Court Opinion

ID: 9941853
Source: CourtListenerOpinion
Date Created: 2024-02-17 21:00:26.763447+00
Date Added: 2024-06-11T13:47:10.854607
License: Public Domain

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                                                  PUBLISHED

                                   UNITED STATES COURT OF APPEALS
                                       FOR THE FOURTH CIRCUIT

                                                   No. 22-1954

        YAGOUB M. MOHAMED, individually and on behalf of all others similarly situated,

                       Plaintiff – Appellant,

        v.

        BANK OF AMERICA N.A.,

                       Defendant – Appellee.

        ------------------------------

        CONSUMER FINANCIAL PROTECTION BUREAU,

                       Amicus Supporting Appellant.

        Appeal from the United States District Court for the District of Maryland, at Baltimore.
        Catherine C. Blake, Senior District Judge. (1:21-cv-01283-CCB)

        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. William M. Jay, GOODWIN PROCTER, LLP, Washington, D.C., for Appellee.
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        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.

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        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 15 U.S.C. § 9021. The program was administered at

        the state level, through agreements between the Secretary of Labor and relevant state

        agencies. § 9021(a)(4), (f )(1). In Maryland, that agency was the Department of Labor’s

        Division of Unemployment Insurance, which processed applications and contracted with

        Bank of America N.A. (Bank) to disburse benefits via prepaid debit cards.

              When the pandemic began, Mohamed was working as a self-employed mechanic.

        In July 2020, he applied for unemployment benefits, and was found eligible to receive

        $14,644 between July and October 2020. Mohamed signed up to receive his benefits on a

        Bank-issued debit card mailed to his home.

              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

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        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 the 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

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        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[.]

        15 U.S.C. § 1693a(2).

               The “Bureau” referenced in that provision is the Consumer Financial Protection

        Bureau, 15 U.S.C. § 1693a(4), and the “regulations” further defining “account” are

        published at 12 C.F.R. § 1005.2(b)(1). Those provisions are contained in a broader

        regulation called Regulation E.

               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 12 C.F.R. § 1005.2(b)(3), (i). Subsection A—which no

        one claims is implicated here—brings in “payroll card account[s]” issued by

        employers. § 1005.2(b)(3)(i)(A). Subsection B covers “‘government benefit account[s],’ ”

        which are defined (subject to an exception not implicated here) as “an account established

        by a government agency for distributing government benefits to a consumer

        electronically.” §§ 1005.2(b)(3)(i)(B), 1005.15(a)(2). Subsections C and D, in turn, sweep

        in accounts used to conduct transactions with “multiple, unaffiliated merchants for goods

        or services” or that can be used “at automated teller machines.” § 1005.2(b)(3)(i)(C), (D).

        Another provision states the broad definitions contained in Subsections C and D—but not

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        Subsections A or B—do “not include” various accounts, including “[a]n account that is

        directly or indirectly established through a third party and loaded only with qualified

        disaster relief payments.” § 1005.2(b)(3)(ii), (B).

                                                     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

        15 U.S.C. § 1693a(2).” JA 37. As discussed, the cited provision defines “account” by

        reference to “regulations of the Bureau,” 15 U.S.C. § 1693(a)(2), which, in turn, include

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        Subsection B, see 12 C.F.R. § 1005.2(b)(3)(i)(B).

               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 statement, Mohamed made several arguments

        that the account was a “government benefit account”—the very assertion necessary to show

        the account was covered by Subsection B. For example, Mohamed asserted that the Bank’s

        “conten[tion] that the account is not a government benefit” account conflicted with the

        Bank’s having “identified the account as a ‘Government Prepaid Debit Card’ in the

        Cardholder Agreement.” SA 47. Mohamed also put his finger on the key issue for resolving

        the Subsection B question, asserting that he “properly pled that he submitted an application

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        through” the state-provided process and that Maryland officials—not the Bank—“opened”

        the relevant account. SA 49; see Part III(B), infra.

