[00:00:01] Speaker 04:
And the next case coming up is Nia versus Bank of America.

[00:00:19] Speaker 04:
And while they are setting up, I just want to tell counsel for the next case, the final case in the calendar, we're splitting time 10, 5, and 5.

[00:00:29] Speaker 04:
Those are all explained.

[00:00:30] Speaker 04:
That's going to be a hard count, not a soft count.

[00:00:33] Speaker 04:
I'll explain what that means.

[00:01:04] Speaker 04:
And you may proceed when you're ready.

[00:01:06] Speaker 02:
Good morning, Your Honors.

[00:01:08] Speaker 02:
My name is Jason Rathod.

[00:01:09] Speaker 02:
I represent the appellant Mohammed Fashad Abdullah Nia.

[00:01:12] Speaker 02:
I'll reserve two minutes.

[00:01:14] Speaker 02:
Very well.

[00:01:15] Speaker 02:
May please the court.

[00:01:16] Speaker 02:
The district court in this case erred in granting summary judgment for Bank of America for four reasons.

[00:01:21] Speaker 02:
First, the district court erred in finding no genuine dispute of material fact as to whether the bank qualified for the immunity provision in the International Emergency Economic Powers Act, IEPA.

[00:01:30] Speaker 02:
Plain presented material facts that, in closing Dr. Nia's account, the bank did not act pursuant to or reliance on an obligation imposed by IEPA and did not act in good faith.

[00:01:41] Speaker 02:
Second, the district court erred by dismissing the civil rights claims.

[00:01:44] Speaker 02:
The bank has a facially discriminatory policy that was the but for cause of Dr. Nia's injury.

[00:01:49] Speaker 02:
Under Section 1981, ACOA and the state UNRWA claim.

[00:01:52] Speaker 02:
The McDonald-Douglas framework does not apply and no further showing was required.

[00:01:57] Speaker 02:
Third, the court's finding of preemption of the state law claims rested on its misapplication of the IEPA immunity provision.

[00:02:03] Speaker 02:
Because the provision does not apply and because the bank's obligations under state and federal law could be readily harmonized, there is no obstacle preemption.

[00:02:10] Speaker 02:
Fourth, regardless of the fate of the IEPA immunity provision or preemption, plaintiff's claims for unfairness and fraudulent conduct under the UCL should have survived.

[00:02:19] Speaker 02:
Those claims arise from the bank's failures to honor its own promises and comply with its own policies with respect to Dr. Nia.

[00:02:26] Speaker 02:
First, as to good faith.

[00:02:29] Speaker 02:
The bank did not act in good faith.

[00:02:32] Speaker 02:
All the ITSR requires is that banks not service Iranian accounts.

[00:02:36] Speaker 02:
Iranian accounts are defined as those of individuals physically present

[00:02:39] Speaker 02:
and ordinarily resident in Iran.

[00:02:43] Speaker 02:
The closure of Dr. Nia's account was not done in good faith.

[00:02:46] Speaker 02:
Good faith performance must be objectively reasonable.

[00:02:49] Speaker 02:
For example, from a recent Ninth Circuit case, 3500 Sepulveda Limited Liability Company versus Macy's W Stores, Inc.

[00:02:57] Speaker 02:
980 F 1317, Ninth Circuit 2020, the covenant of good faith finds particular applications in situations where one party is invested with a discretionary power affecting the rights of another.

[00:03:09] Speaker 02:
the party with discretionary power must exercise such power in good faith through objectively reasonable conduct.

[00:03:16] Speaker 02:
There's a lack of good faith and a lack of objective reasonableness when, under the bank's own definition of good faith, there are knowledge of circumstances which put the bank on notice of a problem.

[00:03:25] Speaker 02:
That comes from the 1968 Black's Law dictionary definition.

[00:03:33] Speaker 02:
Here, let me first by saying that

[00:03:36] Speaker 02:
The framework I would analyze of why it was objectively unreasonable is, first, there's the original sin that the bank committed, which was the consumer residency monitoring program is facially discriminatory on the basis of protected characteristics, which are citizenship and nationality, when the legal mandate is facially neutral.

[00:03:53] Speaker 02:
So they impose a discriminatory policy on a facially neutral legal mandate.

[00:03:59] Speaker 02:
That is not acting in good faith.

[00:04:01] Speaker 02:
It's not engaged in fair dealing, which is embedded within the definition of good faith itself.

[00:04:07] Speaker 02:
The bank's definition also, of good faith, says it requires freedom from knowledge of circumstances which ought to put the holder upon inquiry.

