Danica Brown v. Stored Value Cards, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DANICA LOVE BROWN, No. 18-35735

Plaintiff-Appellant,

D.C. No.

v. 3:15-cv-01370-

MO

STORED VALUE CARDS, INC., DBA

Numi Financial; CENTRAL NATIONAL

BANK AND TRUST COMPANY, Enid, OPINION

Oklahoma,

Defendants-Appellees.

Appeal from the United States District Court

for the District of Oregon

Michael W. Mosman, District Judge, Presiding

Argued and Submitted December 13, 2019

Seattle, Washington

Filed March 16, 2020

Before: Ronald M. Gould and Marsha S. Berzon, Circuit

Judges, and Roger T. Benitez, * District Judge.

Opinion by Judge Gould

*

The Honorable Roger T. Benitez, United States District Judge for

the Southern District of California, sitting by designation.

2 BROWN V. STORED VALUE CARDS, INC.

SUMMARY **

Electronic Fund Transfers Act / Constitutional Law

The panel reversed the district court’s partial dismissal

and partial summary judgment on claims under the

Electronic Fund Transfers Act, the Takings Clause, and

Oregon state law concerning a private company’s return of

released jail or prison inmates’ money via a prepaid debit

card loaded with the balance of their funds.

Defendants assessed fees on the cards. The panel held

that plaintiff stated a claim under EFTA § 1693l-1, which

prohibits charging service fees to “general-use prepaid

cards.” A general-use prepaid card does not include a card

that “is not marketed to the general public.” The panel held

that the released inmates belonged to the general public,

which they rejoined upon release, and defendants indirectly

marketed the cards to the released inmates. The panel

further held that the district court abused its discretion in

denying plaintiff leave to file a third amended complaint

reinstating her EFTA claims under both § 1693l-1 and

§ 1693i, which prohibits the issuance, absent certain

disclosures, of unsolicited validated cards that provide

access to a “consumer’s account.” The panel held that a

consumer account includes the sort of prepaid account that

the released inmates received.

The panel reversed the district court’s grant of summary

judgment to defendants on plaintiff’s per se takings claim.

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

BROWN V. STORED VALUE CARDS, INC. 3

Assuming without deciding that defendants were state

actors, the panel concluded that the release cards were not

the functional equivalent of cash or a check because the

value of the cards quickly and permanently deteriorated.

The panel remanded for the district court to consider in the

first instance the reasonableness of the fees assessed on the

cards.

The panel also reversed the district court’s grant of

summary judgment on plaintiffs’ state law claims, and

remanded the case to the district court for further

proceedings.

COUNSEL

Karla Gilbride (argued), Public Justice, P.C., Washington,

D.C.; Mark Adam Griffin and Daniel Parke Mensher, Keller

Rohrback LLP, Seattle, Washington; Benjamin Wright

Haile, Attorney, Portland, Oregon; for Plaintiff-Appellant.

Eric Nystrom (argued), John C. Ekman, and Natalie I.

Uhlemann, Fox Rothschild LLP, Minneapolis, Minnesota,

for Defendants-Appellees.

Hassan Zavareei, Anna C. Haac, and Tanya S. Koshy, Tycko

& Zavareei LLP, Washington, D.C., for Amici Curiae

International CURE, Equal Justice Under Law, The Florida

Institutional Legal Service Project of Florida Legal Service,

The Legal Aid Society, National Police Accountability

Project, Public Counsel, San Francisco Public Defender's

Office, Southern Poverty Law Center, Texas Civil Rights

Project, Working Narratives, and University Of California

Davis School of Law Immigration Law Clinic.

