Ek Vathana v. Everbank

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

EK VATHANA, individually and on No. 12-15587
behalf of all others similarly
situated, D.C. No.
Plaintiff-Appellant, 5:09-cv-02338-
RS
v.

EVERBANK, AKA EverBank Direct, OPINION
AKA EverBank Federal Savings
Association; EVERBANK FINANCIAL
CORP.; EVERBANK WORLD
MARKETS,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, District Judge, Presiding

Argued and Submitted
February 14, 2014—San Francisco, California

Filed October 31, 2014

Before: Alex Kozinski, Chief Judge, and Diarmuid F.
O’Scannlain and Mary H. Murguia, Circuit Judges.

Opinion by Judge Murguia
2 VATHANA V. EVERBANK

SUMMARY*

Florida Law

The panel affirmed in part and reversed in part the district
court’s summary judgment in favor of EverBank on a breach
of contract claim brought by a certified class of Everbank
customers who purchased EverBank WorldCurrency
certificates of deposit denominated in Icelandic króna.

The class alleged that EverBank breached the terms and
conditions of the WorldCurrency CDs by closing the
WorldCurrency CDs without the class members’ consent, and
delivering the value of the closed CDs in U.S. dollars at the
exchange rate that EverBank obtained in the wholesale
market.

Under Florida law, the panel held that no reasonable jury
could find that EverBank acted in bad faith when it exercised
its discretion to close the WorldCurrency CDs to limit losses
to itself or its customers. The panel also held that a
reasonable jury could find that the terms and conditions were
silent with respect to the currency conversion rate that applied
when the WorldCurrency CDs were closed and the proceeds
from the CDs returned to the class members. The panel
reversed on this ground, and remanded to the district court to
resolve whether EverBank breached the terms and conditions
when it returned the value of the WorldCurrency CDs to the
class members.

*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 VATHANA V. EVERBANK 3

COUNSEL

Michael Millen (argued), Law Office of Michael Millen, Los
Gatos, California, for Plaintiff-Appellant.

Deborah S. Birnbach (argued), Goodwin Procter LLP,
Boston, Massachusetts; Robert B. Bader, Goodwin Procter
LLP, San Francisco, California; William M. Jay, Goodwin
Procter LLP, Washington, D.C., for Defendants-Appellees.

OPINION

MURGUIA, Circuit Judge:

Ek Vathana and a certified class of EverBank customers
purchased EverBank WorldCurrency certificates of deposit
(CDs) denominated in Icelandic króna (ISK), which matured
between October 8, 2008, and December 31, 2008. They
appeal the district court’s order granting summary judgment
for EverBank on their breach of contract action. We have
jurisdiction under 28 U.S.C. § 1291. We affirm in part and
reverse in part.

BACKGROUND

A. EverBank’s WorldCurrency CD

Unlike traditional certificates of deposit, an EverBank
WorldCurrency CD is denominated in foreign currency. This
means that, in addition to earning interest, the principal itself
may rise or fall in value over the maturity period of the CD,
depending on the strength of the foreign currency relative to
U.S. dollars.
4 VATHANA V. EVERBANK

When a customer opens a WorldCurrency CD, EverBank
adds the customer’s investment to its treasury and credits the
customer’s WorldCurrency CD in a foreign currency of the
customer’s choice. Under paragraph 2.7.1 of the terms and
conditions applicable to the WorldCurrency CDs (the “Terms
and Conditions”), the exchange rate that EverBank uses to
convert the customer’s initial investment into the foreign
currency is a rate “within 1% of the wholesale spot price we
pay for your currency.” The “wholesale spot price” is the
currency’s price in the wholesale currency market when the
customer opens the CD.1

This conversion occurs only as a book transaction:
EverBank does not actually exchange the currency invested
for the physical currency in which the CD is denominated.
Instead, in separate transactions, EverBank purchases
“forward contracts” to hedge the risks associated with its
foreign currency liabilities to its WorldCurrency CD
customers. The forward contracts allow EverBank to acquire
a set amount of foreign currency on a specified date and at a
set price, or exchange rate, that is based on the currency’s
wholesale spot price when EverBank purchases the contract.
By entering into forward contracts for the foreign currency in
its WorldCurrency CDs, EverBank is assured delivery of the
currency from which to pay its customers on the date the CDs
mature, should its customers choose to liquidate their
investments. Id. The forward contracts protect EverBank

1
The wholesale currency market is where financial institutions like
EverBank trade large amounts of currency. By contrast, when an
individual goes to a bank to exchange currency, he purchases currency in
the retail market. The retail spot price available to an individual
exchanging money at a bank can differ from the wholesale spot prices
available to banks in the wholesale market.
 VATHANA V. EVERBANK 5

from the risks of exchange rate fluctuation before the CDs’
maturity dates.

