YAGOUB M. MOHAMED, individually and on behalf of all others similarly situated v. BANK OF AMERICA N.A.
No. 22-1954
United States Court of Appeals for the Fourth Circuit
February 16, 2024
HEYTENS, BENJAMIN, and HANES
PUBLISHED
CONSUMER FINANCIAL PROTECTION BUREAU,
Amicus Supporting Appellant.
Argued: October 24, 2023
Decided: February 16, 2024
Before HEYTENS and BENJAMIN, Circuit Judges, and Elizabeth W. HANES, United States District Judge for the Eastern District of Virginia, sitting by designation.
Vacated and remanded by published opinion. Judge Heytens wrote the opinion, which Judge Benjamin and Judge Hanes joined.
ARGUED: Jessica Garland, GUPTA WESSLER PLLC, San Francisco, California, for Appellant. Williаm M. Jay, GOODWIN PROCTER, LLP, Washington, D.C., for Appellee. Lauren Gorodetsky, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C., for Amicus Curiae. ON BRIEF: Leonard Bennett, Craig Marchiando, Tara Keller, CONSUMER LITIGATION ASSOCIATES, P.C., Newport News, Virginia; Robert William Murphy, LAW OFFICE OF ROBERT W. MURPHY, Charlottesville, Virginia; Matthew W.H. Wessler, GUPTA WESSLER PLLC, Washington, D.C., for Appellant. Thomas M. Hefferson, Rohiniyurie Tashima, GOODWIN PROCTER LLP, Washington, D.C., for Appellee. Seth Frotman, General Counsel, Steven Y. Bressler, Deputy General Counsel, Kristin Bateman, Assistant General Counsel, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C., for Amicus Curiae.
TOBY HEYTENS, Circuit Judge:
Yagoub Mohamed appeals a judgment concluding the pandemic unemployment assistance benefits he was to receive via a prepaid debit card were not protected by the Electronic Fund Transfer Act. We conclude the relevant account was a “government benefit account” under the controlling regulations. We thus vacate and remand for further proceedings.
I.
During the COVID-19 pandemic, the federal government took many steps to address the ongoing crisis. As relevant here, the Pandemic Unemployment Assistance program expanded unemployment benefits to people who were not otherwise eligible, including self-employed workers. See
Mohamed‘s card was slow to turn up. By November, a government representative told Mohamed the card should have arrived and directed him to contact the Bank. A Bank representative told Mohamed it had mailed the card but would send a new one. In December, Mohamed received and attempted to activate the new card. He soon discovered the card had a zero balance and the entire $14,644 had been spent between August and October on transactions he did not recognize. The Bank opened an error claim and told Mohamed to file a police report, which he did.
Things continued to go poorly. In January, Mohamed got a letter from the Bank saying it had frozen his account because of possible fraud. Then, in February, the Bank emailed Mohamed stating it had deposited $1,050 into the account. Over the next two months, repeated calls to the Bank yielded conflicting answers about the status of Mohamed‘s account and the state of his fraud claim.
In May, Mohamed sued the Bank in federal district court, asserting its conduct and error-claim procedures violated the federal Electronic Fund Transfer Act and various state law obligations. The next month—more than six months after the initial error claim—the Bank told Mohamed it would credit him for thе full amount of his unemployment benefits. The Bank then moved to dismiss Mohamed‘s complaint for failure to state a claim. The district court granted that motion with respect to Mohamed‘s federal claim and declined to exercise jurisdiction over the state-law claims. Mohamed appeals the dismissal of his federal claim, which we review de novo. See, e.g., Nadenla v. WakeMed, 24 F.4th 299, 304 (4th Cir. 2022).
II.
This appeal turns on a single question: were Mohamed‘s benefits in a covered “account” under the Act and its implementing regulations? Indeed, the Bank conceded before the district court that, if the answer is yes, “Mohamed has a claim at least for statutory penalties.” JA 220.
So what is an “account“? The Act defines the term broadly, stating it:
means a demand deposit, savings deposit, or other asset account (other than an occasional or incidental credit balance in an open end credit plan as defined in section 1602(i) of this title), as described in regulations of the Bureau, established primarily for personal, family, or household purposes, but such term does not include an account held by a financial institution pursuant to a bona fide trust agreement[.]
The “Bureau” referenced in that provision is the Consumer Financial Protection Bureau,
The current regulations state the term “account” “includes a prepaid account,” and further define “[p]repaid account” as including four categories that are introduced by the capital letters A, B, C, and D. See
III.
On appeal, Mohamed asserts he had a qualifying account under three provisions: Subsections B, C, and D. Because we conclude Mohamed is right about Subsection B, we do not reach his arguments about the other two subsections.
