Humphrey v. First Century Bancorp et al

Filing 67

Opinion & Order signed by Judge James S. Gwin on 1/8/19. The Court, for the reasons set forth in this order, denies defendants' motion to dismiss and grants in part and denies in part defendants' motion for summary judgment. (Related Docs. 44 and 51 ) (D,MA)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
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AMBER HUMPHREY,
:
on behalf of herself and the class,
:
:
Plaintiff,
:
:
vs.
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:
STORED VALUE CARDS, D/B/A NUMI :
FINANCIAL, et al.
:
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Defendants.
:
:
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CASE NO. 1:18-CV-1050
OPINION & ORDER
[Resolving Docs. 44, 51]

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
Plaintiff Amber Humphrey sues Defendants Stored Bank Cards, doing business as
Numi Financial (“Numi”), and Republic Bank & Trust Company (“Republic”). With their
complaint, Plaintiffs claim that Defendants violated the Electronic Funds Transfer Act
(“EFTA”) when the Defendants issued unsolicited debit cards. Plaintiffs say these
unsolicited cards then charged fees that Plaintiffs had not agreed to. They allege that this
unsolicited card issuance and Defendants’ related fees violated EFTA and Ohio law.
Defendants move to dismiss the complaint for failure to state a claim1 and move for
summary judgment.2
For the following reasons, the Court DENIES Defendants’ motion to dismiss and
GRANTS IN PART and DENIES IN PART Defendants’ motion for summary judgment.

1

Doc. 44. Plaintiffs oppose. Doc. 48. Defendants reply. Doc. 52. The legal arguments presented in this
motion are largely the same as those in their motion for summary judgment.
2
Doc. 51. Plaintiffs oppose. Doc. 53. Defendants reply. Doc. 54. Plaintiffs surreply. Doc. 58.

Case No. 1:18-cv-1050
Gwin, J.

I.
A.

Background

Plaintiff Humphrey
In August 2017, Plaintiff Humphrey served a thirty-day drug paraphernalia

possession sentence at the Lorain County Jail.3 When she entered the jail, she had sixty
dollars cash.4 The jail took this money and placed Humphrey’s money in an inmate trust
account. During her incarceration, Humphrey used some of her inmate trust money to
purchase food and hygiene items at the commissary.5
When Humphrey was released in September 2017, the jail gave Humphrey an
already validated6 prepaid debit card with the inmate trust account balance.7 The card
carried the Numi brand name and Humphrey’s funds were put in a Republic bank
account.8
At her deposition, Plaintiff testified that no one provided her with paperwork stating
the card’s terms and conditions.9
Plaintiff Humphrey states that she used the card for purchases and then used it to
withdraw cash from an ATM.10

3

Doc. 51-3 at 30 (Humphrey Dep.). Plaintiff was initially diverted into an intensive outpatient substance
abuse program, in lieu of a jail sentence. She states that she decided to finish the program because the
logistical burdens of the program were too heavy in light of her discovery, in May 2018, that she was
pregnant. Id. at 31-32.
4
Id. at 37.
5

Id.

A “validated” card is one that can be used immediately to initiate an electronic funds transfer. See 15
U.S.C. § 1693i.
7
Id. at 50.
8
Doc. 51-17 at 3.
9
Doc. 51-3 at 55.
10
Id. at 71.
6

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Gwin, J.

B.

Defendants’ Prepaid Card Program
Defendant Republic Bank sponsored the prepaid card program. Republic oversees

the program, sets the terms of service, and holds and controls the cardholder funds.11
Defendant Numi manages the card program by servicing the cards and markets the
program to correctional institutions.
Republic keeps Cardholder funds in a “pooled” operating account.12 That is, each
prepaid card is not connected to an individual account. Instead, a single bank account
holds funds for thousands of released inmates.13 Individual card expenditures are tracked
in a sub-ledger.14
The prepaid cards charge high fees for taking certain actions. For example, there is
a $2.95 fee for using an ATM, and a $1.50 fee for performing an ATM balance inquiry. 15
The cards also impose fees for inaction; if there is money remaining on the card five days
after issuance, Republic charges a $5.95 monthly maintenance fee for sitting on the
account holder’s monies.16 A cardholder can request a paper check for the account
balance at no charge but only if the request is made within the five days the card is
issued.17
Defendant Numi contracts with correctional facilities to distribute prepaid cards to
inmates. These Numi correctional facility contracts include provisions requiring the jails
provide cardholder terms when jails give the cards to inmates when the inmates are

11

Doc. 51-17 at 2 (Nelson Decl.).