4 BROWN V. STORED VALUE CARDS, INC.

OPINION

GOULD, Circuit Judge:

When a person is arrested and detained, the detention

facility confiscates his or her personal property, including

any cash. Detention facilities safeguard an inmate’s money

throughout the duration of his or her incarceration, typically

in an inmate trust account. When an inmate is released, the

facility has traditionally returned the inmate’s money. For

local governments, handling inmates’ cash is expensive and

time consuming. In recent years, many local governments

have begun delegating the function of returning the property

of released inmates to private, for-profit companies. One

such company, Stored Value Cards d/b/a Numi (“Numi”),

returns released inmates’ money via a prepaid debit card

loaded with the balance of their funds. Numi does not charge

most local governments for its services. Instead, Numi earns

revenue by charging fees to the cardholders. This case

illustrates some of the hazards and risks that may arise when

prisons transfer what formerly were government functions to

for-profit enterprises.

Danica Brown (“Brown”) 1 brought suit against Numi

and its partner Central National Bank and Trust Company

(“CNB”) (collectively, “Defendants”), alleging that they

violated the Electronic Fund Transfers Act (“EFTA”),

violated the Fifth Amendment Takings Clause, and were

liable for conversion and unjust enrichment under Oregon

state law. The district court dismissed Brown’s EFTA claim

for failure to state a claim, denied leave to file a third

1

Throughout this opinion, we use the terms “Brown” or “Danica

Brown” to refer to Plaintiff Danica Love Brown. When we refer to

shooting victim Michael Brown, we include his first name.

BROWN V. STORED VALUE CARDS, INC. 5

amended complaint, and granted summary judgment to

Defendants on Brown’s takings and state law claims. Brown

appeals, and we reverse and remand.

I

A

The Multnomah County jail confiscates any cash carried

by an arrestee upon incarceration. The inmate’s funds are

kept in an inmate trust account until he or she is released.

Before 2014, Multnomah County returned a released

inmate’s money in the form of cash if the total was less than

$60, or a check if the total was greater than $60. This process

was considered by Multnomah County to be expensive and

time consuming: Multnomah County estimates that it spent

about $275,000 in labor costs annually and two to three staff

hours per day handling inmates’ cash.

In 2014, Multnomah County contracted with Numi to

return released inmates’ funds via prepaid debit cards, which

are sometimes referred to as “release cards.” 2 Multnomah

County pays nothing at all to participate in Numi’s debit card

program. Numi contracts with CNB to issue the release

cards and hold the card funds in a master funding account.

When an inmate is released, the money in his or her inmate

trust account is transferred into the CNB master funding

account. The released inmate receives a prepaid release card

loaded with his or her funds, and the card is activated and

ready for immediate use.

2

Numi is a subcontractor through Multnomah County’s contract

with Securus Technologies. Securus Technologies contracts with

Multnomah County as a commissary partner offering a range of services

in the County’s jails.

6 BROWN V. STORED VALUE CARDS, INC.

Numi earns revenue from the fees that it charges to

cardholders. Counties and municipalities that contract with

Numi have a choice of several fee schedules, distinguished

by how often maintenance fees are charged. P7C cards

charge maintenance fees once per month, and P1C cards

charge maintenance fees once per week. Some counties and

municipalities have negotiated deviations from the standard

fee schedules to lighten the burden on cardholders. Other

counties and municipalities, including Napa County,

California and Broward County, Florida, pay a flat fee to

subsidize each card instead of passing on the fees to

cardholders. When it contracted with Numi, Multnomah

County adopted a P7C fee schedule with no deviations or

subsidies. The schedule it adopted contemplated that the

County would pay no fees itself and Numi’s compensation

would come from fees paid by the former inmates released

into the public.

Under the fee schedule adopted by Multnomah County,

Defendants charge cardholders a $5.95 monthly

maintenance fee, first charged only five days after card

activation. There is also a $2.95 fee for every ATM

withdrawal in addition to any fee charged by the ATM itself.

Other fees include a $0.50 fee for contacting the automated

customer service system more than three times per month, a

$9.95 fee for requesting the balance of the card by check, a

$1.00 fee for each ATM balance inquiry made by the

cardholder, and a $0.95 fee for each attempted transaction

that was declined due to insufficient funds or an incorrect

PIN.

