Preservation of banks’ common law and contractual rights of set-off are at stake in a case pending in the court of appeals. The bank set off its customer’s accounts after a default on a line of credit, strictly in accordance with provisions in the applicable agreements. The customer sued anyway and won compensatory damages, attorneys fees and even punitive damages. 

The case could establish an adverse precedent that jeopardizes this important right. In CBA’s brief, we argued that the trial court should not impose its own notion of fairness in derogation of the parties’ contracts. Set-off rights provide financial institutions with a means of recovering otherwise unsecured loans. Protecting set-off rights helps preserve the availability of vital credit, primarily to small businesses. The case is Pacific Mercantile Bank v. Zigler.