Id.
Id.
14
Id.
12
13

15

Doc. 51-13 (Cardholder agreement).

16

Id.
Id. After this five-day grace period, a check costs $9.95.

17

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Gwin, J.

released.18 Officer Frank Machovina, a Lorain County Jail correctional officer who gave the
prepaid cards to released inmates, states that while he does not recall Ms. Humphrey’s case
in particular, he usually gives the card terms and conditions to each inmate.19

II.
A.

Discussion

Legal Standard
Summary judgment is proper where the moving party has “show[n] that there is no

genuine dispute as to any material fact and that [they are] entitled to judgment as a matter
of law.”20 Where the nonmoving party bears the burden of proof at trial, Rule 56 requires
plaintiffs “to go beyond the pleadings and by her own affidavits, or by the ‘depositions,
answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that
there is a genuine issue for trial.’”21 Summary judgment is appropriate where the moving
party “point[s] out to the district court” that “there is an absence of evidence to support the
nonmoving party’s case.”22
B.

The Court Grants in Part and Denies in Part Defendants’ Motion for Summary
Judgment on Plaintiffs’ EFTA Claim
Plaintiffs allege that the inmate prepaid debit card program violates two EFTA

provisions: 15 U.S.C. § 1693i, which prohibits the unauthorized issuance of debit cards,
and 15 U.S.C. § 1693l-1, which prohibits general-use prepaid card service fees. The Court
addresses each claim in turn.

18
19

Doc. 51-12 at 7.
Doc. 51-19.

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56).
Id. at 324 (quoting Fed. R. Civ. P. 56(e)).
22
Id. at 325.
20
21

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i. Unauthorized Issuance
Plaintiffs bring claims under 15 U.S.C. § 1693i. That provides that
[N]o person may issue to a consumer any card, code, or other means of
access to such consumer's account for the purpose of initiating an electronic
fund transfer other than-- (1) in response to a request or application therefor;
or (2) as a renewal of, or in substitution for, an accepted card, code, or other
means of access, whether issued by the initial issuer or a successor.23
This provision stops the issuance of unsolicited but activated debit cards.
Defendants generally argue that its debit cards are not subject to EFTA’s prohibition
against the issuance of unsolicited debit cards. Defendant contend that because inmate
funds were kept in a pooled account that EFTA does not apply to its card issuance.
EFTA defines “account” as “a demand deposit, savings deposit, or other asset
account . . . as described in regulations of the Bureau, established primarily for personal,
family, or household purposes.”24 The accompanying regulation, defines “account” as “a
demand deposit (checking), savings, or other consumer asset account (other than an
occasional or incidental credit balance in a credit plan) held directly or indirectly by a
financial institution and established primarily for personal, family, or household
purposes.”25
With their motions, Defendants argue that the pooled custodial account used for the
Plaintiffs’ cards is not a “consumer asset account” as defined in the regulation. They offer
two arguments in favor of this view, one textual and one historical.

23

15 U.S.C. § 1693i(a). Defendants do not argue that they are eligible for the 1693i(b) statutory exception.
15 U.S.C. § 1693a.
25
12 C.F.R. § 1005.2 (emphasis added).
24