According to Defendants, a released inmate can avoid

these fees. The back of the release card states in small print

that a $5.95 monthly service fee will be charged five days

after the card’s activation. Released inmates are also

BROWN V. STORED VALUE CARDS, INC. 7

supposed to receive a Card Usage Tips wallet card with a

section entitled “How to avoid Service Fees.” The wallet

card states that there is no fee to transfer their funds to a

personal bank account on Numi’s website, receive cash back

after making a purchase from a retailer, or withdraw funds

over the counter at a bank. The wallet card does not disclose

that not all retailers will provide cash back, or that bank

withdrawals are free only at Mastercard-affiliated banks.

Multnomah County also gave the departing former inmates

a document entitled “Debit Release Card Information” with

a list of designated “surcharge-free ATMs,” but this list was

inaccurate at the time Brown was released because some of

the listed ATMs charged fees.

B

On November 25, 2014, Brown was arrested in Portland,

Oregon. She was participating in a public protest after a

Missouri grand jury had decided not to indict Darren Wilson

for the police-shooting death of Michael Brown. 3 At the

time of Danica Brown’s arrest, she carried $30.97 in cash.

Her cash in that amount was confiscated along with the rest

of her personal belongings when she was taken into

Multnomah County custody. She was released around

2:30am on November 26, about seven hours after her arrest.

The charges against her were later dropped.

Upon her release, Brown did not receive her previously

confiscated money in the form of cash. Instead, she was

3

On August 9, 2014, Michael Brown, an unarmed black teenager,

was shot and killed by Wilson, a white police officer, in Ferguson,

Missouri. Timothy Williams, Five Years After Michael Brown’s Death,

His Father Wants a New Investigation, N.Y. Times (Aug. 15, 2019). The

fatal shooting and the failure to indict Wilson sparked nationwide

protests. Id.

8 BROWN V. STORED VALUE CARDS, INC.

given a Numi debit card loaded with $30.97. Along with the

card, Brown received some paperwork with card

information, including the Card Usage Tips wallet card, and

the Debit Release Card Information sheet. She did not read

the paperwork because she did not have her eyeglasses.

The debit card was not Brown’s immediate concern upon

her release. On November 26, the day after her arrest,

Brown spent most of her time attending her arraignment and

retrieving her other confiscated belongings. November 27

was Thanksgiving Day. When Brown finally examined the

release card and the associated paperwork, she learned that

there was a monthly service charge. She assumed,

incorrectly as it turned out, that the charge would occur after

she had been using the card for a month. She visited Numi’s

website, where she learned that she could transfer the

balance of her card to her personal bank account. But she

chose not to make this transfer because she did not want to

provide her personal bank account information to Numi.

Instead, she used the release card to make small purchases

like buying coffee.

On December 1, Brown attempted to make a $15

purchase and the transaction was declined. Brown learned

that her card had insufficient funds for the purchase because

Defendants had debited a $5.95 monthly service fee earlier

that day, which was only five days after she originally

received the card. Due to the declined transaction,

Defendants debited another $0.95 from her card. Brown

made two more small purchases in early December. On

January 1, Defendants debited the remaining $0.07 from the

card toward her monthly service fee. In total, Defendants

debited $6.97, or twenty-two percent of the card’s original

$30.97 value.

BROWN V. STORED VALUE CARDS, INC. 9

C

In July 2015, Brown filed a complaint against

Defendants on behalf of herself and a proposed class of

formerly incarcerated people who received Defendants’

debit cards upon release and who paid fees associated with

the use or maintenance of those cards. In her original

complaint, she alleged four claims: (1) a violation of section

1693i of EFTA, which prohibits the issuance of unsolicited

debit cards absent certain requirements; (2) a violation of the

Oregon Unfair Trade Practices Act; (3) conversion under

Oregon state law; and (4) unjust enrichment under Oregon

state law.

Defendants moved to dismiss. In response to the motion

to dismiss, Brown filed her first amended complaint. She

removed any reference to section 1693i and eliminated her

claim under the Oregon Unfair Trade Practices Act. She

added two new claims: a violation of section 1693l-1 of

EFTA, which prohibits service fees on general-use prepaid

cards, and a 42 U.S.C. § 1983 claim for a violation of the

Fifth Amendment’s Takings Clause. She realleged her state

law claims for conversion and unjust enrichment.