[00:04:15] Speaker 02:
Here the bank was put on notice to inquire about the lawfulness and fairness of its policy through multiple sources.

[00:04:20] Speaker 02:
First, several complaints lodged by consumers with the Consumer Financial Protection Bureau.

[00:04:25] Speaker 02:
And just take just one example of a CFPB complaint.

[00:04:27] Speaker 02:
If you look at volume 7, ER 1826 to 1828, this is a complaint from February 13, 2018.

[00:04:34] Speaker 02:
It describes very similar facts from an Iranian national student living in the U.S.

[00:04:39] Speaker 02:
who does everything they possibly can to comply with the CRM, and they're turned away.

[00:04:46] Speaker 02:
They get nowhere.

[00:04:47] Speaker 02:
Two things I want to highlight are, one, in that complaint, which by the way, we know it's an Iranian national because the CFPB missed a redaction.

[00:04:54] Speaker 02:
It does specifically say Iranian.

[00:04:56] Speaker 02:
The others, you can infer it.

[00:04:58] Speaker 02:
But for this one, it explicitly says it.

[00:04:59] Speaker 02:
She says, I asked what the reason for restricting my account is.

[00:05:02] Speaker 02:
This is to a Bank of America representative.

[00:05:04] Speaker 02:
Specifically, I asked if it is because of my immigration documentation or my nationality and she responded, my nationality.

[00:05:12] Speaker 02:
It ends with, it is notable that I have to pay the legal fees for my immigration services by the end of the week, but now due to the restriction of my account, I'm not able to do so.

[00:05:20] Speaker 02:
Besides, I currently have no other account with any other bank and I don't have any access to any banking services.

[00:05:25] Speaker 02:
It has been two days now and I have no access to my funds and it has crippled my life.

[00:05:30] Speaker 02:
The record showed the 30p6 witness Sheryl Cote at volume 7, ER 1589-91, that these CFPB complaints were reviewed by a dedicated unit and escalated to leadership in Bank of America.

[00:05:46] Speaker 02:
complaints just like this about how it devastated the lives of several Iranian nationals, and they just proceeded, even though they were on notice that their policies were resulting in the unnecessary closure of many accounts.

[00:06:01] Speaker 02:
They were also on notice from regulators.

[00:06:02] Speaker 02:
The Financial Crimes Enforcement Network and their 2018 Iran advisory, that's at 5 ER 1130, said financial institutions should not take this guidance to mean

[00:06:12] Speaker 02:
that all transactions involving Iran, Iranian citizens, or persons with connections to Iran are suspicious or prohibited.

[00:06:20] Speaker 00:
But the bank is allowed to consider citizenship as a risk factor here.

[00:06:27] Speaker 00:
So I guess I'm having trouble understanding how an action which seems to me to be clearly taken in reliance on the statute, what's the

[00:06:40] Speaker 00:
I mean, what's the strongest evidence here that the bank was acting in bad faith?

[00:06:45] Speaker 00:
I know it's not compelled to do certain things, but I guess what went wrong or where did it begin to go wrong here?

[00:06:53] Speaker 02:
Yes, Your Honor.

[00:06:54] Speaker 02:
So I would point out to that risk matrix.

[00:06:57] Speaker 02:
that the bank looks to, in the promulgating notice for that Appendix A at 74, FedReg 57593, Pin Site 595, it specifically says that this risk-maker imposes no obligations, and the IEPA exculpatory provision, it specifically speaks to an obligation.

[00:07:20] Speaker 02:
And so if this, what they're relying on, says there's no obligation imposed,

[00:07:25] Speaker 02:
then they cannot rely on that as an instruction, because there's nothing in there that's binding on the bank that compels this conduct.

[00:07:36] Speaker 02:
It's merely advisory.

[00:07:37] Speaker 02:
And furthermore, in the description of non-resident aliens, it says, higher risk customers may include non-resident aliens.

[00:07:48] Speaker 02:
And so it's strictly permissive language.

[00:07:50] Speaker 02:
So if it's going to be in accordance with that,

[00:07:52] Speaker 02:
This is permissive language that in the disclaimer of the promulgating notice says imposes no obligations.

[00:07:58] Speaker 02:
So there is nothing that compels them to do that.

[00:08:00] Speaker 02:
So because it's a facially neutral legal mandate, it is a lack of good faith to then impose a facially discriminatory criteria.

[00:08:10] Speaker 02:
And then using their own definition of good faith, which is, are you on notice as you implement this that something's wrong here?

[00:08:17] Speaker 02:
The CFPB complaints, the letter also from the National Iranian American Council that says,

[00:08:21] Speaker 02:
The way you're administering this is resulting in an absurd number of account closures.