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Defendants’ textual argument is that an “other consumer asset account” must be an
account that is kept for the benefit of a single consumer. Apparently, Defendant reason
that “consumer” can only be one individual. Because Plaintiffs’ funds were held in a
pooled account shared by many inmate cardholders, Defendants contend that the
regulation does not apply.
There is simply no textual basis to narrow the regulatory definition this way.26 The
adjectival function of the term “consumer” means to limit the account to accounts used for
personal, rather than business, purposes.27 The Court is unaware of any dictionary defining
the term “consumer” to mean that the account must be held one held by a single individual
rather than a number of persons.
Further, Defendants’ reading is inconsistent with the ejusdem generis canon of
statutory interpretation. The term “consumer” appears as a generic term in a series
describing asset account types: “demand deposit (checking), savings, or other consumer
asset account.” When general terms follow specific ones in such a series, the canon
dictates that “the general terms are construed to embrace only objects similar in nature to
the objects enumerated by the preceding specific words.”28
Defendants’ interpretation violates the canon because the first two terms in the
series—checking and savings—are accounts that can be held jointly. Defendants’

26

The court accepts, for the sake of argument, that the regulation’s narrowing of the definition from the
statute’s “other asset account” to “other consumer asset account” is consistent with the statute.
27
Cf. Consumer Product, Black’s Law Dictionary (8th ed. 2004) (“An item of personal property . . . used for
personal, family, or consumer purposes.”); Consumer Transaction, Black’s Law Dictionary (8th ed. 2004) (“A
bargain or deal in which a party acquires property or services primarily for a personal, family or household
purpose.”).
28
Circuit City Stores Inc., v. Adams, 532 U.S. 105, 114-15 (2001).

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interpretation, which would only include individual accounts, makes the general term

unlike the terms it follows. Thus, Defendants’ textual argument fails.
Defendants’ historical argument turns on the Consumer Financial Protection
Bureau’s (“CFPB”) 2016 amendments to Regulation E, EFTA’s implementing regulations.
These regulations, that will become effective April 1, 2019, add a section to 12 C.F.R.
§ 1005.2(b) separately defining “prepaid account.” Defendants contend that this
amendment would be unnecessary if prepaid accounts already fell under the regulation.
Further, Defendants point out that in 2006, regulators considered (and ultimately declined
to implement) an amendment that would have specifically covered prepaid card accounts.
This argument is also unpersuasive. That the CFPB chose to single out prepaid
accounts for additional regulation does not mean that they were not covered by prior
regulation or statute. On the contrary, the CFPB based its 2016 amendments on EFTA’s
broad statutory definition of “account.” In the Federal Register entry discussing the 2016
rule, the Board noted that “insofar as the statute defines account broadly to include any

other asset account . . . the Bureau believes it is reasonable to include ‘account’ in EFTA to
include prepaid accounts.”29
Additionally, the CFPB explained that its 2006 decision not to issue prepaid-cardspecific regulations was because it was “premature” to regulate the cards. It explained that
“in its view [in 2006] consumers did not often use prepaid cards in the same way that they
used payroll cards.”30 The subsequent growth of prepaid cards led to the expansion of the

Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act
(Regulation Z), 79 Fed. Reg 426, 77127 (Dec. 23, 2014) (emphasis added).
30
Id. The 2006 rulemaking did promulgate specific rules covering payroll cards.
29

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regulation in 2016. This decision was not, as Defendants contend, premised on the view
that prepaid cards fell outside of the regulatory or statutory definition of “account.”
Thus, the Court denies Defendants’ motion for summary judgment on Plaintiffs’
§ 1693i claim.
ii. The Inmate Prepaid Card Is Not a “General-Use Prepaid Card”
Defendants also move for summary judgment on Plaintiffs’ EFTA claim under
15 U.S.C. § 1693l-1, which prohibits the imposition of “service fees” on general-use
prepaid cards.
Defendants argue that the prepaid cards are not covered by this statute and
regulation because the statute excludes cards that are “not marketed to the general
public.”31 The CFPB’s official interpretation of this provision states that a card “is marketed
to the general public if [it] is directly or indirectly offered, advertised, or otherwise
promoted to the general public.”32 Plaintiffs counter that the exception does not apply
because they are members of the general public.
Here, Defendants are correct. While Plaintiffs are now members of the public, there
is no record evidence suggesting that the card was ever directly or indirectly “offered
advertised, or otherwise promoted” to them. Indeed, given that the Plaintiffs had no choice
but to receive the cards, marketing would serve no purpose. 33 Defendant Numi does
perform marketing for the program, but it is program marketing (not card marketing) to