Defendants again moved to dismiss. This time, the

district court granted Defendants’ motion as to Brown’s

EFTA claim and her takings claim, and it denied the motion

as to Brown’s state law claims. The court granted Brown

leave to amend her takings claim.

Brown filed a second amended complaint, realleging her

takings claim and her state law claims. Defendants moved

to dismiss, and the district court denied that motion. The

case proceeded to discovery.

10 BROWN V. STORED VALUE CARDS, INC.

Before the close of discovery, Defendants filed a motion

for summary judgment. 4 While the motion for summary

judgment was pending, Brown filed a motion for leave to file

a third amended complaint to reinstate her EFTA claims as

arising under both section 1693i and section 1693l-1, based

on new evidence obtained in discovery. The district court

denied leave to amend without written opinion or

explanation.

After hearing oral argument, the district court granted

Defendants’ motion for summary judgment on Brown’s

takings and state law claims. Brown filed this appeal

challenging the district court’s orders (1) dismissing her

EFTA claims; (2) denying her leave to file a third amended

complaint reinstating her EFTA claims; and (3) granting

summary judgment to Defendants on the takings and state

law claims. We consider these issues in turn.

II

EFTA protects the rights of consumers in electronic fund

transfers. 15 U.S.C. § 1693(b). The Consumer Financial

Protection Bureau (“CFPB”) has regulatory authority over

most provisions of EFTA. Id. § 1693b(a)(1). At various

points in this litigation, Brown alleged claims under sections

1693i and 1693l-1 of EFTA.

Section 1693i prohibits the issuance, absent certain

disclosures, of unsolicited validated cards that provide

access to a “consumer’s account.” Id. § 1693i. A card is

4

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, a

motion for summary judgment can be filed “at any time until 30 days

after the close of all discovery.”

BROWN V. STORED VALUE CARDS, INC. 11

“validated when it may be used to initiate an electronic fund

transfer.” Id. § 1693i(c).

Section 1693l-1 prohibits charging service fees to

“general-use prepaid cards” unless the card has not been

used for 12 months and other requirements have been met.

Id. § 1693l-1(b). A general-use prepaid card is (1)

“redeemable at multiple, unaffiliated merchants or services

providers, or automated teller machines”; (2) “issued in a

requested amount”; (3) “purchased or loaded on a prepaid

basis”; and (4) “honored . . . by merchants for goods or

services, or at automated teller machines.” Id. § 1693l-

1(a)(2)(A). Relevant for this appeal, a general-use prepaid

card does not include a card that “is not marketed to the

general public.” Id. § 1693l-1(a)(2)(D)(iv).

We review de novo a dismissal for failure to state a claim

under Rule 12(b)(6). Puri v. Khalsa, 844 F.3d 1152, 1157

(9th Cir. 2017). All well-pleaded allegations of material fact

are taken as true and construed in the light most favorable to

the non-moving party. Id. The plaintiff must plead facts to

state a claim for relief that is “plausible on its face.” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570 (2007).

Brown contends that the district court erred by

dismissing her claim under section 1693l-1. 5 Defendants

5

Brown also contends that the district court erred in dismissing her

claim under section 1693i. However, Brown did not cite to section 1693i

in her first amended complaint. An amended complaint supersedes the

original complaint and renders it without legal effect. Lacey v. Maricopa

County, 693 F.3d 896, 925 (9th Cir. 2012) (en banc). Although Brown

alleged a section 1693i claim in her original complaint, she removed any

reference to that subsection in her first amended complaint. Even

assuming that Brown could state a claim under section 1693i without

citing to that exact provision, she did not plead facts sufficient to state a

12 BROWN V. STORED VALUE CARDS, INC.

respond that section 1693l-1 does not apply because the

release cards are not marketed to the general public.

Specifically, they contend that (1) inmates are not the

general public, and (2) Defendants did not directly market

the cards to inmates.