               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 Electronic 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 account before pivoting to

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        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 action 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 the

        relevant account is a “government benefit account” under Subsection B. No one asserts we

        owe any deference to the agency, so our task is to construe the regulation as written. In

        doing so, we apply the “traditional tools of construction.” Kisor v. Wilkie, 139 S. Ct. 2400,

        2415 (2019) (quotation marks removed); accord United States v. Moriello, 980 F.3d 924,

        934 (4th Cir. 2020) (“This Court construes a regulation using the same rules applicable to

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        statutory construction.”).

               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
               machines 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.

        12 C.F.R. § 1005.15(a)(2); see § 1005.2(b)(1)(i)(B) (adopting this definition). The Bank

        does not dispute this account was established “for distributing government benefits to a

        consumer electronically,” nor does it assert that the “does not include” carveout is

        triggered. The merits issue before us thus distills down to whether the relevant account was

        “established by a government 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

               1
                  Establish, Merriam-Webster Dictionary, https://www.merriam-webster.com/
        dictionary/establish [https://perma.cc/5R5Y-V8DB]; accord Establish, Black’s Law
        Dictionary (11th ed. 2019) (“To make or form; to bring about or into existence.”).
               2
                   By, Merriam-Webster Dictionary,             https://www.merriam-webster.com/
        dictionary/by [https://perma.cc/Z72U-YZLF].
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        program and made agreements with States (including Maryland) to administer it.

        15 U.S.C. § 9021(f )(1). A state agency created an application procedure, received

        applications, made benefits determinations, and gave the Bank a list of people who should

        be issued benefit cards. True, the Bank issued the cards and controlled the day-to-day

        operations of the attached account, such as providing recipients with account access and

        histories. But the Bank acted solely at the instigation of—and through its contract with—

        the State of Maryland.

               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 creates 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 offers a f lurry of arguments against this straightforward conclusion. We

        are unpersuaded.

               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 “established by a government agency,” regardless of whether the account also might

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        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. 12 C.F.R. § 1005.15(a)(1). According to the Bank, this shows that it—not

        that agency—established Mohamed’s account because otherwise the agency would be

        “deemed to a be a financial institution” under that provision.

               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 regulation 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.” 12 C.F.R. § 1005.15(a)(1). But the only “access device” at issue here is the

        physical card itself, and the parties agree that card was issued by the Bank.

        See § 1005.2(a)(1) (defining “access device” as “a card, code, or other means of access to

        a consumer’s account”); Oral Arg. 29:20–29:33 (Bank conceding it issued the access

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        device). When asked about this point at oral argument, the Bank responded by pointing out

        the regulation applies even if Maryland only “indirectly” issued the card.

        See Oral Arg. 29:40–30:28. But the Bank never once argues in its briefing that Maryland

        issued an access device—directly or indirectly—which leaves without substantial support

        the Bank’s suggestion that our holding might render the relevant state agency a regulated

        financial institution.

               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) (examining “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 account is “an account established by a

        government agency” “whether or not the account is directly held by the agency or a bank

        or other depository institution.” Electronic Fund Transfers, 59 Fed. Reg. 10678, 10680

        (1994) (emphasis added). That Rule thus distinguished between who “established” an

        account and where (or by whom) the account is “held.” See Bank Br. 38 (acknowledging

        that “‘holding’ an account is not the same as ‘establishing’ one”).

               Second, the 2016 Rule that extended Regulation E’s coverage by adding

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        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 ever 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

        benefit 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—

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        including those for cards “loaded only with qualified disaster relief payments,”

        12 C.F.R. § 1005.2(b)(3)(ii)(B)—were not made applicable to Subsection B, which further

        suggests that Subsection B would still have some effect. Indeed, the Bank does not identify

        any reason why the 2016 Rule would have retained Subsection B if that provision was not

        meant to have any real-world significance. Cf. United States v. Menasche, 348 U.S. 528,

        538–39 (1955) (“It is our duty to give effect, if possible, to every clause and word of a

        statute, rather than to emasculate an entire section, as the Government’s interpretation

        requires.” (quotation marks and citation removed)).

                                             *      *      *

              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

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