FRBSF Supplemental Brief on Mootness — PayServices v. FRBSF

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No. 24-2355 
IN THE UNITED STATES COURT OF APPEALS  
FOR THE NINTH CIRCUIT 
PAYSERVICES BANK, 
Plaintiff-Appellant, 
v. 
FEDERAL RESERVE BANK OF SAN FRANCISCO, 
Defendant-Appellee. 
On Appeal from the United States District Court  
for the District of Idaho  
No. 1:23-cv-00305-REP  
Hon. Raymond E. Patricco, Jr. 
SUPPLEMENTAL BRIEF 
 
Jonathan K. Youngwood 
Meredith Karp   
Simpson Thacher & Bartlett LLP   
425 Lexington Avenue   
New York, NY 10017  
Telephone: (415) 455-3539 
jyoungwood@stblaw.com  
 
Attorneys for Defendant-Appellee Federal 
Reserve Bank of San Francisco  
 
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Table of Contents 
Page 
PRELIMINARY STATEMENT ........................................................................................ 1 
BACKGROUND ................................................................................................................ 2 
ARGUMENT ..................................................................................................................... 3 
I. 
This Case Is Moot Because PayServices Cannot Obtain the Relief it Seeks 
(Question 4) ............................................................................................................. 3 
A. 
PayServices Cannot Obtain an Injunction ................................................... 4 
1. 
PayServices Is Not Eligible for a Master Account Given 
Idaho’s Revocation of Its Preliminary Bank Charter 
(Question 2) ...................................................................................... 4 
2. 
The Court Need Not Abate This Case Because A Successful 
Appeal of the Cease-and-Desist Order Would Not Affect 
PayServices’ Legal Eligibility for a Master Account 
(Question 3) ...................................................................................... 6 
B. 
PayServices Cannot Obtain Monetary Relief .............................................. 7 
II. 
The Court Should Affirm the District Court’s Decision if the Case is Not 
Moot ........................................................................................................................ 9 
CONCLUSION ................................................................................................................ 10 
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PRELIMINARY STATEMENT 
The Federal Reserve Bank of San Francisco (“FRBSF”) files this Supplemental 
Brief in response to the Court’s December 19, 2024 order (the “December Order”).  
Plaintiff-Appellant PayServices Bank (“PayServices”) filed this suit alleging that its 
preliminary, conditional approval for a charter to operate a bank in Idaho entitled it to a 
master account with the Federal Reserve Bank of San Francisco.  As the December Order 
acknowledged, on October 16, 2024, the Idaho Department of Finance (the “Idaho 
Department”) terminated PayServices’ charter and rescinded any right PayServices had to 
call itself a bank. 
PayServices’ claims are moot in light of the termination of its charter (Question 4).  
It is no longer a state-chartered bank and is not allowed to call itself a bank.  As a result, 
it does not meet the minimum eligibility requirement for a master account, independent 
of FRBSF’s risk-based analysis under the Guidelines.  See Idaho Code § 26-202 (Question 
2).  PayServices therefore cannot obtain an injunction ordering FRBSF to provide it with 
a master account and does not otherwise have a valid claim for damages. 
Alternatively, should the Court find that there is still a live case or controversy, it 
should affirm the District Court’s dismissal of this case.  The District Court correctly held 
that PayServices was not entitled to a master account, and that FRBSF was not a federal 
agency subject to suit under the Administrative Procedure Act (the “APA”), the 
Mandamus Act, or the Due Process Clause.  The termination of PayServices’ charter and 
the unavailability of money damages are grounds on which to affirm the district court’s 
dismissal. 
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There is no need to abate this action pending the outcome of PayServices’ appeal 
before the Idaho Department (Question 3).  To FRBSF’s knowledge, the appeal does not 
seek to reverse the termination of its preliminary approval for a charter.  Rather, it 
addresses whether PayServices violated Idaho law by continuing to call itself a bank after 
the termination of its preliminary approval for a charter.  The outcome, therefore, will 
have no bearing on PayServices’ legal eligibility for a master account. 
BACKGROUND 
On August 3, 2022, PayServices received “preliminary, conditional approval to 
engage in the business of banking” from the Idaho Department.  (FER-03, ¶ 2).  On August 
10, 2022, PayServices requested a master account from FRBSF.  (ER-054).  On September 
12, 2022, the Idaho Department granted PayServices a waiver “to use the word bank in its 
name in the state of Idaho” (the “Name Waiver”).   (FER-03, ¶ 3).  On May 4, 2023, the 
Idaho Department warned PayServices that its conditional approval period would expire 
if it “was unable to satisfy all conditional approval requirements.”  (FER-04, ¶ 4).  On 
May 31, 2023, FRBSF denied PayServices’ request for a master account.  (ER-054). 
On August 4, 2023, the Idaho Department found that PayServices’ preliminary 
approval expired because it “had not met the conditions to receive a bank charter,” and 
required PayServices to submit an “updated application.”   (FER-04, ¶ 5).  On October 16, 
2023, the Idaho Department granted PayServices a “one-time extension” to meet the 
conditions set by the Idaho Department in August 2022.  (Id. ¶ 7).  On October 16, 2024, 
when PayServices failed to meet those conditions, PayServices’ preliminary approval 
“expired and was [] terminated.”  (Id. ¶ 9).  That day, the Idaho Department rescinded 
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PayServices’ Name Waiver.  (Id. ¶ 10).  PayServices “rejected the Department’s rescission 
and refused to stop using ‘PayServices Bank.’”  (FER-05, ¶ 11).  In response, the Idaho 
Department issued the Cease-and-Desist Order because “PayServices’ refusal to refrain 
from using the word ‘bank’ and its ongoing use of the word bank in its name is a violation” 
of Idaho law.  (FER-06, ¶ 17).  PayServices was enjoined from “transact[ing] business in 
Idaho” under the name PayServices Bank.  (FER-06).  PayServices appealed that order.1   
ARGUMENT 
I. 
This Case Is Moot Because PayServices Cannot Obtain the Relief It Seeks 
(Question 4)  
PayServices sought the same relief for each of its claims: (1) an order compelling 
FRBSF to grant it a master account and (2) unspecified monetary damages.  (ER-71-73, ¶ 
98, ¶ 103).  However, PayServices is neither statutorily eligible for a master account nor 
is it able to recover monetary damages against FRBSF based on the claims asserted here.  
As a result, no relief can be granted, and the appeal should be dismissed as moot.  See 
Nevada v. United States, 783 F. App’x 700, 703 (9th Cir. 2019) (“If it has become 
 