[00:08:26] Speaker 02:
All of these sources of information that put them on inquiry notice that something is wrong here, and yet they still persisted in what they did.

[00:08:33] Speaker 02:
And a reasonable juror could have viewed that evidence and concluded that the bank did not act in good faith.

[00:08:38] Speaker 02:
There are genuine disputes of material fact there.

[00:08:43] Speaker 02:
if upon inquiry, had they actually taken one of these offer after that, hey, are we doing this correctly?

[00:08:49] Speaker 02:
What comes out in the evidence from the case is that their own executive of the sanctions program admits that it was unnecessary to have Iranian citizenship as the sole criterion for the CRM.

[00:09:03] Speaker 02:
That's at 6ER 1337.

[00:09:05] Speaker 02:
Their own expert says there's alternative means of compliance for those that are in the sanctions regions of Ukraine under identical sanctions.

[00:09:13] Speaker 02:
He says that the bank could just do for them what they do to the Iranian population, which is that they take an address at account opening.

[00:09:20] Speaker 02:
If it's outside of the sanctioned region, then they just use other means of compliance to ensure that they're not engaged in a prohibited transaction.

[00:09:27] Speaker 02:
So he says they could do that exact same thing.

[00:09:30] Speaker 02:
That's a 6ER 1326.

[00:09:36] Speaker 02:
And then the plaintiff's expert, Peter Piatecki, at 3ER547 notes that there's an 88% error rate of the bank's policy, which means that he analyzed just basic data that they had, and it showed that in 88% of the time, there was clear evidence that the person was physically present, ordinarily resident, in the U.S.

[00:09:59] Speaker 02:
when they closed their account.

[00:10:01] Speaker 02:
He said, in his words at 3ER547,

[00:10:05] Speaker 02:
This is a dragnet.

[00:10:06] Speaker 02:
This isn't reasonable.

[00:10:07] Speaker 02:
And that's just the exact same facts as Dr. Nia.

[00:10:14] Speaker 02:
When you look at his facts, the

[00:10:19] Speaker 02:
the history of the credit card history that he has, it clearly shows he's just making purchases at Whole Foods Ralph's in Southern California.

[00:10:26] Speaker 02:
They place calls to him while he's in California.

[00:10:29] Speaker 02:
They know that he's not in Iran because their own evidence says that they cannot place a call to a sanctioned jurisdiction.

[00:10:34] Speaker 02:
So during this entire time, they know he's physically present in the United States.

[00:10:39] Speaker 02:
And then he tells them, I'm about to upload my green card.

[00:10:42] Speaker 02:
And they said, that's fine.

[00:10:44] Speaker 02:
Just do that.

[00:10:45] Speaker 02:
And then everything will be good on your account.

[00:10:47] Speaker 02:
But instead, they immediately close his account, even though it's within the six-month secret deadline that they imposed upon him.

[00:10:56] Speaker 02:
And he's unable to do that.

[00:10:59] Speaker 02:
And this is just the Piatecki evidence of an 88% error rate shows that this isn't just Dr. Nia.

[00:11:04] Speaker 02:
This is a dragnet for Iranian citizens.

[00:11:09] Speaker 02:
So all of this evidence, collectively, the totality of it, shows that the bank could have

[00:11:14] Speaker 02:
the bank did not act in good faith.

[00:11:16] Speaker 02:
There's a genuine dispute of material fact on that front.

[00:11:19] Speaker 02:
Moving to the civil rights claim.

[00:11:22] Speaker 02:
So, basically on the civil rights claims, the court was correct in saying that

[00:11:32] Speaker 02:
the plaintiff has shown a facial discriminatory policy.

[00:11:35] Speaker 02:
And then there's no reason to reinvent the wheel on how to prove a civil rights claim, because once that's shown, it's dispositive evidence.

[00:11:43] Speaker 02:
And then the bank can come forward and say, here's our affirmative defense under AIIPA, but for the reasons I just stated, that does not apply.

[00:11:50] Speaker 02:
Even though if you were to look to their supposed neutral defense, their own case, Gerdom v. Continental Airlines, 692F2,

[00:12:01] Speaker 02:
602, Ninth Circuit, 1982, it shows that the means chosen to achieve the purportedly neutral objective, they can't themselves discriminate on the basis of a protected classification.

[00:12:13] Speaker 02:
And that's what the facts are here.

[00:12:15] Speaker 02:
Sure, sanctions-compliant, laudable goal, but the means you select to achieve that cannot themselves be based on a prohibited classification.

[00:12:29] Speaker 02:
On preemption,

[00:12:30] Speaker 02:
The district court erred in finding conflict or obstacle preemption.