Defendants’ contentions lack merit. The CFPB’s official

commentary to section 1693l-1 acknowledges that a subset

of the population may constitute the general public. See 12

C.F.R. § 1005.20(b)(4) (Supp. I 2019). Whether current

inmates as a subgroup constitute the general public is

irrelevant. The release cards are issued to inmates when they

are released from jail or prison, rejoining the general public.

Second, although at the time of the motion to dismiss

there was no evidence of direct marketing to released

inmates, the CFPB defines “marketing” to include indirect

marketing. See 12 C.F.R. § 1005.20(b)(4) (Supp. I 2019)

(stating that a card is “marketed” if “the potential use of the

card . . . is directly or indirectly offered, advertised, or

otherwise promoted”). Factors to be considered when

determining whether a card is marketed to the general public

include “the means or channel through which the card . . .

may be obtained by a consumer, the subset of consumers that

are eligible to obtain the card . . . and whether the availability

of the card . . . is advertised or otherwise promoted in the

marketplace.” Id.

Applying these factors, Defendants indirectly market the

cards to released inmates. Here, Defendants market the card

program to municipalities and correctional facilities, and

plausible claim for relief under section 1693i. Accordingly, we need not

address Brown’s contention that the district court erred in dismissing her

claim under section 1693i.

BROWN V. STORED VALUE CARDS, INC. 13

Multnomah County does not give released inmates a choice

of whether to accept the cards. Defendants know, expect,

and intend that Multnomah County will give the cards to

released inmates. That is the only way Defendants assure

the use of and obtain payment for the cards. So Defendants

indirectly “offer[], advertise[], or . . . promote[]” the cards to

the released inmates. Id.

When inmates are released from jail or prison, they

reenter the general public. And when Defendants marketed

the cards to Multnomah County, they indirectly marketed

them to these released inmates. Because Defendants

marketed their cards to the general public, section 1693l-1

applies. We hold that Brown plausibly stated a claim for

relief under section 1693l-1 and that the district court erred

in dismissing that claim.

III

We next consider the district court’s denial of Brown’s

motion for leave to file a third amended complaint. We

review denial of leave to amend for an abuse of discretion.

Curry v. Yelp Inc., 875 F.3d 1219, 1224 (9th Cir. 2017).

In March 2018, Brown sought leave to file a third

amended complaint reinstating her EFTA claims under both

section 1693i and section 1693l-1. She proposed to include

new paragraphs detailing Defendants’ direct marketing of

their prepaid cards in jails and prisons based on new

evidence obtained during discovery. In particular, Brown

obtained evidence that Defendants displayed “large, color

posters” in each facility “extoll[ing] the benefits” of the card

as a way for released inmates to access their funds

“immediately.”

14 BROWN V. STORED VALUE CARDS, INC.

Requests for leave to amend should be granted with

“extreme liberality.” Moss v. U.S. Secret Serv., 572 F.3d

962, 972 (9th Cir. 2009) (quoting Owens v. Kaiser Found.

Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)). When

considering whether to grant leave to amend, a district court

should consider several factors including undue delay, the

movant’s bad faith or dilatory motive, repeated failure to

cure deficiencies by amendments previously allowed, undue

prejudice to the opposing party, and futility. Foman v.

Davis, 371 U.S. 178, 182 (1962). Of the Foman factors,

prejudice to the opposing party carries the most weight.

Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052

(9th Cir. 2003).

The Foman factors weigh decidedly against denying

leave to amend. There is no indication that allowing the

amendment would prejudice Defendants, and Defendants do

not contend that they would be prejudiced. There is also no

indication of undue delay, bad faith, or dilatory motive by

Brown: she filed her motion for leave to amend just two

days after a deposition revealed new evidence of direct

marketing to released inmates. Likewise, Brown has not

repeatedly failed to cure deficiencies. Rather, Brown sought

leave to amend based on newly discovered evidence.

Defendants’ central argument on appeal is that any

amendment would be futile because Brown’s EFTA claims

fail as a matter of law. This is incorrect. Brown’s proposed

third amended complaint alleging evidence of direct

marketing to released inmates rejoining the general public

plausibly states a claim for relief under section 1693l-1.