1  
Following the December Order, FRBSF’s counsel contacted counsel for 
PayServices to request information regarding the appeal.  PayServices did not provide 
copies of the appellate papers.  As a result, FRBSF may not have full information 
regarding the issues implicated in the appeal of the Cease-and-Desist Order and cannot 
respond to Question 1 in the December Order regarding the status of PayServices’ appeal.  
To the extent PayServices submits new information in its filing, FRBSF requests the 
opportunity to respond. 
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impossible for us to grant ‘any effectual relief whatever,’ then the case has become 
moot.”).2 
A. 
PayServices Cannot Obtain an Injunction  
Each of PayServices’ claims seek an order requiring FRBSF to grant it a master 
account.  (See ER-072-73, ¶ 98(b), ¶ 103(c)); ER-070, ¶ 89(b); ER-073, ¶ 103(b)).  But, 
as of October 16, 2024, PayServices is prohibited from operating a bank in Idaho and, as 
a result, no longer meets the minimum legal requirement for a master account.   
1. 
PayServices Is Not Eligible for a Master Account Given Idaho’s 
Revocation of Its Preliminary Bank Charter (Question 2) 
Without a charter, PayServices is not eligible for a master account.  Section 342 of 
the FRA states that a Reserve Bank may receive deposits from “any of its member banks” 
or “other depository institutions.”  12 U.S.C. § 342.3  PayServices makes no argument, 
nor could it, that it is a member bank.  It therefore must demonstrate that it is a depository 
institution, which is defined as a “bank” that is “insured” by, or “eligible to make [an] 
application” to be insured by, the Federal Deposit Insurance Corporation (“FDIC”) under 
 
