BoA error not enough to show ‘bad faith’ vs Iranian customers: Appeals court

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A federal appeals panel refused to revive a class action from an Iranian living in California who accused Bank of America of illegally blocking access to banking services in 2019.

Mohammad Farshad Abdollah Nia said Bank of America closed his account after confusing whether one of his proof of residency documents established permanent or temporary status. His lawsuit alleged violations of the Equal Credit Opportunity Ave and California’s Unruh Civil Rights Act and Unfair Competition Law.

U.S. District Court Judge Cynthia Bashant ruled Nia wasn’t allowed to sue because although Bank of America erred, it is shielded from liability under the International Emergency Economic Powers Act.

Nia argued the protection is only available to financial institutions acting under specific regulatory mandates, and the relevant federal rules at the time under Iranian sanctions prohibited servicing “accounts of persons who are ordinarily resident in Iran, except when such persons are not located in Iran.” Bashant disagreed, prompting Nia to challenge the ruling before the U.S. Ninth Circuit Court of Appeals.

Judge Lawrence VanDyke wrote the panel’s opinion, filed April 13; Judges John Owens and Holly Thomas concurred.

VanDyke opened the analysis by quoting an IEEPA clause stating “No person shall be held liable in any court for or with respect to anything done or omitted in good faith in connection with the administration of, or pursuant to and in reliance on, this chapter, or any regulation, instruction, or direction issued under this chapter.”

The panel further said the Office of Foreign Assets Control, which promulgates Iranian Transactions and Sanctions Regulations, specifically prohibits “performing services with respect to Iranian accounts” and defines such accounts as those “of persons who are ordinarily resident in Iran, except when such persons are not located in Iran … maintained on the books of … a United States depository institution or a United States registered broker or dealer in securities.”

Nia opened his credit card account in 2015 and, until 2019, submitted a driver’s license as proof of residency under Bank of America’s consumer residency monitoring policy. BOA sent him a notice in April 2019 of the license’s impending expiration and requesting an updated proof.

“The letter mistakenly listed a Form I-797C (an application for permanent U.S. residency) as permanent proof of residency,” VanDyke wrote. “Nia submitted his Form I-797C. Since the form lacked an expiration date, the bank assigned an internal expiration date pursuant to the CRM policy: November 7, 2019, six months after the date on the Form I-797C.”

When the bank sent another notice in August 2019, it again listed a I-797C as permanent proof. Nia said he returned a miss call that September and spoke with an account representative in September who said there wasn’t anything on his account concerning enough to prompt a call and any important communication would be mailed. When he resubmitted the form, Bank of America said it was insufficient, because temporary proof can only be used once, and requested updated documents. Assuming that request was errant, Nia ignored the situation until BOA restricted his account Oct. 1 and closed it three weeks later.

“Nia’s argument has no root in the text of the statute,” VanDyke wrote, saying it was clear when Congress enacted IEEPA in 1977 that there is no required showing of compulsion to trigger the liability shield. He said the statutory “language affords financial institutions like (BOA) some discretion on how best to comply with the ITSR.”

While the panel agreed the shield applies only to actions taken in good faith, it also said Nia failed to show a factual dispute about whether BOA acted in bad faith. The panel acknowledged clerical mistakes but said ultimately the bank “was merely following its consistent practice of asking that new documentation be submitted several months before the previous documents would expire.”

Nia also argued that actions considered needlessly discriminatory cannot be considered in good faith, but the panel said he supported the assertion with third-party letters complaining about the policy.

“But whether third parties dislike the Bank’s policy says nothing about the bank’s good faith,” VanDyke wrote. “The citizenship-based application of the CRM policy that Nia and the letters complain of merely adheres to OFAC guidance on how to comply with sanctions regulations.”

Finally, Nia pointed to seven complaints against BOA on record with the Consumer Financial Protection Bureau, but the panel reiterated its position on third parties.

“But even accepting Nia’s premise that these complaints could create a genuine issue of material fact about the bank’s good faith, a handful of CFPB complaints (only one of which actually confirms that the complainant is an Iranian citizen) falls far short of proving any sort of widespread lack of good faith motivating the bank’s CRM policy,” VanDyke wrote. “The bank has served 67,000 Iranian citizen accountholders since 2016. Misapplying the CRM policy to one of those 67,000 Iranian citizen accountholders (or even seven, charitably assuming the six other complaints Nia flags were filed by Iranian citizen complainants, which even Nia isn’t sure about) does not create a genuine issue of material fact about the bank’s good faith.”

The panel affirmed Judge Bashant’s summary judgment ruling.

Nia is represented by Migliaccio & Rathod, of Washington, D.C.; Singleton Schreiber, of San Diego; and Hundley Law Group, of Chicago.

Bank of America is represented by Winston & Strawn, of Washington, D.C., Los Angeles and Chicago.