Brown also states a claim for relief under section 1693i,

plausibly alleging that Defendants issued unsolicited,

validated prepaid cards. Defendants contend that section

1693i does not cover the card that Brown received because

BROWN V. STORED VALUE CARDS, INC. 15

that card did not provide access to a “consumer’s account,”

15 U.S.C. § 1693i, as the term “account” was defined by the

CFPB at the time, see id. § 1693a (noting that the CFPB has

the authority to define “account”). In support of this

argument, Defendants note that the regulation implementing

section 1693i, 12 C.F.R. § 1005.2, was amended recently to

state that “[t]he term [account] includes a prepaid account.”

12 C.F.R. § 1005.2(b)(3). Although the change announced

that prepaid cards of the kind that Brown received fall within

section 1693i’s coverage, the former regulation did not state

otherwise. See 12 C.F.R. § 1005.2 (2014). The question is

a statutory interpretation issue for the court.

The text of section 1693i in no way indicates that a

“consumer[] account” cannot encompass the sort of prepaid

account that Brown received access to through her Numi

card; if it did, the subsequent amendment to section 1005.2

would be invalid. Both then and now, section 1005.2

defined “account” as “a demand deposit (checking), savings,

or other consumer asset account . . . held directly or

indirectly by a financial institution and established primarily

for personal, family, or household purposes.” What Brown

received was an account “held directly or indirectly by a

financial institution”—through Mastercard—that she could

use for her own “personal, family, or household purposes.”

We acknowledge that Brown sought leave to amend long

after she filed her original complaint and after two previous

amendments. But the Federal Rules call for liberal

amendment of pleadings before trial. Fed. R. Civ. P.

15(a)(2) (“The court should freely give leave [to amend]

when justice so requires.”). And a district court’s denial of

leave to amend without explanation is subject to reversal:

“Such a judgment is ‘not an exercise of discretion; it is

merely abuse of that discretion and inconsistent with the

16 BROWN V. STORED VALUE CARDS, INC.

spirit of the Federal Rules.’” Eminence Capital, LLC,

316 F.3d at 1052 (quoting Foman, 371 U.S. at 182).

A liberal approach to amendment seems particularly

appropriate where other persons throughout the nation could

benefit from a resolution of novel issues that also apply to

them, especially when there is a vast mismatch of resources

between released inmates and well-funded national

companies and the amendment does not prejudice

defendants. As the use of Numi’s debit release cards

increases, so has the litigation challenging the card fees. See

Humphrey v. Stored Value Cards, 355 F. Supp. 3d 638 (N.D.

Ohio 2019); Regan v. Stored Value Cards, Inc., 85 F. Supp.

3d 1357 (N.D. Ga. 2015). The parties in this case and others

would benefit from a decision by the district court on the

merits as opposed to leaving the issue unresolved by denying

leave to amend.

We hold that the district court abused its discretion when,

without written explanation or opinion, it denied Brown

leave to file a third amended complaint, and Defendants

suffer no significant prejudice from amendment.

IV

We finally turn to the district court’s grant of summary

judgment to Defendants on Brown’s takings claim. As a

preliminary matter, Defendants did not contest that they

were state actors in their motion for summary judgment.

Defendants previously contested the state action issue in

their motions to dismiss, and the district court found that

Brown sufficiently pleaded that Defendants and the state

were joint participants in the challenged activity. For

purposes of this appeal, we assume without deciding that

Defendants are state actors.

BROWN V. STORED VALUE CARDS, INC. 17

The district court held that there was no per se taking

because the release cards are the functional equivalent of

cash or a check. This analysis is misguided. The release

cards are not the functional equivalent of cash or a check

because the value of the cards quickly and permanently

deteriorates. We hold that Defendants were not entitled to

summary judgment on the per se takings claim. 6

We review de novo a district court’s grant of summary

judgment. Branch Banking & Tr. Co. v. D.M.S.I., LLC,

871 F.3d 751, 759 (9th Cir. 2017). Summary judgment is

proper when, viewing the evidence in the light most

favorable to the non-moving party, “there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a).

