying the Act's garnishment limitations, which provide certain exemptions for wages. The Secretary later amended the complaint to allege the bank had violated the Act continuously since about July 23, 1971 by honoring garnishments of accounts covered by the exemption. The complaint prayed for an injunction requiring the bank to comply with the Act as interpreted by the Secretary and further for an order requiring the bank to restore to its depositors any sums lost by excessive garnishment payments, together with interest. Except for Mr. Hill's account, the amended complaint did not name any specific instance in which the bank had violated the Act.

After three years of discovery in which all concerned sought to identify the depositors' accounts which had been garnished in alleged violation of the Act and to calculate the applicable exemption in each case, both parties moved for summary judgment. The district court entered judgment for the bank, holding that the statutory exemption applies to garnishments of the employer of a debtor but not to a bank which holds the debtor's deposits, and that even if the Act does apply to garnishment of compensation on deposit in the bank, the bank has no duty to assert the statutory defenses of the depositor.

The garnishment restrictions of section 303(a) are stated as follows:

Except as provided in subsection (b) of this section and in section 1675 of this title, the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed

(1) 25 per centum of his disposable earnings for that week, or

(2) the amount by which his disposable earnings for that week exceed thirty times the Federal minimum hourly wage prescribed by section 206(a)(1) of title 29 in effect at the time the earnings are payable,

whichever is less. In the case of earnings for any pay period other than a week, the Secretary of Labor shall by regulation prescribe a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in paragraph (2).

15 U.S.C. § 1673(a). The "disposable earnings" of the employee are calculated from "earnings" by deducting "any amounts required by law to be withheld." Act § 302(b), 15 U.S.C. § 1672(b). Central to the Secretary's interpretation of section 302(a) is the definition of "earnings" as used in that section:


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