Paragraph 2.7.10 of the Terms and Conditions sets out the
WorldCurrency CD’s renewal policies upon maturity. It
provides in relevant part,

Renewal Policies: Except as provided in the
Lock-In Alternative section above, your
WorldCurrency CD is automatically
renewable; however, you may do one of the
following options by providing instructions to
the Trading Desk at least one week prior to
the maturity date of the outstanding CD:

1. liquidate your account upon maturity.

2. remove the interest and re-invest the
principal.

3. roll over the CD proceeds (principal
plus interest).

If you choose to roll over the CD, it will be re-
invested in the same currency for the same
maturity, at the current prevailing interest
rate.

....

If we do not receive maturity instructions
from you at least one week prior to maturity,
your CD will automatically renew, reinvesting
your principal and any interest into a CD of
6 VATHANA V. EVERBANK

the same currency and maturity, at the
prevailing interest rate on the date of renewal.

B. Lead Plaintiff Ek Vathana’s WorldCurrency CDs
and Iceland’s Financial Crisis

On July 23, 2008, lead plaintiff Ek Vathana opened the
first of two ISK-denominated WorldCurrency CDs that
matured during the class period. The price of ISK when
Vathana opened the CD was 78.65 ISK per U.S. dollar. Id.
The value of the CD when Vathana opened it was 747,676.53
ISK, or $9,447.49. Vathana opened his second
WorldCurrency CD on September 10, 2008. The exchange
rate was 88.05 ISK per U.S. dollar, and the value of the CD
was 3,547,501.93 ISK, or $40,040.07. Both of Vathana’s
WorldCurrency CDs had three-month maturities.

A month later, Iceland’s financial system was in crisis.
The Prime Minister addressed the nation on October 6, 2008,
describing the “major difficulties” facing Iceland’s banks,
which had grown so rapidly before the recession that their
liabilities were “many times Iceland’s GNP.” The Prime
Minister warned the country that “[m]ajor credit lines to the
banks have been closed and it was decided this morning to
suspend trading with the banks and with the savings funds in
the Icelandic Stock Exchange.” The Icelandic government
passed emergency legislation allowing it effectively to put
Iceland’s major banks into receivership. The Central Bank of
Iceland imposed restrictions on the exchange of ISK into
foreign currency.

Because of the crisis in Iceland, EverBank was unable to
find any counterparties willing to offer forward contracts for
ISK. Because it could not hedge the risk of offering
 VATHANA V. EVERBANK 7

WorldCurrency CDs denominated in ISK going forward,
EverBank decided not to roll over its ISK-denominated
WorldCurrency CDs set to mature in early October 2008. Id.
EverBank paid the proceeds of the matured CDs in U.S.
dollars, calculating their value using the available wholesale
spot price. Id.

In mid-October, EverBank was again unable to find
anybody willing to enter into forward contracts for ISK.
However, unlike the week before, it could not even find any
parties willing to trade ISK for U.S. dollars on the wholesale
market.

Vathana’s first WorldCurrency CD matured on October
22, 2008. Two days before it matured, Vathana emailed
EverBank, instructing it to roll over his CD. He wrote, “I will
not accept a forced liquidation conversion. If you choose to
close my accounts, I demand you send me the actual physical
ISKs.” Id.

In late October 2008, EverBank finally located a party
willing to offer a ISK/Euro forward contract, on the basis of
which EverBank could calculate a wholesale conversion rate
for U.S. dollars. The exchange rate was about 253 ISK per
U.S. dollar, dramatically worse than the 78.65 ISK per U.S.
dollar rate at which Vathana opened the CD. Id. EverBank
notified Vathana that it had closed his CD, converted the ISK
to U.S. dollars at the 253 ISK per U.S. dollar rate, and
deposited the proceeds, $2,958.03, into Vathana’s account
with EverBank. Vathana lost $6,489.46.

On December 10, 2008, EverBank closed Vathana’s
second WorldCurrency CD and returned the value of that
account to Vathana in U.S. dollars at a slightly better
8 VATHANA V. EVERBANK

exchange rate of about 217 ISK per U.S. dollar. The rate was
still significantly worse than the approximately 88 ISK per
U.S. dollar rate at which he opened the CD. Vathana lost
$23,700.88 on that CD.