The district court mistakenly reasoned that the release

card is the functional equivalent of cash. According to the

district court, the release card is a “highly transferable,

usable liquid” form of currency, similar to cash. The district

court acknowledged certain transaction costs and practical

difficulties that come with the card, such as the fact that to

avoid paying a fee, a card recipient must go to a Mastercard-

affiliated bank to receive the cash value of the card from a

bank teller, but it concluded that such costs and difficulties

were de minimis.

There is at least one crucial difference between the

release card and cash: the ticking clock. From the moment

Brown received her release card, she had only five days to

either spend the money or retrieve the card’s cash value

6

Because we conclude that the district court erred in granting

summary judgment to Defendants on Brown’s per se takings theory, we

do not address her regulatory takings theory.

18 BROWN V. STORED VALUE CARDS, INC.

before being charged a $5.95 monthly service fee. Cash does

not similarly deteriorate in value in five days. If Brown put

$30.97 in cash in her wallet and did not spend it, then she

would still have $30.97 in cash after six months’ time. By

contrast, if Brown did not spend the $30.97 on the release

card, then the card would have no value six months later

because of the monthly service fees. Similarly, a check does

not deteriorate in value if it is not cashed within such a very

short time. And although a particular check may not be

negotiable after several months, see U.C.C. § 4-404, the debt

meant to be paid is not cancelled, and the maker of the check

still owes the full amount. Because the release card

deteriorates in value quickly and permanently, the district

court was incorrect to conclude that the release card is the

functional equivalent of cash or of a check.

The district court erred in granting summary judgment to

Defendants on Brown’s takings claim. 7

The next step in a fees-for-services takings analysis is to

determine whether the fees are a “fair approximation of the

cost of benefits supplied.” United States v. Sperry Corp.,

493 U.S. 52, 60 (1989) (quoting Massachusetts v. United

States, 435 U.S. 444, 463 n.19 (1978)). The district court

explicitly declined to rule on the reasonableness of the fees.

We decline to opine at length upon an issue not decided

below, see Foti v. City of Menlo Park, 146 F.3d 629, 638

(9th Cir. 1998). We note that the extent to which the fees

7

The district court also erred in granting summary judgment to

Defendants on Brown’s Oregon state law claims for conversion and

unjust enrichment. The district court based its ruling on its analysis that

the release cards were the functional equivalent of cash. Having

explained why this analysis was incorrect, see supra, we vacate that

ruling and remand for the district court to evaluate Brown’s state law

claims in the first instance.

BROWN V. STORED VALUE CARDS, INC. 19

were avoidable might be a factor for the district court to

consider in the next step of the takings analysis. 8 We reverse

and remand so that the district court may consider the

reasonableness of the fees in the first instance.

V

There can be little doubt that Multnomah County’s

release card program with Numi has changed the simple

government function of returning confiscated money to a

released inmate into a venture in which the released inmate’s

money can be eroded or lost by the charge of profit-oriented

fees. Numi is entitled to fair compensation for its services,

but that does not mean that it should be able without

restriction to provide cards to released inmates who have not

asked for them and who are likely to end up with less money

than was taken from them. Similarly, the government of

Multnomah County should not so easily be able to shift the

burden of securing and returning released inmates’ funds to

the released inmates themselves, many of whom, like

Brown, are never charged with a crime.

We hold that (1) Brown’s section 1693l-1 claim should

not have been dismissed for failure to state a claim; (2) the

district court abused its discretion when it denied Brown

leave to file a third amended complaint; (3) summary

judgment was not proper on Brown’s takings claim; and (4)

summary judgment was not proper on Brown’s state law

8

As this issue is not pertinent to our holding, we do not decide at

this point whether the district court was correct in determining that the

fees were voluntarily incurred by Brown.

20 BROWN V. STORED VALUE CARDS, INC.

claims. We reverse and remand for further proceedings not

inconsistent with this opinion.

REVERSED AND REMANDED.