Danica Brown v. Stored Value Cards, Inc.
953 F.3d 567
9th Cir.2020Background
- Multnomah County stopped returning small cash amounts directly and contracted in 2014 with Stored Value Cards d/b/a Numi to issue prepaid "release cards" to returning detainees, funded from inmate trust accounts.
- Numi charged cardholders fees under the County's chosen P7C schedule (notably a $5.95 monthly maintenance fee assessed five days after activation, plus ATM and other fees); Multnomah paid nothing to subsidize cards.
- Danica Brown was released with $30.97 loaded on a Numi release card; she did not transfer the balance and within days fees reduced the balance by $6.97.
- Brown sued alleging (1) violations of the Electronic Fund Transfer Act (EFTA §§1693i and 1693l-1), (2) a Fifth Amendment taking under §1983, and (3) state-law conversion and unjust enrichment. The district court dismissed EFTA claims, denied leave to further amend, and granted summary judgment to defendants on takings and state-law claims.
- The Ninth Circuit reversed: it held Brown plausibly stated a claim under EFTA §1693l-1, the district court abused its discretion in denying leave to amend, and summary judgment was improper on the takings and state-law claims; the case was remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of EFTA §1693l-1 (prohibition on fees for general‑use prepaid cards) | Brown: release cards are marketed (directly or indirectly) to released inmates who rejoin the general public, so §1693l-1 applies and fees are unlawful. | Numi/CNB: cards are not marketed to the general public; inmates are not the general public and there was no direct marketing to them. | Court: indirect marketing to released inmates via contracts with counties renders cards "marketed" to the general public; §1693l-1 claim plausibly pleaded — dismissal reversed. |
| Denial of leave to file third amended complaint (reinstating EFTA claims based on new discovery) | Brown: new discovery (e.g., promotional posters in facilities) justified prompt amendment; amendment not futile. | Defendants: amendment would be futile and prejudicial. | Court: denial without explanation was an abuse of discretion; leave should have been granted; remanded. |
| Summary judgment on Fifth Amendment takings claim (whether release cards are the functional equivalent of cash/checks) | Brown: cards rapidly and permanently lose value (fees starting five days after activation), so they are not the functional equivalent of cash/check and may support a per se taking. | Defendants: release cards are liquid, transferable, and functionally equivalent to cash or checks. | Court: district court erred; cards are materially different because of quick erosion of value; summary judgment improper; remanded for takings analysis (including fee reasonableness). |
| Summary judgment on state-law claims (conversion, unjust enrichment) | Brown: fees unlawfully depleted funds, supporting conversion and unjust enrichment claims. | Defendants: cards are equivalent to cash so no conversion; plaintiffs voluntarily accepted cards. | Court: district court relied on the same flawed equivalence reasoning; summary judgment vacated and remanded for district court to reconsider. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Foman v. Davis, 371 U.S. 178 (factors governing leave to amend pleadings)
- Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (prejudice as principal factor; denial without explanation reversible)
- United States v. Sperry Corp., 493 U.S. 52 (fees-for-services takings: fees must fairly approximate costs)
- Massachusetts v. United States, 435 U.S. 444 (takings principles relevant to fees analysis)
- Lacey v. Maricopa County, 693 F.3d 896 (amended complaint supersedes prior complaint)
- Puri v. Khalsa, 844 F.3d 1152 (de novo review of Rule 12(b)(6) dismissal standard)
- Curry v. Yelp Inc., 875 F.3d 1219 (abuse-of-discretion standard for denial of leave to amend)
- Branch Banking & Tr. Co. v. D.M.S.I., LLC, 871 F.3d 751 (de novo review of summary judgment)