EverBank did not renew or roll over any of its ISK-
denominated WorldCurrency CDs maturing between October
8, 2008, and December 31, 2008. Instead, it closed the CDs
on their maturity dates and returned the value of the CDs to
its customers in U.S. dollars according to the rates that
EverBank obtained in the wholesale market.

C. Proceedings Before the District Court

Vathana brought a class action for breach of contract
against EverBank on behalf of all EverBank WorldCurrency
CD customers whose ISK-denominated WorldCurrency CDs
matured between October 8, 2008, and December 31, 2008.
Vathana claims that EverBank breached the Terms and
Conditions by (1) closing the WorldCurrency CDs without
the class members’ consent, and (2) delivering the value of
the closed CDs in U.S. dollars at the exchange rate that
EverBank obtained in the wholesale market. Vathana alleges
that the Terms and Conditions required EverBank to
automatically renew the CDs and did not specify a conversion
rate that applied when the WorldCurrency CDs were closed
and liquidated.

The parties twice moved for summary judgment. First, the
parties cross-moved for summary judgment on Vathana’s
claim that EverBank breached the Terms and Conditions by
paying the CDs’ proceeds in U.S. dollars at the wholesale
spot price. The district court granted summary judgment to
EverBank on this claim, rejecting Vathana’s argument that
 VATHANA V. EVERBANK 9

the currency conversion rate in paragraph 2.7.1 of the Terms
and Conditions, “within 1% of the wholesale spot price we
pay for your currency,” applies when the WorldCurrency CD
is opened but does not clearly apply when the CD is closed.
The district court agreed with EverBank that the conversion
rate in paragraph 2.7.1 applies to all conversions applicable
to the account, including when the account is opened and
when it is closed.

Second, the parties each moved for summary judgment on
whether EverBank breached the Terms and Conditions by
unilaterally closing the CDs when they matured. The district
court concluded that, although EverBank was ordinarily
required under paragraph 2.7.10 of the Terms and Conditions
to automatically renew the CD or honor the customer’s
instructions, EverBank was released from doing so under
paragraph 1.17 of the Terms and Conditions. This paragraph
provides that “if we [EverBank] believe that it is necessary to
close your account immediately in order to limit losses by
you or us, we may close your account prior to providing
notice to you.” Because the district court saw no factual
dispute over whether EverBank closed the class members’
accounts in good faith under this provision, the district court
determined that EverBank had not breached the Terms and
Conditions. The district court also disagreed with Vathana
that EverBank’s decision to close the accounts was an
“amendment” to the CD’s renewal policies set forth in
paragraph 2.7.10. The district court therefore rejected
Vathana’s argument that EverBank violated the Truth in
Savings Act by failing to notify the class members of the
“amendment.” Having concluded that Vathana could not
prevail as a matter of law on either of his theories of breach,
the district court entered judgment for EverBank. Vathana
now appeals.
10 VATHANA V. EVERBANK

DISCUSSION

We review de novo the district court’s grant of summary
judgment. Posey v. Lake Pend Oreille Sch. Dist. No. 84,
546 F.3d 1121, 1126 (9th Cir. 2008). Summary judgment is
appropriate if “the movant shows that 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 parties agree that the Terms and Conditions are
governed by Florida law. Under Florida law, clear and
unambiguous contract language may be interpreted as a
matter of law. Smith v. Shelton, 970 So. 2d 450, 451 (Fla.
Dist. Ct. App. 2007). Whether contract language is
ambiguous is also a question of law. Id. A contract’s wording
is ambiguous if it is “reasonably susceptible to more than one
interpretation.” Lambert v. Berkley S. Condo. Ass’n, 680 So.
2d 588, 590 (Fla. Dist. Ct. App. 1996). If the wording is
ambiguous, interpreting the contract involves a factual
question and summary judgment is inappropriate. Smith,
970 So. 2d at 451.

