On August 25, 2016, a federal district court in Oregon denied a motion to dismiss a lawsuit brought by former prisoner Danica Love Brown, who had filed a class-action complaint naming Stored Value Cards, Inc. d/b/a Numi Financial and Central National Bank and Trust Company as defendants.
Brown’s complaint stated she “was arrested by Portland Police in November, 2014, during a peaceful protest of a Missouri grand jury’s decision not to charge Officer Darren Wilson in the shooting death of Michael Brown. Ms. Brown was charged with interfering with a peace officer ... [and] was jailed for 8 hours at the Multnomah County Jail.”
Jail officials confiscated $30.97 in cash from Brown when she was booked into the facility. Upon her release, they did not return her money but instead gave her a prepaid release debit card with a balance of $30.97.
Brown alleged that “release cards are extremely profitable for Defendants, who charge their unwitting and unwilling customers exorbitant fees to possess and/or use the cards, [and who] charge some consumers a $5.95 ‘monthly’ service charge, [or] ... a $3.50 ‘weekly’ service charge.” She claimed violations of the federal Electronic Fund Transfer Act (EFTA), unjust enrichment, conversion and violation of the Oregon Unfair Trade Practices Act.
On February 25, 2016, the district court denied the defendants’ motion to compel arbitration in the case, finding it was unclear whether Brown had a meaningful choice when she was presented with the options of receiving her money on a debit card or not at all when she was released from jail. She had denied receiving – and thus agreeing to – the cardholder agreement when she was given the debit card, and the court noted her “lack of real alternatives when accepting the card.”
In denying arbitration, the district court cited a January 13, 2015 ruling in a suit raising similar issues in Georgia; the court in that case, which also involved Stored Value Cards, found a release debit card arbitration clause was unenforceable. [See: PLN, April 2016, p.38]. That ruling was affirmed by the Eleventh Circuit Court of Appeals. See: Reagan v. Stored Value Cards, Inc., 608 Fed.Appx. 895 (11th Cir. 2015).
The defendants in Brown’s case then filed a motion to dismiss, arguing she had failed to state a cause of action. While the court found that the EFTA and Section 1983 claims could not be sustained, the complaint sufficiently asserted violations of state law for the lawsuit to continue.
According to the district court’s summary of the issues raised in the motion to dismiss, the defendants argued they were entitled to provide debit cards rather than cash refunds because a valid contract existed between the plaintiff and defendants, although no contract was alleged or attached to the complaint. Brown argued that her state law claims were based on conversion and unjust enrichment, and that there was no contract between the parties that incorporated the fees and costs incurred by using the debit card, which formed the nexus of her complaint.
The defendants contended that since the sheriff’s office that arrested Brown had authorized the debit card contract it must be lawful, and the court held the fact 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.”
In its final analysis the district court explained that for a motion to dismiss to be sustained, the movants must establish there are no questions of fact upon which relief could be granted. In this case, the court found that Brown had alleged sufficient facts to sustain her state law claims, and the suit could therefore proceed. The court also held that returning money to released prisoners was a traditionally governmental function, and thus the defendants were acting under color of state law when performing that service.
The case remains pending with Brown represented by attorneys from the Human Rights Defense Center (HRDC), PLN’s parent organization; Oregon attorneys Benjamin W. Haile and Phil Goldsmith; and New York attorney Raymond Audain. See: Brown v. Stored Value Cards, Inc., U.S.D.C. (D. Ore.), Case No. 3:15-cv-01370-MO; 2016 U.S. Dist. LEXIS 113657.
Release debit cards represent a growing business in prisons and jails that is increasingly facing court challenges by released prisoners who object to the involuntary nature of the cards and having to pay fees to access their own money. [See: PLN, June 2014, p.20]. HRDC has filed multiple comments with the federal Consumer Financial Protection Bureau, arguing for greater regulation of release debit cards.
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Related legal case
Brown v. Stored Value Cards, Inc.
|U.S.D.C. (D. Ore.), Case No. 3:15-cv-01370-MO; 2016 U.S. Dist. LEXIS 113657