CBP does indeed mean 11:59 PM Eastern Time, not local time. The I-94 system uses Eastern Time for determining dates, no matter where in the US you enter/exit from, no matter how practical it seems for folks on the west coast.

For ESTA, the only "discretion" is through a grant of Satisfactory Departure from USCIS or CBP. If you haven't applied for Satisfactory Departure and you exceed the 90 days, the system automatically cancels your ESTA and you're no longer eligible for the Visa Waiver Program — you'd have to apply for a visitor visa to visit the US again. For visa holders, your visa gets automatically cancelled, and you'd also need a new visa to return to the US again.

If you land at SFO at 9pm, you'll be recorded as arriving the next day no matter how long you spend in the customs line, since it's already 12am ET. If you depart from LAX at 11:35pm on a Sunday, it'll be recorded as a Monday departure since it's already Monday in Eastern Time.