31

15 U.S.C. § 1693l-1(a)(2)(D)(iv); 12 C.F.R. § 1005.20(b)(4).

Consumer Financial Protection Bureau's Official Staff Commentary on Regulation E , FRRS 6-5480.74, 2012
WL 2563634, at *9.
33
The Court notes that the informational materials to be provided to inmates upon receipt of their cards
promote an upgraded “personalized and reloadable” card with additional benefits. However, this upgraded
card seems to be different from the card actually issued on release. See Doc. 51-5 at 3.
32

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correctional institutions.34 Thus, the Court grants Defendants’ motion for summary
judgment on Plaintiffs’ § 1693l-1 claim.
C.

Defendant is Not Entitled to Summary Judgment on Plaintiffs’ Ohio Law Claims
Plaintiffs bring Ohio state law unjust enrichment and conversion claims. Plaintiffs

may recover for unjust enrichment if they 1) conferred a benefit upon the Defendants; 2)
Defendants knew of that benefit; and 3) the Defendants retained that benefit under
circumstances where it would be unjust to do so without payment.35 To prevail on a claim
for conversion, Plaintiffs must show “(1) plaintiff's ownership or right to possession of the
property at the time of conversion; (2) defendant's conversion by a wrongful act or
disposition of plaintiff's property rights; and (3) damages.”36
i. Unjust Enrichment
Defendants argue that they should receive summary judgment on Plaintiffs’ unjust
enrichment claim because the Plaintiffs’ fees came from a lawful contract between
Defendant Numi and Lorain County. Defendants cite to Mickelson v. Cty. of Ramsey,
where a district court dismissed similar claims under Minnesota law on these grounds. 37
The Court is not persuaded that the ostensibly lawful contract between Numi and
Lorain County, standing alone, justifies the Defendants’ retention of fees. If, as Plaintiffs
allege, the unsolicited issuance of the cards violated federal law, then the whole prepaid

34

Doc. 51-11 at 7.

35

Stratmar Retail Servs., Inc. v. Firstenergy Serv. Co., No. 5:14CV780, 2015 WL 5662534, at *9 (N.D. Ohio

Sept. 24, 2015)
36

Dream Makers v. Marshek, 8th Dist. Cuyahoga No. 81249, 2002-Ohio-7069, 2002 WL 31839190, ¶ 19.

37

No. 13-CV-2911, 2014 WL 4232284, at *15 (D. Minn. Aug. 26, 2014) (dismissing claim that fee
imposition amounted to unjust enrichment because “[p]ursuant to [the bank’s] agreement with Ramsey
County, assessment of debit card fees . . . was legally authorized”), aff'd, 823 F.3d 918 (8th Cir. 2016).

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card program—including the retention of fees—was unlawful notwithstanding the existence
of an otherwise valid contract between Defendant Numi and the Lorain County Jail.
Further, the legality of the contract between Numi and the Lorain Jail does not necessarily
dictate that the involuntary imposition of fees on third parties is justified.38
Defendants also argue that Plaintiffs cannot recover fees under a theory of unjust
enrichment because there was a binding contract between them and the Plaintiffs.39
Defendants contend that Plaintiffs entered into a contract, regardless of whether they
received the card terms and conditions at issuance. Defendants say that Plaintiffs card use
to withdraw their money should be found to be an acceptance of the card’s terms and
conditions.
In support of this argument, Defendants cite to Heiges v. JP Morgan Chase Bank ,

N.A., in which a district court found that the plaintiff had entered into a binding arbitration
agreement with the bank by using a credit card, even though the bank could not produce a
signed cardholder agreement.40 In that case, however, the plaintiff had personally and
affirmatively opened the credit card account at issue, giving rise to the presumption that
there had been a “meeting of the minds” as to card terms and conditions.41

