Humphrey v. First Century Bancorp et al

Filing 82

Opinion & Order signed by Judge James S. Gwin on 4/1/19. The Court, for the reasons set forth in this order, grants partial summary judgment for the plaintiffs and certifies the following issue for interlocutory appeal: whether a bank account holding pooled inmate card funds is "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." (Related Doc. 74 ) (D,MA)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
----------------------------------------------------------------AMBER HUMPHREY,

on behalf of herself and the class,
Plaintiffs,
vs.
STORE VALUE CARDS, INC., et al.,
Defendants.

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CASE NO. 1:18-CV-1050

OPINION & ORDER
[Resolving Doc. 74]

----------------------------------------------------------------JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
On January 8, 2019, the Court denied in part Defendants’ motion for summary
judgment.1 On March 12, 2019, the Court conducted a telephonic status conference.2
There, the Court informed the parties that it was contemplating granting partial summary
judgment to Plaintiffs on complaint Count III independent of a motion,3 and certifying the
decision for interlocutory appeal.4 The parties both responded with position papers.5
For the following reasons, the Court GRANTS partial summary judgment for the
Plaintiffs and CERTIFIES the following issue for interlocutory appeal: whether a bank
account holding pooled inmate card funds is “a demand deposit (checking), savings, or
other consumer asset account (other than an occasional or incidental credit balance in a

1

Doc. 67.
Doc. 76.
3
See Fed. R. Civ. P. 56(f)(1).
4
28 U.S.C. § 1292(b).
5
Docs. 77, 78.
2

Case No. 1:18-cv-1050
Gwin, J.
credit plan) held directly or indirectly by a financial institution and established primarily for
personal, family, or household purposes.”6
I.

Background7

In August 2017, Plaintiff served a thirty-day drug paraphernalia possession sentence
at the Lorain County jail. When she was released, she had a balance remaining in her
commissary account. The jail returned her funds on an already validated prepaid debit
card issued by Defendant Republic Bank.
Republic kept the funds in a “pooled” operating account. That is, instead of
maintaining an individual account for each prepaid card, Defendant held thousands of
released inmates’ funds in a single account. Republic tracked individual card expenditures
with a sub-ledger.
Plaintiffs brought this class action suit alleging, inter alia, that the program violates
the Electronic Funds Transfer Act’s (“EFTA”) prohibition against unsolicited debit card
issuance.8 This provision 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.9
Federal regulations define “account” as “a demand deposit (checking), savings, or other
consumer asset account (other than an occasional or incidental credit balance in a credit

6

See 12 C.F.R. § 1005.2.

7

This abbreviated factual background is drawn from the Court’s previous decision denying Defendants’
motion for summary judgment. See Doc. 67.
8
15 U.S.C. § 1693i.
9
15 U.S.C. § 1693i(a) (emphasis added).

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Gwin, J.
plan) held directly or indirectly by a financial institution and established primarily for
personal, family, or household purposes.”10
Defendants moved for summary judgment, primarily arguing that the pooled
operating prepaid account was not an “consumer asset account” under the regulatory
definition. The Court denied its motion in part.11 The Court reasoned that the prisoner
accounts were consumer asset accounts for personal purposes.
The parties agree that this determination is central to this lawsuit and agree that
early court of appeals review of this finding could avoid large potentially wasted expense
associated with tracking down class members.
II.

Discussion

A. The Court Grants Summary Judgment to Plaintiffs on Their UnauthorizedIssuance EFTA Claim
Under Federal Rule 56(f)(1), the Court may grant summary judgment for a
nonmovant without a motion after giving notice and a reasonable opportunity to respond.12
The Court grants summary judgment when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”13
For the same reasons outlined in its decision denying Defendants’ motion for
summary judgment, the Court finds that the pooled account holding Plaintiffs’ funds is a
consumer account covered by EFTA. Thus, the unsolicited inmate prepaid card issuance
violated EFTA’s unsolicited-issuance provision.