2  
If this Court dismisses the appeal as moot, it should leave the District Court’s order 
of dismissal in place, rather than vacating the judgment.  Vacatur is appropriate “to prevent 
preclusion based on an unreviewed judgment due to ‘happenstance’ or ‘the unilateral 
action of the party who prevailed below.’”  Pinson v. Carvajal, 69 F.4th 1059, 1064 n.6 
(9th Cir. 2023) (emphasis added).  “[C]ourts usually won’t vacate lower court decisions 
when the appellant’s voluntary actions moot the appeal.”  City & Cty. of S.F. v. United 
States Citizenship & Immigration Servs., 992 F.3d 742, 753 (9th Cir. 2021).  Here, 
PayServices’ own actions in its failure to meet the conditions imposed by the Idaho 
Department mooted the appeal.  
3  
Even Section 248a of the FRA—the purported source of PayServices’ entitlement 
to a master account—is limited to depository institutions.  12 U.S.C. § 248a.     
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the Federal Deposit Insurance Act (FDIA).  12 U.S.C. § 461(b)(1)(A)(i); (ER-050, ¶ 4) 
(alleging that PayServices is a “bank which is eligible to make application to become an 
insured bank”).4  In short, to qualify as a depository institution under § 461(b)(1)(A)(i), 
PayServices must be a bank. 
A bank is either a national or state bank.  12 U.S.C. § 1813(a)(1) (Bank “means 
any national bank and state bank[.]”).  PayServices purports to be an Idaho state bank (ER-
050, ¶ 2), but a state bank must be “engaged in the business of receiving deposits” and 
“incorporated under the laws of any State.”  12 U.S.C. § 1813(a)(2).  The Idaho Bank Act 
forbids any person from “engag[ing] in or transact[ing] any banking business”—including 
“receiving or accepting of money…on deposit as a regular business”—“without the 
written approval of,” and a “written charter” from, the Idaho Department.  Idaho Code § 
26-202.   
The only written authorization PayServices received from the Idaho Department 
was its preliminary approval, which was “terminated” in October 2024.  (FER-04, ¶ 9).  
Notably, the Idaho Department made clear it would not grant an extension.  (Id. ¶ 7).  After 
PayServices’ preliminary approval was terminated, the Idaho Department found that 
PayServices had violated the Idaho Bank Act by continuing to transact business and 
advertise under the name “PayServices Bank.”  (FER-05-06).5   
 
4  
Depository institutions also include savings associations, credit unions, or mutual 
savings banks, none of which are at issue here.  12 U.S.C. § 461 (b)(1)(A)(ii)-(v).   
5  
In keeping with the discussion of avian taxonomy at the December 4, 2024, 
argument, in this case the metaphorical bird does not look, swim, or quack like a duck. 
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The termination of PayServices’ preliminary charter is dispositive.  A charter is a 
threshold requirement to be a bank in the state of Idaho.  Idaho Code § 26-202.  And 
operating a bank is a threshold requirement to qualifying for a master account under the 
FRA.  12 U.S.C. § 461(b)(1)(A)(i).  Pursuant to Section 342, FRBSF has no legal authority 
to accept deposits, or offer depository accounts to, ineligible institutions.  12 U.S.C. § 342.       
2. 
The Court Need Not Abate This Case Because a Successful 
Appeal of the Cease-and-Desist Order Would Not Affect 
PayServices’ Legal Eligibility for a Master Account (Question 3) 
Although PayServices appealed the Cease-and-Desist Order, the Cease-and-Desist 
Order finds only that PayServices violated Idaho law after the expiration of PayServices’ 
preliminary approval.  A stay is not warranted pending resolution of that appeal.6  As this 
Court has held, a court may stay federal proceedings in favor of a parallel state proceeding 
only in “exceptional circumstances.”  Ernest Bock, LLC v. Steelman, 76 F.4th 827, 836 
(9th Cir. 2023).  Even when a stay may help “prioritize efficient ‘disposition of 
litigation,’” a “substantial doubt” as to “whether the state proceedings will resolve the 
federal action . . . precludes the granting of a stay.”  Id. at 836, 841.  Here, to the knowledge 
of FRBSF, PayServices is not an eligible institution regardless of the disposition of the 
appeal.  
 
