Mich. First Credit Union v. T-Mobile USA, Inc.

108 F.4th 421

MICHIGAN FIRST CREDIT UNION, Plaintiff-Appellant, v. T-MOBILE USA, INC., Defendant-Appellee.

No. 23-1952

United States Court of Appeals, Sixth Circuit

Decided and Filed: July 16, 2024

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:22-cv-13159—Jonathan J.C. Grey, District Judge.

ON BRIEF: Charles J. Holzman, HOLZMAN LAW, PLLC, Southfield, Michigan, for Appellant. Robert D. Boley, ARENT FOX SCHIFF LLP, Ann Arbor, Michigan, Jennifer K. Chung, DAVIS WRIGHT TREMAINE LLP, Seattle, Washington, James H. Moon, DAVIS WRIGHT TREMAINE LLP, Los Angeles, California, for Appellee.

Before: MOORE, COLE, and MATHIS, Circuit Judges.

OPINION

MATHIS, Circuit Judge.

The Electronic Fund Transfer Act ("EFTA") requires banks, credit unions, and similar financial institutions to reimburse their customers for unauthorized electronic transfers of money from the customers' accounts. Pursuant to its obligations under the EFTA, Michigan First Credit Union had to reimburse several of its customers for unauthorized electronic fund transfers who were subject to a cellphone scheme. Michigan First now seeks to recover those reimbursed funds from wireless cellular service provider T-Mobile USA, Inc. Specifically, Michigan First contends it is entitled to indemnification or contribution from T-Mobile. The district court dismissed Michigan First's complaint, finding it failed to state a claim for indemnification or contribution under the EFTA or state law. We affirm.

I.

T-Mobile is a wireless telephone carrier with millions of subscribers. Each subscriber's mobile device is given a subscriber identity module ("SIM") card with a unique T-Mobile identifier. The SIM card ensures that calls, text messages, and other data are properly routed to the subscriber's device.

A scam called "SIM Swap" has victimized some T-Mobile subscribers. A SIM Swap occurs when: (1) a scammer contacts T-Mobile and falsely claims that a subscriber's mobile device was lost, damaged or stolen; (2) the scammer asks T-Mobile to activate a new SIM card associated with the subscriber's device—when the card is actually located in the scammer's device; (3) T-Mobile does not properly validate the request and unwittingly activates the new SIM card, thereby giving the scammer access to the subscriber's data; (4) the scammer takes advantage of this by accessing the subscriber's private information, including bank details; and (5) the scammer uses these details to make unauthorized financial transactions. After discovering the scam, T-Mobile subscribers often contact their banks to challenge the unauthorized charges. Financial institutions subject to the EFTA must reimburse their customers for unauthorized transactions regardless of fault, except in limited circumstances. 15 U.S.C. § 1693g; see also Merisier v. Bank of Am., N.A., 688 F.3d 1203, 1204 (11th Cir. 2012).

Michigan First is a state-chartered credit union subject to the EFTA. Michigan First claims that T-Mobile failed to adequately safeguard its subscribers from SIM Swaps and, as a result, Michigan First has been forced to reimburse its affected customers.

Michigan First filed a putative class action against T-Mobile, seeking to hold T-Mobile liable for these reimbursed funds based on common-law indemnification and contribution. Michigan First's amended complaint raised claims for indemnification and contribution under the EFTA and its implementing regulation ("Regulation E"), 12 C.F.R. pt. 1005, the Michigan Electronic Funds Transfer Act ("MEFTA"), Mich. Comp. Laws § 488.1-.31, and state common law.

T-Mobile moved to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6), arguing: (1) the EFTA does not provide for indemnification or contribution; (2) the EFTA expressly preempts the MEFTA, and (3) the EFTA also preempts any state common-law claim for indemnification or contribution. The district court agreed and dismissed Michigan First's amended complaint. This timely appeal followed.

II.

We review an order dismissing a complaint under Federal Rule of Civil Procedure 12(b)(6) de novo. Lindke v. Tomlinson, 31 F.4th 487, 495 (6th Cir. 2022). To survive a Rule 12(b)(6) motion to dismiss, the complaint must allege facts sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Determining whether a complaint states a facially plausible claim requires courts to construe the complaint in a light most favorable to the plaintiff, accept all well-pleaded factual allegations as true, and decide whether there is enough factual content to allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

III.