[00:12:35] Speaker 02:
There is no basis for finding preemption.

[00:12:37] Speaker 02:
Preemption occurs when it is physically impossible to comply with both state and federal statutes.

[00:12:41] Speaker 02:
That's from Pacific Gas and Electric Company v. State Energy Conservation and Development Commission 461 US 190, 1983.

[00:12:49] Speaker 02:
And so it's simply possible to comply both with their sanctions

[00:12:56] Speaker 02:
In fact, they do it with the Ukrainian population for the regions that are subject to the exact same sanctions as Iran, without this sort of dragnet approach that they take with the Iranians.

[00:13:09] Speaker 02:
Their own expert says, you could do the exact same thing with Iran.

[00:13:12] Speaker 02:
The plaintiff's expert says, in fact, it would be better if you did that, because then your focus is actually on prohibited transactions, rather than

[00:13:21] Speaker 02:
a focus on rigorously policing these documents from people that has no nexus to the actual prohibition set forth in the ITSR.

[00:13:30] Speaker 02:
And then finally for the UCL claims, even if the court were to find that the IEPA good faith provision applies, even if they were to find that the other claims are somehow preempted by obstacle preemption, the claims for unfairness and fraudulent conduct, those still survive because those are unique to Dr. Nia

[00:13:50] Speaker 02:
And those are unique to the circumstances in which he complied with everything they asked.

[00:13:56] Speaker 02:
He honored their policy.

[00:13:58] Speaker 02:
He did everything correct.

[00:13:59] Speaker 02:
Their own documents misrepresented what was required to comply with the policy.

[00:14:04] Speaker 02:
He submitted the I-797C form, which they said would satisfy an obligation.

[00:14:11] Speaker 02:
And yet they still closed this account.

[00:14:13] Speaker 02:
And they knew that he was in Southern California when they did so.

[00:14:17] Speaker 02:
They also promised him that if you upload your green card, everything will be good with your account.

[00:14:21] Speaker 02:
But then they closed it prematurely before he could do so.

[00:14:24] Speaker 02:
And so based on this totality of facts, that could both be a basis for a finding of unfairness under the UCL,

[00:14:36] Speaker 02:
and also a finding for fraudulent conduct under the UCL.

[00:14:40] Speaker 02:
I'll reserve the rest of my time.

[00:14:41] Speaker 04:
Thank you.

[00:14:41] Speaker 04:
Very well.

[00:14:42] Speaker 04:
Thank you, Counsel.

[00:14:50] Speaker 01:
Good morning, Your Honors.

[00:14:51] Speaker 01:
Michael Kimberley for Appley Bank of America.

[00:14:55] Speaker 01:
Your Honors, plaintiff's theory in this case is that a bank's consumer due diligence program

[00:15:01] Speaker 01:
developed to comply with sanctions, regulations, and OFAC guidance promulgated under IEPA is dis-entitled to IEPA's liability shield and violates various civil rights laws, anti-discrimination laws, if it takes into account whether consumers are citizens of a comprehensively sanctioned nation and require those who are

[00:15:24] Speaker 01:
to prove temporary U.S.

[00:15:26] Speaker 01:
residents on a biannual basis, never minding that ordinary residents outside of that nation is a legal precondition to providing lawful banking services to such individuals.

[00:15:38] Speaker 01:
And we submit that just is not a tenable legal theory.

[00:15:42] Speaker 03:
Now, can I?

[00:15:44] Speaker 03:
So it seems perhaps maybe not maybe not the only crux, but one crux as far as the difference between your side and their side on this argument in this case is

[00:15:55] Speaker 03:
They take the position that in order to have the benefit of the shield, that the actions you took have to be compelled by.

[00:16:03] Speaker 03:
And I don't understand that your argument to be that your actions, specifically these actions, were compelled in the sense that I think you would concede, or at least factually, maybe some of your experts concede, that you could have attacked this problem maybe a different way.

[00:16:18] Speaker 03:
But this is one way to attack it, and another way would it be

[00:16:21] Speaker 03:
things maybe I don't completely understand, like knowing where all the credit card transactions occur, et cetera, which I think maybe is part of their argument.

[00:16:29] Speaker 03:
So if you assume that theirs is that you only get the shield if it's compelled, and your argument is, no, it's not just if it's compelled, but if it's something that was taken in good faith, could you help explain to me, if you can do this, what would happen if we had an interpretation that it had to be

[00:16:48] Speaker 03:
compel that would would basically make the shield not very useful or not applicable what what happens if we were to adopt their their request that you only get the shield if it's compelled well I think if the court were to adopt their interpretation of the shield

[00:17:04] Speaker 01:
In addition to their interpretation of the underlying guidance and directives from OFAC, it would apply to nobody.