6  
To the extent PayServices is separately appealing the expiration of the preliminary 
approval for a charter, that information is not publicly available.  If PayServices provides 
information suggesting that it is appealing the expiration of its preliminary approval along 
with the Cease-and-Desist Order, FRBSF requests an opportunity to respond. 
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When PayServices’ preliminary approval expired on October 16, 2024, it “was [] 
terminated” in full.  (FER-04, ¶ 9).  The Idaho Department confirmed as much when it 
rescinded PayServices’ Name Waiver the same day.  (Id. ¶ 10).  As the Idaho Department 
explained, PayServices’ charter was terminated pursuant to the terms of a letter dated 
October 15, 2023, and the termination was communicated to PayServices on October 16, 
2024.  (Id. ¶¶ 7-9).  Thus, the October 18, 2024 Cease-and-Desist Order did not effectuate 
the termination.  That order is about PayServices’ name, not its charter. The Idaho 
Department found that PayServices violated the Unauthorized Use of Name provision, 
and enjoined PayServices from further violations.  (FER-05).  The Cease-and-Desist 
Order itself concerns only PayServices’ misconduct after PayServices’ preliminary 
approval expired.  It does not address the expiration of the preliminary approval, and 
nothing in the Cease-and-Desist Order (or any other publicly available document) 
suggests the expiration of PayServices’ preliminary approval for a charter was appealable.  
Thus, the “state proceeding cannot resolve” PayServices’ eligibility for a master account 
“because the [Idaho Department] has not raised such a claim in that forum.”  United States 
v. State Water Res. Control Bd., 988 F.3d 1194, 1208 (9th Cir. 2021). 
B. 
PayServices Cannot Obtain Monetary Relief 
PayServices also seeks money damages based on its (incorrect) theory that FRBSF 
is a federal agency that is subject to the APA, Mandamus Act, and Due Process Clause.  
Even if FRBSF were a federal agency for the purposes of PayServices’ claims (it is not), 
PayServices would be unable to obtain monetary relief in this case.  As the Supreme Court 
explained in FDIC v. Meyer, courts cannot imply a damages action against federal 
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agencies unless the “substantive law on which the claimant relies” provides for that 
remedy.  510 U.S. 471, 484-86 (1994).  Here, the claims PayServices brings do not provide 
for monetary damages. 
First, to maintain a suit under the APA a plaintiff must “seek[] relief other than 
money damages.”  United Aeronautical Corp. v. United States A.F., 80 F.4th 1017, 1033 
(9th Cir. 2023); Alcoa, Inc. v. Bonneville Power Admin., 698 F.3d 774, 806 (9th Cir. 2012) 
(holding that “‘monetary damages’ are not available” under the APA).   Plaintiffs cannot 
use the APA to obtain compensatory damages arising from an alleged APA violation, 
which is exactly what PayServices seeks to do here.  See Bowen v. Massachusetts, 487 
U.S. 879, 900, 899 (1988) (distinguishing between “the recovery of money damages and 
the recovery of specific property or monies” under the APA).   
Second, the Mandamus Act provides only for an order to “compel . . . any agency 
[of the United States] to perform a duty owed to the plaintiff.”  28 U.S.C. 1361.  It does 
not permit suits for money damages.  See Denton v. Schlesinger, 605 F.2d 484, 485 (9th 