10

12 C.F.R. § 1005.2.
Defendants also argued that the cards in question were not subject to EFTA’s provisions governing
“general-use prepaid cards” under 15 U.S.C. § 1693l-1(a)(2)(D)(iv). The Court agreed and granted partial
summary judgment to Defendants on Plaintiffs’ complaint Count III.
12
Fed. R. Civ. P. 56(f)(1).
13
Fed. R. Civ. P. 56(a).
11

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Gwin, J.
Defendants contend that summary judgment is inappropriate because unlike the
Defendants’ previous motion, the Court must now draw all inferences in their favor. This
is true, but Defendants do not identify any factual disputes on this limited issue that would
stop summary judgment if resolved in their favor. Indeed, Defendants themselves admit
that the Court’s summary judgment motion denial turned on the “purely legal” question
whether the regulations cover pooled accounts.14
Defendants also contend that the record unequivocally demonstrates that the
pooled account was established for business purposes, exempting it from EFTA. While
Defendants frame this argument as a factual dispute, it is essentially an argument about the
legal effect of undisputed facts.
The Court rejects this argument. The pooled accounts were established for
“personal, family, or household purposes” because the cardholders used the accounts for
personal, family or household purposes.15 Defendants have not pointed to any evidence
from which a reasonable juror could find that the cardholders used the cards for business
purposes.
If the Defendants mean that the accounts were established for business purposes
because the bank established them for business purposes, then Defendants’ interpretation
sweeps too broadly. This interpretation would exempt all accounts from EFTA, because

14

Doc. 77 at 7.
Defendants’ own marketing materials indicate that the benefits of its upgraded card include “online
shopping” “online bill pay,” and “worldwide ATM access,” all of which are personal, family, or household
purposes. See Doc. 51-5 at 3. Plaintiff used the card to withdraw cash from an ATM and (allegedly)
purchase Chinese Food, which also represent personal, family, or household uses of the card. See Doc. 51-3.
at 56-57.
15

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Gwin, J.
nearly all accounts “held directly or indirectly by a financial institution” are held to
generate profits for the bank.
Thus, the Court grants partial summary judgment for Plaintiffs on complaint Count
III.
B. The Court Certifies This Decision for Interlocutory Appeal
The Court may certify a question for appeal under 28 U.S.C. § 1292(b) where “(1) a
controlling legal question is involved; (2) there is “substantial ground for ‘difference of
opinion’ regarding it”; and (3) an immediate appeal would materially advance the
litigation's ultimate termination.”16
The question whether the pooled inmate funds accounts are “accounts” for EFTA
purposes is a controlling question of law, because its resolution materially affects the
outcome of the case.17 The EFTA claims in this suit are large relative to the other state-law
claims.18
There is substantial ground for difference of opinion on this issue because the
question is one “on which there is little precedent or one whose correct resolution is not
substantially guided by previous decisions.”19 The Court is not aware of any district court
decision discussing whether pooled inmate funds accounts are an “account” for EFTA
purposes, much less one from the Sixth Circuit. While the Court was not ultimately
persuaded by Defendants’ summary judgment arguments, they rightly point out that federal

16
17

In re Baker & Getty Fin. Servs., Inc., 954 F.2d 1169, 1172 (6th Cir. 1992).
See In re City of Memphis, 293 F.3d 345, 351 (6th Cir. 2002) (question is controlling where it materially

affects the outcome of the case).
18
See Baker, 954 F.2d at 1172 n.8 (6th Cir. 1992) (“[T]he resolution of an issue need not necessarily
terminate an action . . . to be “controlling.” (some internal quotation marks omitted) (alteration in original)).
19
In re Miedzianowski, 735 F.3d 383, 384 (6th Cir. 2013)

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Gwin, J.
agencies have contemplated prepaid-card-specific amendments to EFTA on several
occasions and only recently amended the regulation to add “prepaid account” to its
definitions.20 In light of this argument, there is room for difference of opinion on this
question.
Finally, resolving this question on appeal question would materially advance the
termination of this litigation because it would resolve a legal issue at the center of the
parties’ dispute.
III.

Conclusion

For these reasons, the Court GRANTS partial summary judgment for the Plaintiffs
and CERTIFIES the following issue for interlocutory appeal: whether a bank account
holding pooled inmate card funds is “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.”
IT IS SO ORDERED.

s/

Dated: April 1, 2019

James S. Gwin

JAMES S. GWIN
UNITED STATES DISTRICT JUDGE

20

The amendments take effect April 1, 2019. See 83 Fed. Reg. 6364-01.

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