[00:17:10] Speaker 01:
And that's because OFAC doesn't, you know, it doesn't micromanage these things for banks.

[00:17:16] Speaker 03:
It doesn't say banks must do X, Y and Z. Is it more that there's a strict liability aspect here, right?

[00:17:21] Speaker 03:
So if you actually screw up and you find out that

[00:17:25] Speaker 03:
you find out afterwards that you screwed up and you have, and now what happens?

[00:17:29] Speaker 03:
You get, you have to pay fines.

[00:17:30] Speaker 03:
What happens?

[00:17:31] Speaker 01:
Yes.

[00:17:31] Speaker 01:
So, so if I could, your honor, I actually think there are sort of stepping back half a step from your question.

[00:17:36] Speaker 01:
I think there are two answers.

[00:17:38] Speaker 01:
The first is that the regulations and guidance documents in fact do compel what bank of America is doing here.

[00:17:45] Speaker 01:
I think the second answer is the statute is not, it doesn't call for strict scrutiny, right?

[00:17:50] Speaker 01:
It doesn't call for,

[00:17:51] Speaker 01:
the least restrictive means for complying with OFAC directions.

[00:17:57] Speaker 01:
And this is what you described as our principle.

[00:18:01] Speaker 03:
Yeah, it would be weird if it did to have a good faith requirement because I don't know what that would, it would either be compelled or not, it wouldn't matter what your faith, what your good, bad faith was.

[00:18:10] Speaker 01:
Exactly.

[00:18:11] Speaker 01:
So let me start with the first point, which is that when you look at the OFAC framework

[00:18:17] Speaker 01:
and guidelines and enforcement advisories all taken together.

[00:18:21] Speaker 01:
There really is a requirement here that large banks like Bank of America with huge consumer bases, many of which are foreign nationals, really have to take this sort of thing into consideration.

[00:18:35] Speaker 01:
I point the court to start with the opening of the framework that OFAC has issued.

[00:18:40] Speaker 01:
This is ER 1869.

[00:18:43] Speaker 01:
And it says, to be sure, this is not mandatory language, but I'll get us there.

[00:18:47] Speaker 01:
It says, OFAC strongly encourages banks like Bank of America to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program.

[00:19:02] Speaker 01:
Then if you skip to 1872, it says that a fundamental element of a sound sanctions compliance program is ongoing risk assessment.

[00:19:12] Speaker 01:
It says, quote, the purpose of a risk assessment is to identify inherent risks, risks attaching to individuals because of their characteristics in order to inform risk based decisions and controls.

[00:19:27] Speaker 03:
So because we have a limited amount of time, this is all in the briefing.

[00:19:30] Speaker 03:
And I think I understand.

[00:19:31] Speaker 03:
I'm sure my colleagues understand.

[00:19:33] Speaker 03:
I'm not sure I agree with you that when you tie it all together that it compels because it certainly seems to be that

[00:19:40] Speaker 03:
it's consistent with a risk-based approach, but I think it's at least theoretically possible you could skin this cat a different way.

[00:19:47] Speaker 03:
You could, it seems to me that there is, if somebody is a foreign nationalist citizen of Iran, then there is a, it's gotta be, statistically speaking, a higher risk that they might be residing there and fall within the, but all I'm saying, if you assume for a second that there's a different way you could get there to try to filter, and so it wasn't,

[00:20:09] Speaker 03:
strictly compelled, which I understand to be their argument, then what is your argument that it shouldn't have to be strictly compelled?

[00:20:18] Speaker 01:
Well, again, I think that just comes from the language of the statute itself.

[00:20:22] Speaker 01:
No person shall be held liable, I'm reading now from the statute, for anything done in good faith in connection with or pursuant to and reliance on not

[00:20:34] Speaker 01:
not specific directions, not compulsions, but any regulation, instruction, or direction.

[00:20:41] Speaker 01:
Now, I would take, frankly, the framework to be a direction, strong encouragement to adopt a particular kind of policy.

[00:20:50] Speaker 01:
And I would add that part of the framework is a direction, and it is a direction, to banks like Bank of America in all, excuse me, to take into account

[00:21:04] Speaker 01:
what it describes as settlements published by OFAC to reassess and enhance their respective protocols.

[00:21:12] Speaker 01:
Well, one of the compliance settlements in the record is a settlement with TD Bank at ER 1855.