1. EverBank’s Closure of the CDs at Maturity

We decide first whether EverBank breached the Terms
and Conditions by unilaterally closing the class members’
WorldCurrency CDs when they matured. The district court
concluded that EverBank’s decision to close the CDs was
justified by paragraph 1.17, which provides, in relevant part,
“[i]f we believe that it is necessary to close your account
immediately in order to limit losses by you or us, we may
close your account prior to providing notice to you.”
 VATHANA V. EVERBANK 11

Under Florida law, “where the terms of the contract afford
a party substantial discretion to promote that party’s self-
interest, the duty to act in good faith nevertheless limits that
party’s ability to act capriciously.” Cox v. CSX Intermodal,
Inc., 732 So. 2d 1092, 1097–98 (Fla. Dist. Ct. App. 1999).
“Yet, the limit placed on a party’s discretion is not great. . . .
Unless no reasonable party . . . would have made the same
discretionary decision . . . , it seems unlikely that [the party’s]
decision would violate the covenant of good faith.” Ernie
Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1291
(11th Cir. 2001) (alterations in original) (internal quotation
marks omitted).

We agree with the district court that Vathana failed to
introduce evidence sufficient for a reasonable jury to find that
EverBank breached the Terms and Conditions by exercising
its discretion under paragraph 1.17 in bad faith. Vathana’s
own expert testified that forward contracts for ISK were
unavailable from October 2008 to December 2008. It is
undisputed that, had EverBank rolled over the
WorldCurrency CDs without entering into forward contracts,
and had ISK continued to lose value, EverBank could have
been exposed to up to $12 million in losses. It is also
undisputed that, if EverBank had continued to offer ISK-
denominated WorldCurrency CDs, it would have had to
charge the CD-holders interest, rather than pay them interest.

In hindsight, EverBank liquidated the class members’
WorldCurrency CDs when they were least valuable. The CDs
would have regained value if EverBank had remained in the
ISK market until Iceland’s economy improved. But paragraph
1.17 gave EverBank discretion to close the WorldCurrency
CDs immediately to limit its or its customers’ losses –
discretion that was limited only by EverBank’s obligation
12 VATHANA V. EVERBANK

under Florida law to act in good faith. Vathana has not
pointed to any facts demonstrating that no reasonable person
would have made the same discretionary decision that
EverBank made under the circumstances. See Ernie Haire
Ford, 260 F.3d at 1291.

Vathana also argues that EverBank’s decision not to
renew the WorldCurrency CDs was a change to its renewal
policy, and that its failure to disclose this change to the class
members with sufficient notice violated federal law. Vathana
relies on the Truth in Savings Act § 266 (TISA), 12 U.S.C.
§ 4305(c), which requires depository institutions like
EverBank to notify its customers of any changes to its
renewal policies 30 days before the changes come into effect.
We agree with the district court that Vathana’s TISA
argument is unpersuasive.

TISA does not provide a private right of action to enforce
its provisions. See 12 U.S.C. § 4309 (providing for
administrative enforcement of TISA). But, even if it did,
EverBank has always reserved the right to terminate any
deposit account to limit losses: Paragraph 1.17 has always
modified the automatic renewal policy in paragraph 2.7.10.
Moreover, TISA does not provide that a bank’s failure to give
notice prevents the change from coming into effect, as
Vathana contends. Vathana’s unavailing TISA argument does
not alter our conclusion that the district court properly held
that Vathana failed to produce sufficient facts for a
reasonable jury to find that EverBank acted in bad faith in
closing the class members’ CDs.
 VATHANA V. EVERBANK 13

2. The Currency Conversion Rate

Vathana argues that paragraph 2.7.1 of the Terms and
Conditions does not supply the currency conversion rate that
applies when the WorldCurrency CDs are closed. According
to Vathana, if paragraph 2.7.1 does not apply to an account’s
closing, then he and the rest of the class were entitled to
payment in ISK, not U.S. dollars. While we do not address
whether the plaintiffs were entitled to payment in ISK absent
a contractual conversion rate, we disagree with the district
court’s conclusion that paragraph 2.7.1 unambiguously
provides this rate. The Terms and Conditions could
reasonably be interpreted as providing a currency conversion
rate applicable only when a WorldCurrency CD is opened.
Therefore, the district court erred in deciding as a matter of
law that EverBank did not breach its agreement with the class
members by converting the value of their CDs into U.S.
dollars at a currency conversion rate within 1% of the
wholesale spot price.

Paragraph 2.7.1 of the Terms and Conditions provides:

Conversion Information: This account will
be used to hold funds denominated in a
currency other than U.S. dollars. If you
request funds in this account to be
denominated in a currency other than the
currency sent to us to fund the account, we
will convert your funds using a then current
conversion rate set by us. Your currency
conversion rate will be within 1% of the
wholesale spot price we pay for your
currency. Exceptions may occur when a
14 VATHANA V. EVERBANK

specific conversion rate is agreed upon
between you and us.

