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Court of Appeal, Fourth District, Division 3, California.

Terry BETZ, Plaintiff and Appellant, v. NATIONAL BANK OF SOUTHERN CALIFORNIA, Defendant and Respondent.

No. G004415.

Decided: July 29, 1988

Cox, Castle & Nicholson, Robert J. DeMarco and Robert M. Vantress, for plaintiff and appellant. Hagenbaugh & Murphy, Alan R. Zuckerman and Robert F. Donohue, for defendant and respondent.


Can an officer of a national bank, terminated because his wages were garnished, sue for tortious discharge despite a federal statute authorizing the bank to dismiss “at pleasure”?   Yes.


The National Bank of Southern California dismissed Terry Betz from his position as vice-president four days after receiving notice his wages were to be garnished.   Betz sued the bank for “wrongful termination in violation of public policy,” citing state law prohibiting dismissal for wage garnishment.   (Labor Code, § 2929.)   The complaint stated a second cause of action for unlawful withholding of wages.

The bank moved for summary adjudication of the first cause of action on the ground a federal statute giving national banks the right to terminate officers “at pleasure” preempts California's law of tortious discharge.   The trial court agreed and ordered the final judgment in the action “shall award judgment for the defendant on the first cause of action․”

Betz filed a notice of appeal from that order and subsequently dismissed his remaining cause of action without prejudice.   We therefore deem the notice of appeal to be from a final, appealable order.


Betz presents two arguments for reversing the summary adjudication against him.   First, he contends the trial court erred in ruling federal banking law entirely preempts California's law of tortious discharge.   Second, he argues that even if a finding of preemption is theoretically proper, the bank's failure to hire and fire him according to the procedures prescribed by the federal statute makes that law inapplicable to his case.   We agree with Betz's first proposition, as explained below, and thus pay no further heed to the procedural niceties of his employment and termination.

California Labor Code section 2929, subdivision (b) prohibits an employer from discharging an employee “by reason of the fact that his wages have been subjected to garnishment for the payment of one judgment.”   This legislation enacted a form of consumer protection earlier adopted by Congress.  “This section is intended to aid in the enforcement of the prohibition against discharge for garnishment of earnings provided in the Consumer Credit Protection Act of 1968 (15 U.S.C. Secs. 1671–1677) and shall be interpreted and applied in a manner which is consistent with the corresponding provisions of such act.”  (Labor Code, § 2929, subd. (e).)

It is well established that dismissal of an employee in violation of a fundamental principle of public policy gives rise to a tort cause of action for wrongful discharge.  (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330.)   Public policy may be proclaimed “by the Legislature in a statute or by courts in decisional law.”  (Koehrer v. Superior Court (1986) 181 Cal.App.3d 1155, 1165, 226 Cal.Rptr. 820.)   In claiming tortious discharge, Betz asserts the bank violated the public policy expressed in Labor Code section 2929 when it dismissed him because of his wage garnishment.

The bank, for its part, relies on an express provision of the National Banking Act granting its board of directors the right to dismiss officers at pleasure.  (12 U.S.C. § 24, Fifth.)   The bank argues this congressional grant of an unfettered right of dismissal clashes with California's statutory prohibition against termination for wage garnishment.   And, of course, federal law preempts state law in the event the two “actually” conflict.   (California Federal Sav. and Loan Ass'n v. Guerra (1987) 479 U.S. 272, ––––, 107 S.Ct. 683, 689, 93 L.Ed.2d 613, 623.)

The United States Supreme Court observed in Guerra that “pre-emption is not to be lightly presumed,” and summarized the circumstances in which actual conflict between federal and state statutes will be found:  “Such a conflict occurs either because ‘compliance with both federal and state regulations is a physical impossibility,’ [citations] or because the state law stands ‘as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’  [Citations.]”  (Ibid.)   The bank contends the provisions of Labor Code section 2929 are preempted because they are an “obstacle” to accomplishment of congressional objectives as embodied in the National Banking Act.

But the bank's bald assertion a conflict exists is suspect.   It reflects a superficial analysis of the statutes in question and ignores the requirement that we must “consider the relationship between state and federal laws as they are interpreted and applied, not merely as they are written.”  (Jones v. Rath Packing Co. (1977) 430 U.S. 519, 526, 97 S.Ct. 1305, 1310, 51 L.Ed.2d 604.)

The National Banking Act was enacted in 1927;  its general purpose was to insure stability and uniformity in the national bank system, particularly in the event of financial disaster.  (American Sugar Refining Co. v. Anderson (6th Cir.1939) 107 F.2d 948, 950.)   Contrary to defendant's suggestion, federal public policy did not freeze with enactment of the National Banking Act but continues to develop, as expressed in the innumerable congressional acts adopted from 1927 to the present.   Congressional “objectives,” then, evolve and can only be determined by considering the interaction of both early and later statutes touching upon the same subject matter.

