Mohamed v. Bank of Am. N.A.

93 F.4th 205

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.

No. 22-1954

United States Court of Appeals, Fourth Circuit

Argued: October 24, 2023

Decided: February 16, 2024

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: Jessica Garland, GUPTA WESSLER PLLC, San Francisco, California, for Appellant. William 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.

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.

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 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., Nadendla 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[.]

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 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 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...