The district court acknowledged that reading paragraph 2.7.1
alone, the currency conversion rate “within 1% of the
wholesale spot price we pay for your currency” appears only
to apply when EverBank converts the customer’s U.S. dollars
into foreign currency to fund the account. The district court
also recognized that paragraph 2.7.1 appears at the beginning
of the section of the Terms and Conditions specifically
applicable to the WorldCurrency CD, whereas provisions
governing the withdrawal of funds from the CDs and the
renewal of the CDs appear later, suggesting that the
conversion rate in paragraph 2.7.1 applies only when the
account is opened. Id.

However, the district court reasoned that, looking at the
Terms and Conditions as a whole, paragraph 2.7.1 provides
the WorldCurrency CDs’ generally applicable, default
conversion rate. The district court pinpointed the paragraph
of the Terms and Conditions offering a “Lock-In Alternative”
rate as conclusive evidence that the currency conversion rate
in paragraph 2.7.1 otherwise applies to all conversions. Under
that paragraph, the customer can contact EverBank at any
point during the CD’s maturity period to lock in an exit
currency conversion rate for the CD rather than risk further
fluctuations in the market before the CD matures. Because
EverBank offers the customer this alternative exit currency
conversion rate, the district court reasoned that the alternative
rate must be “distinct from an otherwise understood currency
conversion rate that is generally applicable to the account.”
Thus, the district court concluded that paragraph 2.7.1
necessarily provides the generally applicable conversion rate.
 VATHANA V. EVERBANK 15

We agree with the district court that the Lock-In
Alternative suggests that many customers might desire to
have their balances converted into U.S. dollars upon maturity,
and that it would therefore be reasonable for the Terms and
Conditions to provide for a generally understood currency
conversion rate. But we disagree that the Lock-In Alternative
establishes as a matter of law that paragraph 2.7.1 provides
that rate.

First, the structure of paragraph 2.7.1 strongly suggests
that its conversion rate applies only when EverBank converts
a customer’s deposit to a foreign currency when the CD is
opened. The paragraph begins by explaining that, if the
customer “request[s] funds in this account to be denominated
in a currency other than the currency sent to us to fund the
account,” EverBank will convert the customer’s initial
investment into foreign currency “using a then current
conversion rate set by us.” The sentence “[y]our currency
conversion rate will be within 1% of the wholesale spot price
we pay for your currency” immediately follows.

Second, the wording of the sentence “[y]our currency
conversion rate will be within 1% of the wholesale spot price
we pay for your currency” supports the interpretation that the
currency conversion rate applies only when the account is
opened, but not when it is closed, as EverBank only
purchases foreign currency when the customer first opens the
CD, and not when it closes the account.

Third, other references to currency conversion rates in the
Terms and Conditions do not refer to a wholesale spot price
or refer back to paragraph 2.7.1. For example, paragraph
2.7.8, which provides the penalties for early withdrawal,
states that if the customer wishes to withdraw the value of the
16 VATHANA V. EVERBANK

WorldCurrency CD before it matures, the customer will pay
an early withdrawal penalty and receive the value of the CD
“converted to U.S. dollars at prices prevailing in the market
at the time of early withdrawal, minus a conversion cost of up
to 1.5%.”

The Terms and Conditions do not unambiguously supply
a currency conversion rate applicable when the
WorldCurrency CD is closed. Thus, EverBank may have
breached its agreement with the class members by returning
the value of their WorldCurrency CDs using a currency
conversion rate within 1% of the wholesale spot price.
Because the Terms and Conditions are ambiguous, summary
judgment for EverBank on this issue was inappropriate.

CONCLUSION

No reasonable jury could find that EverBank acted in bad
faith when it exercised its discretion to close the
WorldCurrency CDs to limit losses to itself or its customers.
However, we conclude that a reasonable jury could find that
the Terms and Conditions are silent with respect to the
currency conversion rate that applied when the
WorldCurrency CDs were closed and the proceeds from the
CDs returned to the class members. We reverse the district
court’s entry of summary judgment on this ground. We
remand to the district court to resolve whether EverBank
breached the Terms and Conditions when it returned the
value of the WorldCurrency CDs to the class members.

Each party shall bear its own costs on appeal.

AFFIRMED in part, REVERSED in part, and
REMANDED.