Cir. 1979); Grondal v. United States, 37 F.4th 610, 619-20 (9th Cir. 2022).   
Finally, as the Supreme Court confirmed in Meyer, the Due Process Clause does 
not provide for monetary damages in these circumstances.  510 U.S. at 473, 486.  The 
Sixth Circuit’s decision in American Premier Underwriters, Inc. v. Amtrak is instructive.  
709 F.3d 584, 590 (6th Cir. 2013).  Therein, the Sixth Circuit analyzed whether Amtrak 
could be sued for monetary damages for alleged violations of the Due Process Clause.  It 
held that Amtrak—which lacked traditional sovereign immunity due to its sue-or-be-sued 
clause—“cannot be sued for damages” for constitutional violations because it “possesses 
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the status of a ‘Government entity’ with regard to [such] violations.”  Id.  The same rule 
applies here.  
In all, the APA, Mandamus Act, and Due Process Clause do not provide for 
monetary damages in this case.  Because PayServices cannot obtain either the injunctive 
or monetary relief it seeks, the Court should dismiss this case. 
II. 
The Court Should Affirm the District Court’s Decision if the Case is Not 
Moot 
In the alternative, should the Court determine there is a live case or controversy, it 
should affirm the District Court’s holding that each of PayServices’ claims fails as a matter 
of law.   
The termination of PayServices’ charter is a new fact, about which the Court may 
take judicial notice.  See Bentley v. Bureau of Alcohol, Tobacco, Firearms, & Explosives, 
414 F. App’x 28, 30 (9th Cir. 2011).  PayServices’ inability to obtain injunctive relief or 
recover monetary damages are separate grounds for affirmance of the dismissal, in 
addition to the sound rationale of the District Court that Reserve Banks have discretion to 
grant or deny master accounts to eligible institutions.  Two other federal courts have 
reached the same conclusion as the District Court in this case, and no court has held to the 
contrary.  See Banco San Juan Internacional, Inc. v. FRB of N.Y., 2025 U.S. Dist. LEXIS 
3507, at *19 (S.D.N.Y. Jan. 8, 2025);7 Custodia Bank, Inc. v. Federal Reserve Board of 
Governors, 728 F. Supp. 3d 1227, 1245 (D. Wyo. Mar. 29, 2024) (“[T]he plain language 
 
7  
The Southern District of New York granted the motion to dismiss in Banco San 
Juan on January 8, 2025. 
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of the relevant statutes can only reasonably be read to give the Federal Reserve Banks 
discretion in granting or denying requests for a master account.”).  The District Court also 
properly dismissed PayServices’ claims because FRBSF is not a federal agency “for the 
purposes of PayServices’ claims against FRBSF.”  (ER-031, 034-36); Banco San Juan, 
2025 U.S. Dist. LEXIS 3507, at *46.  These reasons, coupled with the unavailability of 
injunctive or monetary relief, are valid grounds for an affirmance. 
CONCLUSION 
For the foregoing reasons, this Court should dismiss this case as moot or, 
alternatively, affirm the District Court’s order dismissing PayServices’ Complaint. 
Dated: January 17, 2025 
/s/ Jonathan K. Youngwood 
 
Jonathan K. Youngwood   
Meredith Karp 
Simpson Thacher & Bartlett LLP 
425 Lexington Avenue   
New York, NY 10017  
Telephone: (212) 455-2000 
jyoungwood@stblaw.com  
Meredith.Karp@stblaw.com 
Attorneys for Defendant-Appellee 
Federal Reserve Bank of San 
Francisco 
 
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