[00:21:20] Speaker 01:
that considers as an aggravating factor for imposing more than $100,000 in civil sanctions that TD Bank did not adequately take into account the citizenship of members of, excuse me, of nationals of North Korea.

[00:21:37] Speaker 01:
And as a consequence, violated the sanctions protocols respecting North Korea, which is also a comprehensively sanctioned nation.

[00:21:46] Speaker 01:
And in describing the aggravating factors, OFAC said this.

[00:21:50] Speaker 01:
It said TD Bank had reason to know that it maintained accounts for North Korean nationals, citizens, because at account opening, the account holders of all nine accounts presented to the bank North Korean passports.

[00:22:05] Speaker 01:
And yet the bank failed then to take additional steps to monitor those individuals and ensure that the accounts were not

[00:22:13] Speaker 01:
violating the sanctions.

[00:22:15] Speaker 01:
So the framework says develop a risk-based protocol.

[00:22:18] Speaker 01:
It says in updating and keeping that protocol current, watch out what we're doing in published settlements with banks concerning sanctions efforts.

[00:22:29] Speaker 01:
And in one of those published settlements, OFAC holds a bank as an aggravating factor liable for not taking into account

[00:22:41] Speaker 01:
that it was servicing North Korean national accounts.

[00:22:45] Speaker 01:
So I would say that's compulsion.

[00:22:46] Speaker 01:
But even if you don't think that, at the very least, a program that takes these characteristics into consideration is pursuant to and a reliance on OFAC guidance and directions.

[00:23:03] Speaker 01:
Um, and again, if, if, um, to take plaintiff's position as correct is to say that in order to satisfy the liability shield, you really have to have a narrowly tailored least restrictive means approach to interpreting, uh, the liability shield.

[00:23:22] Speaker 01:
And that isn't what the liability shield says.

[00:23:24] Speaker 01:
It says any good faith effort, any good faith effort.

[00:23:28] Speaker 00:
So the argument goes further than that.

[00:23:30] Speaker 00:
Their argument is that the liability shield

[00:23:34] Speaker 00:
essentially doesn't, that it has no function because the statute doesn't compel anything and therefore banks can't look at citizenship at all.

[00:23:42] Speaker 00:
I mean, it seems absurd to me.

[00:23:45] Speaker 01:
Well, I certainly am inclined to agree, Your Honor, because again, if you were not to read the directions that I just laid out as compelling the sort of program that Bank of America has adopted and you were to take the plaintiff's interpretation of the statute, it's true, it would apply to a null set.

[00:24:03] Speaker 03:
So can I ask you a follow-up on that?

[00:24:05] Speaker 03:
I think that's right, or at least it's a very strict reading.

[00:24:11] Speaker 03:
So your argument is plain text, this thing is capacious, the liability shield.

[00:24:16] Speaker 03:
Their argument reduces it to either nothing or a very small world.

[00:24:23] Speaker 03:
I'm not sure they made this argument, but it seemed like there could be a middle ground, which is citizenship.

[00:24:31] Speaker 03:
is a unique thing that, you know, is that itself requires a more narrow, separate aside from the library.

[00:24:42] Speaker 03:
So other things you would take into account wouldn't necessarily require this sort of what you're calling strict scrutiny, which I think I understand where you're coming at that from.

[00:24:51] Speaker 03:
But that citizenship would or national being a national form in one of these, from one of these countries.

[00:24:59] Speaker 03:
I don't know that they made that argument.

[00:25:01] Speaker 03:
Maybe I missed it, but I don't know that they made like a special argument about this citizenship.

[00:25:06] Speaker 03:
It seems like they put their eggs in the basket of that it has to be compelled.

[00:25:11] Speaker 03:
They really emphasize it has to be compelled.

[00:25:13] Speaker 03:
What if they had made that argument?

[00:25:16] Speaker 03:
Did they make the argument, and if they did, does that help them?

[00:25:19] Speaker 01:
I don't understand them to have made that argument.

[00:25:21] Speaker 01:
I don't know how it could help them, because I think it would have to be the other way around.

[00:25:24] Speaker 01:
The statute itself

[00:25:26] Speaker 01:
refers to nationals.

[00:25:28] Speaker 01:
This is the provision authorizing imposition of sanctions.

[00:25:32] Speaker 01:
It authorizes the president to bar transactions, quote, involving any interest of any foreign country or a national thereof.

[00:25:41] Speaker 01:
So that's 50 USC 1702A1.

[00:25:44] Speaker 01:
So the statute itself envisions a sanctions program that is honed in on and focuses on citizenship.

[00:25:53] Speaker 03:
So that's a statute and the actual sanctions themselves

[00:25:56] Speaker 03:
don't necessarily sanction every Iranian national.