On appeal, Michigan First offers three theories to show that it has stated viable indemnification and contribution claims. First, it contends that the EFTA implies a right to indemnification or contribution. Second, Michigan First asserts that it has stated a claim for indemnification or contribution under the MEFTA because the EFTA does not preempt the MEFTA. And third, Michigan First maintains that the EFTA does not preempt its state common-law indemnification claim. We address each argument in turn.

A. Indemnification or Contribution under the EFTA

The U.S. Constitution grants Congress the authority to pass federal laws within the purview of its enumerated powers. U.S. Const. art. I, §§ 1, 8. This includes the authority to create "private rights of action to enforce federal law." Alexander v. Sandoval, 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001). But when Congress "enacts a provision that creates a right or prohibits specified conduct," it "may not wish to pursue the provision's purpose to the extent of authorizing private suits for damages." Hernandez v. Mesa, 589 U.S. 93, 100, 140 S.Ct. 735, 206 L.Ed.2d 29 (2020). We thus look to federal statutes to determine whether Congress has established a cause of action and to discern the available remedies. See id.

Indemnification and contribution are remedies sometimes available to aggrieved litigants. Generally speaking, a right to indemnification can arise where the wrongful act of one party results in another party being held liable, entitling the latter party to restitution for any losses. Restatement (Second) of Torts § 886B (Am. L. Inst. 1979). A right to contribution arises when two or more parties cause a loss, requiring each party to pay a proportionate share of the loss. Id. § 886A. Claims for indemnification or contribution under a federal statute may be created in two different ways: (1) through action by Congress, either expressly or implicitly; or (2) by "federal common law through the exercise of judicial power to fashion appropriate remedies for unlawful conduct." Nw. Airlines, Inc. v. Transp. Workers Union of Am., AFL-CIO, 451 U.S. 77, 90, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981); see also Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 638, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981); Miller v. Bruenger, 949 F.3d 986, 991 (6th Cir. 2020). It is undisputed that the EFTA does not contain an express right to indemnification or contribution. See 15 U.S.C. § 1693 et seq. We therefore focus our attention on whether the EFTA provides an implied remedy and, if not, whether one exists under federal common law.

1.

Determining whether the EFTA provides for an implied right to indemnification or contribution requires us to construe the statute. Nw. Airlines, 451 U.S. at 91, 101 S.Ct. 1571. The "ultimate question" is "whether Congress intended to create the private remedy." Id. Four factors relevant to this analysis include: (1) the statutory text—specifically, whether the language indicates that the statute was enacted for the "special benefit of a class of which [the plaintiff] is a member"; (2) the statute's legislative history; (3) the purpose and structure of the statute's scheme; and (4) the likelihood that Congress intended to supersede or supplement existing state remedies. Id. at 91-92, 101 S.Ct. 1571. "[U]nless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist." Id. at 94, 101 S.Ct. 1571.

Start with the statutory text. The EFTA does not mention a right to indemnification or contribution for financial institutions. To the contrary, the plain text demonstrates that Congress enacted the EFTA for the benefit of consumers, not financial institutions like Michigan First.

Congress passed the EFTA as Title XX of the Financial Institutions Regulatory and Interest Rate Control Act of 1978, Pub. L. No. 95-630, 92 Stat. 3641 (codified at 15 U.S.C. § 1693 et seq.), which added the EFTA as Title IX to the comprehensive financial regulatory reform package known as the Consumer Credit Protection Act, 15 U.S.C. §§ 1601-1692 (1976). The EFTA, as we have explained, "protects individual consumer rights by 'provid[ing] a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer systems.' " Clemmer v. Key Bank Nat'l Ass'n, 539 F.3d 349, 351 (6th Cir. 2008) (alteration in original) (quoting 15 U.S.C. § 1693(b)). Although the use of the term "participants" might suggest that Congress intended to also benefit financial institutions, Congress clarified that "[t]he primary objective of" the EFTA "is the provision of individual consumer rights." 15 U.S.C. § 1693(b). And the legislative findings accompanying the EFTA indicate that Congress adopted the Act to regulate the conduct of financial institutions for the benefit of their consumers:

Congress finds that the use of electronic systems to transfer funds provides the potential for substantial benefits to consumers. However, due to the

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