Brown v. Stored Value Cards, Inc.

• Decision Date: 16 March 2020
• Docket Number: No. 18-35735,18-35735
• Citation: 953 F.3d 567
• Parties: Danica Love BROWN, Plaintiff-Appellant, v. STORED VALUE CARDS, INC., dba Numi Financial; Central National Bank and Trust Company, Enid, Oklahoma, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

953 F.3d 567

Danica Love BROWN, Plaintiff-Appellant,

v.STORED VALUE CARDS, INC., dba Numi Financial; Central National Bank and Trust Company, Enid, Oklahoma, Defendants-Appellees.

No. 18-35735

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 13, 2019 Seattle, Washington

Filed March 16, 2020

Karla Gilbride (argued), Public Justice, P.C., Washington, D.C.; Mark Adam Griffin and Daniel Parke Mensher, Keller Rohrback LLP, Seattle, Washington; Benjamin Wright Haile, Attorney, Portland, Oregon; for Plaintiff-Appellant.

Eric Nystrom (argued), John C. Ekman, and Natalie I. Uhlemann, Fox Rothschild LLP, Minneapolis, Minnesota, for Defendants-Appellees.

Hassan Zavareei, Anna C. Haac, and Tanya S. Koshy, Tycko & Zavareei LLP, Washington, D.C., for Amici Curiae International CURE, Equal Justice Under Law, The Florida Institutional Legal Service Project of Florida Legal Service, The Legal Aid Society, National Police Accountability Project, Public Counsel, San Francisco Public Defender's Office, Southern Poverty Law Center, Texas Civil Rights Project, Working Narratives, and University Of California Davis School of Law Immigration Law Clinic.

Before: Ronald M. Gould and Marsha S. Berzon, Circuit Judges, and Roger T. Benitez,^* District Judge.

GOULD, Circuit Judge:

When a person is arrested and detained, the detention facility confiscates his or her personal property, including any cash. Detention facilities safeguard an inmate’s money throughout the duration of his or her incarceration, typically in an inmate trust account. When an inmate is released, the facility has traditionally returned the inmate’s money. For local governments, handling inmates’ cash is expensive and time consuming. In recent years, many local governments have begun delegating the function of returning the property of released inmates to private, for-profit companies. One such company, Stored Value Cards d/b/a Numi ("Numi"), returns released inmates’ money via a prepaid debit card loaded with the balance of their funds. Numi does not charge most local governments for its services. Instead, Numi earns revenue by charging fees to the cardholders. This case illustrates some of the hazards and risks that may arise when prisons transfer what formerly were government functions to for-profit enterprises.

Danica Brown ("Brown")¹ brought suit against Numi and its partner Central National Bank and Trust Company ("CNB") (collectively, "Defendants"), 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. The district court dismissed Brown’s EFTA claim for failure to state a claim, denied leave to file a third amended complaint, and granted summary judgment to Defendants on Brown’s takings and state law claims. Brown appeals, and we reverse and remand.

I

A

The Multnomah County jail confiscates any cash carried by an arrestee upon incarceration. The inmate’s funds are kept in an inmate trust account until he or she is released. Before 2014, Multnomah County returned a released inmate’s money in the form of cash if the total was less than $60, or a check if the total was greater than $60. This process was considered by Multnomah County to be expensive and time consuming: Multnomah County estimates that it spent about $275,000 in labor costs annually and two to three staff hours per day handling inmates’ cash.

In 2014, Multnomah County contracted with Numi to return released inmates’ funds via prepaid debit cards, which are sometimes referred to as "release cards."² Multnomah County pays nothing at all to participate in Numi’s debit card program. Numi contracts with CNB to issue the release cards and hold the card funds in a master funding account. When an inmate is released, the money in his or her inmate trust account is transferred into the CNB master funding account. The released inmate receives a prepaid release card loaded with his or her funds, and the card is activated and ready for immediate use.

Numi earns revenue from the fees that it charges to cardholders. Counties and municipalities that contract with Numi have a choice of several fee schedules, distinguished by how often maintenance fees are charged. P7C cards charge maintenance fees once per month, and P1C cards charge maintenance fees once per week. Some counties and municipalities have negotiated deviations from the standard fee schedules to lighten the burden on cardholders. Other counties and municipalities, including Napa County, California and Broward County, Florida, pay a flat fee to subsidize each card instead of passing on the fees to cardholders. When it contracted with Numi, Multnomah County adopted a P7C fee schedule with no deviations or subsidies. The schedule it adopted contemplated that the County would pay no fees itself and Numi’s compensation would come from fees paid by the former inmates released into the public.