[00:26:00] Speaker 03:
It sanctions transactions that occur from within Iran.

[00:26:05] Speaker 01:
Well, it's two things.

[00:26:06] Speaker 01:
It's got to be in Iran by an individual ordinarily resident in Iran.

[00:26:12] Speaker 01:
And who is more likely than anybody to be ordinarily resident in Iran?

[00:26:16] Speaker 01:
A citizen of Iran.

[00:26:17] Speaker 03:
Right, right.

[00:26:18] Speaker 03:
And so it totally makes sense to use that as a first cut and say, that's something, if that's true,

[00:26:25] Speaker 03:
Yeah, we're going to look more closely.

[00:26:27] Speaker 03:
And that just seems like what your program does.

[00:26:29] Speaker 03:
Their argument is, yeah, but you could get at it a different way since strictly being a Iranian citizen is not a prohibitor.

[00:26:39] Speaker 03:
It's an Iranian citizen plus some other things.

[00:26:42] Speaker 03:
And maybe not even an Iranian citizen.

[00:26:44] Speaker 03:
If you are a non-Iranian citizen, but you live in Iran, then you would be

[00:26:50] Speaker 03:
You would be prohibited if you're in and your ordinary resident there, you would be prohibited correct so that you could see their argument is.

[00:26:57] Speaker 03:
I totally understand that you that it helps you to get there by starting with their citizenship because that's it.

[00:27:03] Speaker 03:
That is a. It just makes common sense that that.

[00:27:06] Speaker 03:
that group of people are going to more often fit within the requirements for the for the sanctions.

[00:27:14] Speaker 01:
Right.

[00:27:15] Speaker 03:
But it isn't necessarily a perfect fit.

[00:27:18] Speaker 03:
So and since you could get at it another way, that's why I'm struggling with the fact that it's somehow compelled.

[00:27:26] Speaker 01:
Well, but I guess is the point, Your Honor.

[00:27:28] Speaker 01:
It isn't a perfect fit, and that's why Bank of America has adopted its consumer residency monitoring program.

[00:27:35] Speaker 01:
All it requires is every six months a refresh of documentation.

[00:27:40] Speaker 03:
And if it worked correctly, we wouldn't even be here today.

[00:27:43] Speaker 03:
And if there was a mistake, and I guess your argument is just that mistakes sometimes happen, but that doesn't mean that the program's

[00:27:50] Speaker 01:
Well, that's right.

[00:27:51] Speaker 01:
I mean, that that is what a risk based program is.

[00:27:53] Speaker 01:
A risk based program is not a one to one match.

[00:27:56] Speaker 01:
It's identify what are indicators of risk.

[00:28:01] Speaker 01:
and make determinations to limit risk on which accounts to service or not.

[00:28:06] Speaker 01:
Bank of America could say we won't service any accounts for citizens of comprehensively sanctioned nations.

[00:28:14] Speaker 01:
That would be a risk-based protocol.

[00:28:16] Speaker 01:
It's taking it further.

[00:28:17] Speaker 01:
It is not taking that approach, and it's trying to narrow it in.

[00:28:21] Speaker 03:
I saw that in the briefs.

[00:28:22] Speaker 03:
Is that right?

[00:28:23] Speaker 03:
It's not illegal for Bank of America to say,

[00:28:26] Speaker 03:
no Iranian citizen gets a bank account.

[00:28:29] Speaker 01:
My knowledge it is not illegal, Your Honor.

[00:28:30] Speaker 01:
There is no law.

[00:28:31] Speaker 03:
So a little bit they're being punished for, attacked for, for trying to help.

[00:28:36] Speaker 01:
Exactly.

[00:28:39] Speaker 01:
And so this is, this is what I would submit is a reasonable approach to identifying

[00:28:45] Speaker 01:
Iranian citizens who have a political affiliation with the Republic of Iran and therefore could legally be ordinarily resident there to determine whether they are in fact not resident there and they're temporarily resident here in the US and therefore not in Iran while they are banking.

[00:29:02] Speaker 01:
It is a one-to-one match for what the regulations say and it is, I submit plainly, a good faith effort to comply with the directions of the fact.

[00:29:12] Speaker 03:
If you don't think it's a one-to-one match, if we think it's a point A to

[00:29:15] Speaker 03:
1.2, that's good enough, in your view, as long as it's good faith.

[00:29:19] Speaker 01:
Well, and risk-based, because, really, they're- So they don't have to be compelled.

[00:29:23] Speaker 01:
It doesn't have- well, no.