A.
Before reaching the merits, we must address a question about forfeiture. Mohamed‘s lead argument is that the Act applies because he had a “government benefit account” under Subsection B. The Bank insists this argument is forfeited because Mohamed failed to raise it in the district court. See Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 603 (4th Cir. 2004) (“Absent exceptional circumstances, . . . we do not consider issues raised for the first time on appeal.“). Mohamed says he preserved a Subsection B argument, and, even if he did not, we should exercise our discretion to overlook the forfeiture.
The forfeiture question is close. In the end, however, we conclude Mohamed did enough to preserve the issue.
Mohamed‘s complaint—the pleading whose sufficiency we are assessing—is broad enough to include a claim that Subsection B applies here. The complaint asserts that Mohamed “maintained a debit card account, which is an ‘account’ as defined by
Mohamed likewise preserved an argument that Subsection B applies in his brief opposing the Bank‘s motion to dismiss. In its memorandum supporting that motion, the Bank argued that none of Subsections A through D applied. Supplemental Appendix (SA) 12-13 n.4. In response, Mohamed described “[t]he pertinent regulations” as Subsections B, C, and D; quoted those regulations in full; and asserted that his “account satisfies the definition of 12 C.F.R. § 1005.2, B through D.” SA 43-44 (emphasis added). The only argument abandoned in that brief was one based on Subsection A.
True, Mohamed‘s brief opposing the Bank‘s motion to dismiss focused mostly on rebutting the Bank‘s assertion that the funds constituted “qualified disaster relief payments“—an issue all now agree is relevant only to Subsections C and D. The Bank also makes much of Mohamed‘s statement that “[s]ince the prepaid account does not meet the qualified disaster relief exception, whether it was a government benefit card does not supply any grounds for dismissal.” SA 48. But when read in its full context, that statement reflects Mohamed‘s reliance on alternative theories, not an abandonment of any argument about Subsection B. Just before the quoted
The Bank relies heavily on Mohamed‘s arguments during the hearing on its motion to dismiss. The Bank went first. In response to a question from the court, the Bank asserted Subsection B did not apply because the account was not “established by a government agency” before pivoting to a longer discussion about whether the payments were qualified disaster relief payments (an issue that, again, is relevant only to Subsections C and D). See JA 244-47. In his own presentation, Mohamed did not respond to the Bank‘s argument about Subsection B, focusing on rebutting the Bank‘s claim about the qualified disaster relief payments issue. When closing his argument, Mohamed stated:
So our view on this is that the Eleсtronic Funds Transfer Act applies on its very face, and that we have stated a cause of action for Count 1 not subject to the carve-out. Your Honor, I don‘t have any further argument with respect to Count 1.
JA 268.
The Bank insists Mohamed‘s statement that he did not have “any further argument” effectively conceded any claim under Subsection B. That is not how oral arguments work. We may take judicial notice that parties’ verbal presentations often do not touch on every point raised by the briefs or an opposing parties’ argument, and a failure to do so is not forfeiture. At any rate, when asked directly whether he was “relying on an argument that this is a government benefit card,” Mohamed responded: “It is a government benefit account.” JA 268-69. Mohamed then acknowledged the Bank‘s “view” that Subsection B did not apply because “they are the ones that established” the aсcount before pivoting to an argument that resolution of the Subsection B question did not “make[] . . . much [of] a difference in determining whether the [Act] applies” because the account qualified under Subsections C and D. JA 268-69.
No question, Mohamed could have done more to develop his repeated assertions that Subsection B applies and to explain how his arguments about these (admittedly intricate) provisions fit together. So it is understandable that the district court did not specifically address Subsection B in its ruling, focusing instead on the qualified disaster relief payments issue that dominated both sides’ briefing and argument. Having reviewed the entire record, however, we conclude Mohamed did enough to “signal” that he “contested” the Bank‘s view about Subsection B and to put the district court “on notice” of the parties’ dispute. In re Under Seal, 749 F.3d 276, 288-89 (4th Cir. 2014); accord Maynard v. General Elec. Co., 486 F.2d 538, 539 (4th Cir. 1973) (“While we will not consider new causes of actiоn raised for the first time on appeal, any theory plainly encompassed by the pleadings . . . should be considered on appeal.” (alterations and quotation marks removed)).
B.
On the merits, we conclude Mohamed has stated a claim under the Act because
We start, as always, with the text. The regulations define “government benefit account” as:
an account established by a government agency for distributing government benefits to a consumer electronically, such as through automated teller mаchines or point-of-sale terminals, but does not include an account for distributing needs-tested benefits in a program established under state or local law or administered by a state or local agency.