The Consumer Credit Protection Act of 1968 (15 U.S.C. § 1671 et seq.), upon which Labor Code section 2929 is based, contains a strong statement of the public policy underlying the federal prohibition against dismissal for wage garnishment (15 U.S.C. § 1674).   Among the congressional findings stated in the act is the following:  “The application of garnishment as a creditors' remedy frequently results in loss of employment by the debtor, and the resulting disruption of employment, production, and consumption constitutes a substantial burden on interstate commerce.”  (15 U.S.C. § 1671, subd. (a)(2).)   Congress concluded, on the basis of this and other findings, “that the provisions of this subchapter are necessary and proper for the purpose of carrying into execution the powers of the Congress to regulate commerce and to establish uniform bankruptcy laws.”  (15 U.S.C. § 1671, subd. (b).  See also Donovan v. Southern California Gas Co. (9th Cir.1983) 715 F.2d 1405, 1407–1408;  Usery v. First Nat. Bank of Arizona (9th Cir.1978) 586 F.2d 107, 110;  Stewart v. Travelers Corporation (9th Cir.1974) 503 F.2d 108, 113–114.)

Congress underscored the seriousness of its intent to resolve the problems and burdens resulting from garnishment by expressly stating, “[t]his subchapter does not annul, alter, or affect ․ the laws of any State [¶] (1) prohibiting garnishments or providing for more limited garnishments than are allowed under this subchapter, or [¶] (2) prohibiting the discharge of any employee by reason of the fact that his earnings have been subjected to garnishment for more than one indebtedness.”  (15 U.S.C. § 1677.)   In other words, Congress intended no preemption of state law affording similar or greater protection to consumers;  to the contrary, the federal legislation sets a minimum standard.

Undoubtedly, congressional objectives in enacting the Consumer Credit Protection Act differed substantially from the federal purposes behind adoption of the National Banking Act 40 years earlier.   To find a conflict between a national bank's right to dismiss at will and an employee's right not to be fired because of wage garnishment, one need look no further than these two federal statutes.   Harmonizing these competing federal laws resolves the central question of this appeal, namely, whether congressional “purposes and objectives” are thwarted by enforcement of Labor Code section 2929 against national banks, resulting in preemption.

 When two federal statutes are “in conflict with each other, and there is no statutory language which makes any cross-reference, and ․ the legislative history is silent as to the possible conflict, ․ the later statute constitutes an amendment of the earlier one.  [Citations.]”  (Hines, Inc. v. United States (6th Cir.1977) 551 F.2d 717, 725.)   The language and purpose of the Consumer Credit Protection Act prohibiting discharge of employees by reason of wage garnishment stand in stark contrast to the sweeping right of at will dismissal Congress gave to national banks decades earlier.   Neither the statutory language nor the legislative history of the later act speaks to this discord.   Accordingly, we must conclude Congress intended to amend the National Banking Act to restrict the right of dismissal where wage garnishment is the reason.   It follows that Labor Code section 2929 does not conflict with federal law and, therefore, is not preempted by it.1

 Defendant cites two cases for the proposition a national bank's right to dismiss at will is not subject to state law or public policy.   But neither case supports this broad assertion.   In Bollow v. Federal Reserve Bank of San Francisco (9th Cir.1981) 650 F.2d 1093 the court rejected the argument federal reserve bank employees are entitled under California law to a hearing before termination.   The court noted the Federal Reserve Bank Act, 12 U.S.C. section 341, Fifth contains a provision, “virtually identical” to that in the National Banking Act, allowing at pleasure dismissal of federal reserve bank employees.  (Id., at p. 1097, fn. 3.)   Concluding the statutory language confers “no process or tenure rights,” the court held any state law extending such rights is in conflict with the federal law and preempted by it.  (Id., at p. 1098.)   In contrast, preemption does not occur in the instant case precisely because we find no conflict.

Similarly, in Inglis v. Feinerman (9th Cir.1983) 701 F.2d 97 the court disavowed state procedural rights for employees of federal home loan banks.   Section 1432, subdivision (a) of the Federal Home Loan Bank Act (12 U.S.C., § 1421 et seq.) contains at will dismissal language mirroring that considered in Bollow, and in the case before us.   The court, without analysis, announced it was following Bollow in allowing “no inroads into the ‘dismiss at pleasure’ language.”  (Id., at p. 99.)  Inglis is not persuasive and we decline to follow it.

Betz is entitled to maintain his cause of action against the bank for tortious discharge in violation of public policy.   We reverse the judgment and award Betz his costs on appeal.


1.   This conclusion is in line with federal decisions holding national banks subject to state laws that do not contradict federal law, frustrate the purpose for which the banks were created, or impair their efficiency in performing their ordained duties.  (Lewis v. Fidelity & Deposit Co. of Maryland (1934) 292 U.S. 559, 566, 54 S.Ct. 848, 851, 78 L.Ed. 1425, National State Bank, Elizabeth, N.J. v. Long (3d Cir.1980) 630 F.2d 981.)

WALLIN, Associate Justice.

SONENSHINE, Acting P.J., and CROSBY, J., concur.