[00:29:25] Speaker 01:
I think it's got to be pursuant to a direction of OFAC, which is a strong encouragement to adopt exactly this kind of policy.

[00:29:32] Speaker 01:
And if Bank of America didn't adopt this policy, it would be subject to more extreme sanctions if it did, in the end, violate the Iran regulations.

[00:29:42] Speaker 01:
Thank you, Your Honors.

[00:29:44] Speaker 04:
All right.

[00:29:51] Speaker 03:
Can I ask just a lead-off question?

[00:29:53] Speaker 03:
I saw in the briefs that Bank of America said, we don't have to even give bank accounts to Iranian citizens, period.

[00:30:02] Speaker 03:
But I didn't hear a response from you all in the briefs on that.

[00:30:04] Speaker 03:
Is that true?

[00:30:05] Speaker 03:
Do some banks not do that?

[00:30:07] Speaker 03:
Do they just not provide bank accounts to Iranian citizens?

[00:30:10] Speaker 02:
We think that's unsupported in the record.

[00:30:13] Speaker 03:
I'm asking more the legal question.

[00:30:15] Speaker 02:
Sure.

[00:30:16] Speaker 02:
The legal question, I think that would be illegal in the view of Dr. Nia.

[00:30:21] Speaker 02:
The administration of this sanctions regulation has to be objectively reasonable.

[00:30:28] Speaker 02:
That's the touchstone of good faith.

[00:30:30] Speaker 02:
And so, we don't think this is boundless or it just opens floodgate or it's meaningless.

[00:30:35] Speaker 02:
It's just if you're going to avail yourself of this affirmative defense, your actions have to be objectively reasonable.

[00:30:42] Speaker 02:
And we say there's genuine disputes of material fact as to whether they are objectively reasonable.

[00:30:47] Speaker 02:
If you look at the City of Los Angeles Department of Water and Power v. Manhart, that's 435 U.S.

[00:30:51] Speaker 02:
702.

[00:30:54] Speaker 02:
that says their individual risks like individual performance may not be predicted by resort to prohibited classifications.

[00:31:01] Speaker 02:
You can't use citizenship or Iranian nationality as a proxy.

[00:31:05] Speaker 02:
And also the one point, other point that I would make is that

[00:31:10] Speaker 02:
We don't say that you can't consider citizenship at all.

[00:31:13] Speaker 02:
You can't wholesale not consider it.

[00:31:14] Speaker 02:
It's just as the FinCEN guidance says, there has to be a nexus to Iran.

[00:31:18] Speaker 02:
It could be broader.

[00:31:20] Speaker 02:
Citizenship could be a factor, but then you also have to have other factors such that others could be disqualified.

[00:31:25] Speaker 02:
If it's only Iranians that are disqualified under their CRM, then it's a but-for-cause based on a prohibited classification.

[00:31:34] Speaker 02:
If others could be encompassed within that, then it would not be a but-for-cause.

[00:31:40] Speaker 03:
Did I understand you just to say your position is not that they're strictly disallowed from considering Iranian citizenship, it's that

[00:31:53] Speaker 03:
they did it wrong here, but you're not, so your position is they could, they would need to have something that was a better fit.

[00:32:00] Speaker 02:
Absolutely, Your Honor.

[00:32:01] Speaker 02:
They could.

[00:32:02] Speaker 02:
It just could not be, Iranian citizenship could not be the disqualifying factor and only the disqualifying factor.

[00:32:08] Speaker 02:
If you look to the FinCEN guidance we point to, it just says Iranian nexus.

[00:32:12] Speaker 02:
Citizenship could be one form of a nexus, but if you have a business on the border of Iran,

[00:32:16] Speaker 02:
If you have a pattern of transaction cryptocurrency trades in the Middle East, there is a whole host of factors that would just not apply only to Iranian citizens.

[00:32:25] Speaker 02:
So if there's a more holistic set of things, which is what they do with the Ukrainian population subjected to the exact same sanctions regimes, then that would be different.

[00:32:36] Speaker 02:
On the North Korea point, I know I'm out of time.

[00:32:37] Speaker 02:
On the North Korea point, it's 31 CFR

[00:32:44] Speaker 02:
Section 510-201A2, it specifically speaks to North Korean nationals, so it's a different regime.

[00:32:50] Speaker 02:
The TD Bank decision is irrelevant.

[00:32:51] Speaker 02:
Thank you, Your Honors.

[00:32:52] Speaker 02:
All right.

[00:32:52] Speaker 04:
Thank you, Counsel.

[00:32:53] Speaker 04:
Thanks to both of you for your briefing and argument in this case.

[00:32:55] Speaker 04:
This matter is submitted.