By Jorge Casuso

Dec. 21 - A federal appeals court Friday refused to rehear a case striking down Santa Monica's pioneering ban on ATM surcharges, likely ending a three-year legal saga that captured national attention.

The 3 to 0 decision by the 9th U.S. Circuit Court of Appeals lets stand its earlier ruling in October upholding a decision by a lower court that any local ordinances restricting banks from charging non-customers an extra fee violates federal law. It also upholds the finding that federal banking regulations adopted by Congress allow banks to charge fees for ATM usage.

In a published decision that also overturns a similar ban approved by San Francisco voters, Judge Joseph T. Sneed wrote, "The district court correctly granted summary judgement and a permanent injunction prohibiting the Cities from enforcing the Ordinances."

The San Francisco-based appeals court noted that only the federal government can create such regulations, not city councils or local voters. The Santa Monica City Council and San Francisco voters both adopted similar laws three years ago, helping spur a national movement to ban banks from charging non-customers an additional fee, which averages about $1.50 per transaction.

"We find that the ordinances are pre-empted by federal law and regulations and thus invalid by reason of the Supremacy Clause of the Constitution,'' Judge Joseph T. Sneed wrote.

City officials said they were disappointed by the decision. "I'm disappointed because that was an important consumer protection measure," said Mayor Pro Tem Kevin McKeown. "The federal and state legislators won't touch the banks who donate large bucks to their campaigns."

The ordinances' future, McKeown said, will likely hinge on whether San Francisco - which petitioned the court to rehear the case -- takes Friday's decision to the U.S. Supreme Court..

"We never in closed session sat down and said, 'What can we do?'" McKeown said. "San Francisco had to pursue it. The voters had asked for it. Their elected officials had to respond."

The appeals court decision upholds U.S. District Judge Vaughn Walker's ruling in July 2000 that any local laws restricting ATM surcharges violate the National Banking Act, as well as the Home Owners Loan Act, which govern both nationally chartered and federal savings banks.

Blocking the ordinances from being enforced at the request of Bank of America, Wells Fargo Bank and others, the San Francisco federal judge shot down Santa Monica's contention that the 1978 Electronic Funds Transfer Act gives cities powers to protect consumers in the area of ATMs.

In Friday's published ruling, the court concurred. "Prohibition of the ATM fees is not the type of consumer protection measure contemplated by the EFTA," Judge Sneed wrote. "The EFTA was enacted to prevent fraud, embezzlement and unauthorized disclosure in electronic fund transfers, not to regulate service fees charged by financial institutions."

In passing their bans, the Cities of Santa Monica and San Francisco argued that ATM fees unduly burden the elderly, disabled and poor and undermine competition in the local banking industry.

The banks claimed that ATMs actually lose money and denied that the surcharges led to greater concentration in the local banking industry. They also argued that the ordinances impaired their ability to compete.

Santa Monica's law fueled a nationwide movement, with local governments as far flung as Miami, New York, San Diego and New Orleans exploring similar bans.

It also triggered a counter attack by California's two biggest banks -- Wells Fargo and Bank of America -- which stopped allowing non-customers to use the 33 ATMs they operate in the city.

CalFed later joined the suit, which was filed in federal court on November 3, 1999, the day after San Francisco voters overwhelmingly approved their measure.