Tuesday, April 14, 2026
Page 3
Ninth Circuit:
Iranian’s Claims of Banking Bias Barred by Liability Shield
Opinion Says Putative Class Action by San Diego Resident Complaining That His Account Was Closed Due to Discriminatory Practices Is Barred by Protections for Good Faith Efforts to Comply With U.S. Sanctions
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals held yesterday that a trial judge properly granted summary judgment to a financial institution accused of discriminating against account holders with ties to Iran, in violation of California and federal law, in a putative class action filed by a San Diego resident who had his account closed after the bank misstated proof-of-residency requirements.
Declaring that the plaintiff’s claims are barred by a liability shield provided for in the International Emergency Economic Powers Act (“IEEPA”), which protects good faith efforts of banks to conform with federal regulations relating to sanctions imposed on foreign powers, the court, in an opinion authored by Circuit Judge Lawrence VanDyke, opined that discretionary policies adopted by institutions to try to comply with the rules are covered.
At issue is 50 U.S.C. §1702(a)(3), which provides:
“No person shall be held liable in any court for or with respect to anything done or omitted in good faith…pursuant to and in reliance on, this chapter, or any regulation…issued under this chapter.”
Saying that District Court Judge Cynthia A. Bashant of the Southern District of California did not err in ruling that most of plaintiffs’ claims were precluded by the liability shield, VanDyke wrote reasoned that she “properly granted summary judgment to the Bank based on IEEPA’s liability shield provision” and that the plaintiff’s reliance on the institution’s error in listing an application form as “proof of permanent residency” did not establish bad faith.
Craft Sanctions
IEEPA, found at 50 U.S.C. §§1701-1710, authorizes the president to craft sanctions on foreign countries that pose unusual and extraordinary threats. Sanctions against Iran have been in effect, with some gaps, since 1979.
Federal regulations, adopted in 2012 as part of efforts to forestall Iran from acquiring technologies supportive of nuclear ambitions, prohibit U.S. banks from “performing services” relating to “accounts of persons who are ordinarily resident in Iran, except when such persons are not located in Iran.”
The U.S. Office of Foreign Assets Control (“OFAC”) issues guidance to banks that “strongly encourage[e]” them to develop a sanctions compliance program that takes into account the residency and citizenship of accountholders.
To comply with the regulations, Bank of America N.A. adopted a policy that requires accountholders who are citizens of Iran to periodically submit documents as proof of their “physical presence” in the U.S. These documents are classified either as permanent records, which may be cited for subsequent residency requests, or temporary ones, which may only be used once before the associated expiration date.
Credit Card Account
An Iranian citizen purportedly living in San Diego, Mohammad Farshad Abdollah Nia, opened a credit card account with Bank of America in 2015, submitting his driver’s license as proof of residency. In April 2019, the bank sent him a letter requesting updated proof-of-residency documentation as the permit was set to expire.
The letter incorrectly listed Form I-797C, which is an application for U.S. residency, as an example of a document qualifying as permanent proof of residence in the country. He submitted a Form I-797C, and the institution assigned the record an expiration date of Nov. 7, 2019.
He spoke with a bank representative, who purportedly told him that she did not see anything wrong with his account. After resubmitting his Form I-797C, he ignored warnings that his residency records were set to expire.
After the bank closed his account in October 2019, Nia filed a putative class action complaint in San Diego Superior Court in August 2021. The bank removed the matter to federal court.
In the operative pleading, he asserted violations of 42 U.S.C. §1981, which guarantees equal rights under the law to “all persons within the jurisdiction” of the U.S., the Equal Credit Opportunity Act (“ECOA”), and California’s Unruh Civil Rights Act and Unfair Competition Law (“UCL”). He alleged that “[w]hen Defendant…closes an account, the account holder loses access to their funds” and said:
“Plaintiff brings this civil-rights class-action lawsuit on behalf of himself and others who have been impacted by Defendant’s discriminatory practice of arbitrarily restricting and closing the accounts of persons of Iranian descent based on their race, religion, ancestry, citizenship, and/or immigration status.”
Bashant granted in part the defendant’s motion for summary judgment on March 26, 2024, concluding that the state law causes of action were preempted by the IEEPA and that the act’s liability shield forecloses each of the plaintiff’s claims except for those alleging insufficient notice under the ECOA and the UCL. Nia voluntarily dismissed the surviving claims with prejudice, and judgment was entered against him.
Compelled Actions
Addressing a contention that §1702(a)(3) only excuses liability for actions “compelled” by the regulatory scheme, VanDyke cited legal dictionaries and remarked:
“Nia’s argument has no root in the text of the statute. In 1977, when IEEPA was enacted, ‘pursuant’ meant ‘in accordance with’ or ‘by reason of.’…‘Reliance’ meant ‘dependence.’ Neither term suggests compulsion….That language affords financial institutions like the Bank some discretion on how best to comply with the [regulations].”
Saying that “[a]pplying a sanctions compliance program based on citizenship may not be compelled…, but it is certainly permitted,” he remarked:
“Given IEEPA’s expansive language, the Bank’s…policy falls comfortably within the liability shield’s ambit. The policy is clearly built around the demands of the [regulations]. The Bank requests ‘[p]roof of United States (U.S.) physical presence,’ ‘[p]roof of permanent U.S. residence,’ or ‘[p]roof of presence in a third country…’—precisely the information most helpful in assessing whether the Bank might be servicing ‘accounts of persons who are ordinarily resident in Iran.’…[T]he policy and the Bank’s internal sanctions compliance guidance inform employees that the policy was adopted to comply with OFAC’s sanction regime.”
Good Faith
Acknowledging that, “[o]f course, the liability shield still only applies to actions taken in good faith,” he said:
“Nia fails to identify a genuine issue of material fact about the Bank’s good faith here. He points first to the Bank’s mistaken classification of the Form I-797C….[N]othing in the record suggests that the Bank’s mistake was not in good faith. Contrary to Nia’s assertions, the Bank never ‘withh[e]ld’ the fact that the Form I-797C would expire. Months before the deadline, the Bank’s August 2019 letters informed Nia that ‘[t]he temporary residency documentation you provided will soon expire.’ ”
The plaintiff pointed to letters and other complaints accusing the banking giant of discrimination relating to the policy, VanDyke responded:
“[T]hird-party disapproval has no bearing on the Bank’s good faith. 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…policy. The Bank has served 67,000 Iranian citizen accountholders since 2016. Misapplying the…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.”
Circuit Judges John B. Owens and Holly A. Thomas joined in the opinion.
The case is Nia v. Bank of America N.A., 24-6187.
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