Under the fee schedule adopted by Multnomah County, Defendants charge cardholders a $5.95 monthly maintenance fee, first charged only five days after card activation. There is also a $2.95 fee for every ATM withdrawal in addition to any fee charged by the ATM itself. Other fees include a $0.50 fee for contacting the automated customer service system more than three times per month, a $9.95 fee for requesting the balance of the card by check, a $1.00 fee for each ATM balance inquiry made by the cardholder, and a $0.95 fee for each attempted transaction that was declined due to insufficient funds or an incorrect PIN.

According to Defendants, a released inmate can avoid these fees. The back of the release card states in small print that a $5.95 monthly service fee will be charged five days after the card’s activation. Released inmates are also supposed to receive a Card Usage Tips wallet card with a section entitled "How to avoid Service Fees." The wallet card states that there is no fee to transfer their funds to a personal bank account on Numi’s website, receive cash back after making a purchase from a retailer, or withdraw funds over the counter at a bank. The wallet card does not disclose that not all retailers will provide cash back, or that bank withdrawals are free only at Mastercard-affiliated banks. Multnomah County also gave the departing former inmates a document entitled "Debit Release Card Information" with a list of designated "surcharge-free ATMs," but this list was inaccurate at the time Brown was released because some of the listed ATMs charged fees.

B

On November 25, 2014, Brown was arrested in Portland, Oregon. She was participating in a public protest after a Missouri grand jury had decided not to indict Darren Wilson for the police-shooting death of Michael Brown.³ At the time of Danica Brown’s arrest, she carried $30.97 in cash. Her cash in that amount was confiscated along with the rest of her personal belongings when she was taken into Multnomah County custody. She was released around 2:30am on November 26, about seven hours after her arrest. The charges against her were later dropped.

Upon her release, Brown did not receive her previously confiscated money in the form of cash. Instead, she was given a Numi debit card loaded with $30.97. Along with the card, Brown received some paperwork with card information, including the Card Usage Tips wallet card, and the Debit Release Card Information sheet. She did not read the paperwork because she did not have her eyeglasses.

The debit card was not Brown’s immediate concern upon her release. On November 26, the day after her arrest, Brown spent most of her time attending her arraignment and retrieving her other confiscated belongings. November 27 was Thanksgiving Day. When Brown finally examined the release card and the associated paperwork, she learned that there was a monthly service charge. She assumed, incorrectly as it turned out, that the charge would occur after she had been using the card for a month. She visited Numi’s website, where she learned that she could transfer the balance of her card to her personal bank account. But she chose not to make this transfer because she did not want to provide her personal bank account information to Numi. Instead, she used the release card to make small purchases like buying coffee.

On December 1, Brown attempted to make a $15 purchase and the transaction was declined. Brown learned that her card had insufficient funds for the purchase because Defendants had debited a $5.95 monthly service fee earlier that day, which was only five days after she originally received the card. Due to the declined transaction, Defendants debited another $0.95 from her card. Brown made two more small purchases in early December. On January 1, Defendants debited the remaining $0.07 from the card toward her monthly service fee. In total, Defendants debited $6.97, or twenty-two percent of the card’s original $30.97 value.

C

In July 2015, Brown filed a complaint against Defendants on behalf of herself and a proposed class of formerly incarcerated people who received Defendants’ debit cards upon release and who paid fees associated with the use or maintenance of those cards. In her original complaint, she alleged four claims: (1) a violation of section 1693i of EFTA, which prohibits the issuance of unsolicited debit cards absent certain requirements; (2) a violation of the Oregon Unfair Trade Practices Act; (3) conversion under Oregon state law; and (4) unjust enrichment under Oregon state law.

Defendants moved to dismiss. In response to the motion to dismiss, Brown filed her first amended complaint. She removed any reference to section 1693i and eliminated her claim under the Oregon Unfair Trade Practices Act. She added two new claims: a violation of section 1693l -1 of EFTA, which prohibits service fees on general-use prepaid cards, and a 42 U.S.C. § 1983 claim for a violation of the Fifth Amendment’s Takings Clause. She realleged her...