38

A district court in Oregon reached the same conclusion regarding Oregon common-law unjust enrichment
claims involving a nearly-identical inmate prepaid program. See Brown v. Stored Value Cards, Inc., No.
3:15-CV-01370, 2016 WL 4491836, at *5 (D. Or. Aug. 25, 2016) (“Certainly, that the government authorized
Defendants to act is at least some evidence that some people in society would find Defendants' retention of
fees acceptable, but it hardly seems to be the per se ban on an unjust enrichment claim that Defendants
propose.”).
39
See R.J. Wildner Contracting Co. v. Ohio Tpk. Comm'n, 913 F. Supp. 1031, 1043 (N.D. Ohio 1996)
(recovery for unjust enrichment prohibited where express contract covers same subject).
40
Heiges v. JP Morgan Chase Bank, N.A., 521 F. Supp. 2d 641, 647 (N.D. Ohio 2007) (“Accordingly,
[Plaintiffs’] argument that he never signed the underlying Agreement misses the relevant point. By simply
using the card, he agreed to be bound by the Agreement and all its terms.”).
41
The same is true for Karmolinski v. Equifax Info. Servs., LLC, No. CIV. 04-1448-AA, 2005 WL 7213289, at
*2 (D. Or. Oct. 31, 2005), another case cited by the defendants. There, the Plaintiff had sent the bank a
signed credit card application.

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Here, in contrast, there is no evidence that Plaintiffs voluntarily requested the
prepaid debit cards or showed any intention of entering into a bargain prior to card
issuance. Additionally, Plaintiff has raised a dispute of material fact as to whether inmates
received the card terms and conditions at issuance. Given this dispute, it is not clear that
the Defendants made a sufficiently definite offer, such that Plaintiffs’ subsequent use of the
cards represented acceptance.42
Further, some class members may have incurred the $5.95 monthly maintenance
fee without ever actually using the card. Even if that card use were assent to the card terms
and conditions, class members who never used to card to withdraw money incurred this
monthly fee through inaction. For these class members, there is no colorable argument
that they have entered into a contract with Defendants.
ii. Conversion
Defendants contend that summary judgment is appropriate for Plaintiffs’ conversion
claim because a conversion claim does not lie where the claim is for a sum certain, as
opposed to specific and identifiable monies.43 Defendants argue that because the Plaintiffs’
funds were held in the a pooled custodial account and were not sequestered, the funds at
issue are not specific are not identifiable.
Plaintiffs have presented sufficient evidence for a jury to conclude that the allegedly
converted funds are specific and identifiable. Under Ohio law, a claim for conversion may

See Gen. Motors Corp. v. Keener Motors, Inc., 194 F.2d 669, 675–76 (6th Cir. 1952) (“An offer must be so
definite in its terms, or must require such definite terms in the acceptance, that the promises and
performances to be rendered by each party are reasonably certain.”).
43
See Carter v. PJS of Parma, Inc., No. 1:15 CV 1545, 2016 WL 1316354, at *2 (N.D. Ohio Apr. 4, 2016)
(dismissing conversion claim brought by former servers because the allegedly converted tips were not specific
and identifiable).
42

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lie where the disputed funds are held in trust.44 Here, record evidence shows that the
Plaintiff’s funds were kept in such a trust account.45 Because of this trust arrangement,
there is sufficient record evidence to show that correctional facilities had an obligation to
return the specific funds surrendered on entry—not merely a certain amount of money—
upon release.
III.

Conclusion

For the foregoing reasons, the Court DENIES Defendants’ motion to dismiss, and
GRANTS IN PART and DENIES IN PART Defendants’ motion for summary judgment.

s/

Dated: January 8, 2019

James S. Gwin

JAMES S. GWIN
UNITED STATES DISTRICT JUDGE

See Haul Transp. of VA, Inc. v. Morgan, No. CA 14859, 1995 WL 328995, at *4 (Ohio Ct. App. June 2,
1995) (noting that a conversion claim would be valid if Defendant had held the funds “in trust or in some
fiduciary capacity for [Plaintiff]”).
45
See Doc. 51-18 at 1. (explaining that inmate funds are deposited into an “inmate trust account” upon
booking).
44

12