The regulations do not further define “established by a government agency,” so we consider the words’ “ordinary meaning” and the “context” in which they are used. Southwest Airlines Co. v. Saxon, 596 U.S. 450, 455 (2022) (quotation marks removed). As used here, “establish” means “to bring into existence”1 and “by” means “through the agency or instrumentality of.”2 Thus, our ultimate question: was Mohamed‘s account brought into existence through the agency or instrumentality of a government agency?
Of course it was. Congress created the Pandemic Unemployment Assistance
program and made agreements with States (including Maryland) to administer it.
The underlying principle is a familiar one. Consider the situation where a person walks into a bank branch and says she wants to open an account. Yes, a bank teller—not the customer—will be the person who physically сreates the account, most likely through a series of keystrokes on the bank‘s computers. But that does not mean the account was “established” exclusively by the bank (much less by its teller). Rather, it was the customer whose actions brought about the account‘s existence by asking the teller to open it on her behalf. So too here.
The Bank insists that “[u]nder any meaning of established,” it “made or formed these accounts and brought them into existence.” Bank Br. 30 (alterations and quotation marks removed). But the relevant definition does not turn on who “established” an account in a general sense or direct us to determine whether a party other than a government agency might have played a role in its happening. Instead, the regulation asks whether the account was “establishеd by a government agency,” regardless of whether the account also might be said to have been established by someone else or whether the government recruited a private party to assist with its efforts. And, as we have already explained, the initiating party here was Maryland.
The Bank also contends that “[t]he larger regulatory context confirms that Mohamed‘s account is not a government benefit account.” Bank Br. 31. The Bank emphasizes that an adjacent regulatory provision says “[a] government agency” that undertakes certain actions “is deemed to be a financial institution for purposes of the Act” and thus takes on a host of new obligations the relevant Maryland agency has never complied with.
That argument omits the other requirement in the relevant regulation. The regulation the Bank cites does not say a government agency must be deemed to be a financial institution before it can establish an account or that any government agency that establishes an account is, without more, deemed to be a financial institution subject to additional obligations. Instead, the regulatiоn declares that, to be deemed a financial institution, a government agency must also “directly or indirectly . . . issue[] an access device to a consumer for use in initiating an electronic fund transfer of government benefits from an account.”
Finally, the parties have a spirited back and forth about the regulation‘s evolutionary history and how well a conclusion that Mohamed‘s account is covered by Subsection B fits within the overall scheme. Of course, we must read the regulation‘s words—just like a statute‘s—“in their context and with a view to their place in the overall [regulatory] scheme.” Lynch v. Jackson, 853 F.3d 116, 121 (4th Cir. 2017); accord Jimenez-Rodriguez v. Garland, 996 F.3d 190, 197 (4th Cir. 2021) (exаmining “the historical language of” the relevant regulations). Having done so, we conclude the relevant contextual clues point sharply in Mohamed‘s favor.
First, the 1994 Rule that extended Regulation E to electronic distribution of government benefits said a government benefit
Second, the 2016 Rule that extended Regulation E‘s coverage by adding Subsections C and D again acknowledged that “government benefit account programs are typically administered by financial institutions pursuant to a contract between the institution and the agency.” Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z), 81 Fed. Reg. 83934, 84001 (2016). That Rule thus recognized that States regularly contract with third parties, such as banks, to administer government benefit programs without changing the program‘s essentially governmental nature.
Third, it appears the Bank‘s proposed interpretation would—at least as a practical matter—render Subsection B a dead letter. The Bank would have us hold that no prepaid card issued as part of a government program is a government benefit account unless the funds are pulled directly from the government‘s coffers. But when asked at oral argument, the Bank could not identify a single modern example of a government benefit program that works that way or even state with certainty whether such a system has evеr existed. See Oral Arg. 24:25-27:28; accord Oral Arg. 13:15-13:20 (CFPB counsel representing “[t]he Bureau isn‘t aware of a single government agency that operates a program on its own“).
The Bank responds that Subsection B is not meant to have independent significance after the 2016 Rule, which added two new expansive categories of prepaid accounts (Subsections C and D). But that argument does not explain how electronic government bеnefit cards were covered before the 2016 Rule, which stated it did not “narrow or expand” “the scope of coverage for government benefit accounts.” 81 Fed. Reg. at 83995-96. Nor does it explain why the exclusions applicable to the new, broader categories— including those for cards “loaded only with qualified disaster relief payments,”
* * *
We hold Mohamed has stated a claim under the Act because his pandemic assistance benefits were held in a “government benefit account.” The judgment is vacated, and the case is remanded for further proceedings consistent with this opinion.
SO ORDERED