Brown v. Stored Value Cards, Inc., No. 18-35735 (9th Cir. 2020)
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Plaintiff filed suit against Numi, and its partner CNB, alleging that they violated the Electronic Fund Transfers Act (EFTA), violated the Fifth Amendment Takings Clause, and were liable for conversion and unjust enrichment under Oregon state law. Numi is a for-profit, private company that returns released inmates' money via a prepaid debit card loaded with the balance of their funds. Numi earns revenue by charging fees to the cardholders, rather than the government.
The Ninth Circuit held that plaintiff plausibly alleged a claim under section 1693l-1 of the EFTA and the district court erred in dismissing the case for failure to state a claim. The court explained that, because defendants marketed their cards to the general public, section 1693l-1 was applicable. In this case, defendants marketed the card program to municipalities and correctional facilities, and Multnomah County does not give released inmates a choice of whether to accept the cards. Therefore, when defendants marketed the cards to Multnomah County, they indirectly marketed them to these released inmates, and then the inmates reenter the general public.
The panel also held that the district court abused its discretion when it denied plaintiff leave to file a third amended complaint; summary judgment was not proper on plaintiff's takings claim; and summary judgment was not proper on plaintiff's state law claims.
Court Description: Electronic Fund Transfers Act / Constitutional Law. The panel reversed the district court’s partial dismissal and partial summary judgment on claims under the Electronic Fund Transfers Act, the Takings Clause, and Oregon state law concerning a private company’s return of released jail or prison inmates’ money via a prepaid debit card loaded with the balance of their funds. Defendants assessed fees on the cards. The panel held that plaintiff stated a claim under EFTA § 1693l-1, which prohibits charging service fees to “general-use prepaid cards.” A general-use prepaid card does not include a card that “is not marketed to the general public.” The panel held that the released inmates belonged to the general public, which they rejoined upon release, and defendants indirectly marketed the cards to the released inmates. The panel further held that the district court abused its discretion in denying plaintiff leave to file a third amended complaint reinstating her EFTA claims under both § 1693l-1 and § 1693i, which prohibits the issuance, absent certain disclosures, of unsolicited validated cards that provide access to a “consumer’s account.” The panel held that a consumer account includes the sort of prepaid account that the released inmates received. The panel reversed the district court’s grant of summary judgment to defendants on plaintiff’s per se takings claim. BROWN V. STORED VALUE CARDS, INC. 3 Assuming without deciding that defendants were state actors, the panel concluded that the release cards were not the functional equivalent of cash or a check because the value of the cards quickly and permanently deteriorated. The panel remanded for the district court to consider in the first instance the reasonableness of the fees assessed on the cards. The panel also reversed the district court’s grant of summary judgment on plaintiffs’ state law claims, and remanded the case to the district court for further proceedings.
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