The return of Mr. Hom - case No.14-16214

This is good news and I am happy that Joe took the case pro bono.......

In the United States Court of Appeals
for the Ninth Circuit
JOHN C. HOM
Appellant,
v.
UNITED STATES OF AMERICA
Appellee.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
CASE NO. 3:13-cv-03721-WHA
HON. WILLIAM ALSUP, PRESIDING
____________________________________________________

 Pro Bono Counsel for the Appellant..............Joseph A. DiRuzzo, III and Jeffrey J. Molinaro

ARGUMENT
Appellant, John Hom, respectfully submits this Reply to Appellee, United States of America’s Answer Brief. As will be demonstrated below, the Government’s brief is fundamentally flawed in several ways.
First, the District Court erred in granting summary judgment to the Government because the accounts at issue are not “bank, securities, or other financial accounts” under the Bank Secrecy Act of 1970 (“BSA”). Here, contrary to the Government’s position, because “engage in the business of banking” is undefined by the BSA, this Court must look to the term’s plain and ordinary meaning and construe the BSA in pari materia with other acts similar in purpose, namely Foreign Account Tax Compliance Act (“FATCA”). When such an analysis occurs, it is evident that to “engage in the business of banking” requires more than merely holding funds as credit to provide a service, namely the ability to play online poker, and returning unused funds or earned credits. Without more, such is insufficient to be considered as engaging in banking services.
Moreover, contrary to the Government’s assertion, the Secretary’s conclusion that the accounts at issue qualify as “bank or other financial accounts” is entitled to no deference. Such a conclusion was not the product of rulemaking via the Administrative Procedures Act (“APA”). Rather, it is a post-hoc rationalization to defend a position taken in litigation. Such rationalizations have been expressly rejected. Further, to the extent the Government attempts to assert a new position, namely that PokerStars and PartyPoker acted as casinos and/or currency exchanges, it waived such arguments through its express disaffirmance of such positions in the trial court. As such, this Court should not address such arguments.
Moreover, although the Court may affirm for any ground supported by the record, courts are hesitant and have recognized exceptions to such rules where due process concerns would exist or where the movant on summary judgment has not asserted before the trial court a failure of the nonmovant’s evidence on a defense and therefore has not shifted the burden to the nonmoving party. Both situations exist in this case.
Even if this Court did consider the merits of the Government’s newly revised position, summary judgment was still improper. Here, because any exchange of funds was incidental to the service being provided, namely online poker, neither PokerStars nor PartyPoker would constitute a “currency exchange” as that term is defined. Further, no evidence was produced in the trial court to establish the gaming revenues of either PokerStars or Party Poker. Such evidence is necessary and relevant as the definition of “financial institution” only includes casinos with gaming revenues which exceed $1 million. Thus, a material question of fact exists and remand would be proper.
Finally, similar to its casino and currency exchange arguments, the Government’s new attempt to argue that the poker accounts are covered under 31 U.S.C. § 5312(a)(2)(Z) as businesses regulated by the Secretary as “financial institution[s]”, such a position is incorrect, a sham and a clear post-hoc rationalization by counsel in an attempt to save an already weak litigation position. Thus, the argument should be rejected by this Court.
Second, in concluding that the accounts at issue were foreign accounts, the District Court made an error of law in its determination that an account is considered foreign based on the nationality of the financial entity and not the geographic location of the account holding the money at issue. In its Answer Brief, the Government solely and exclusively focuses on the District Court’s factual determination and ignores any and all legal arguments presented by Hom regarding the District Court’s conclusion. However, the trial court’s factual conclusion, premised on this erroneous view of the law, is entitled to no deference and should be rejected. Moreover, the failure to rebut the arguments of Hom in the Government’s Answer Brief acts as a waiver of such a position by the Government. Accordingly, this Court should reverse and remand.

I. THE ACCOUNTS AT ISSUE ARE NOT “BANK, SECURITIES, OR OTHER FINANCIAL ACCOUNTS” UNDER THE BANK SECRECY ACT.
A. PokerStars, PartyPoker, and FirePay are not engaged in the business of banking and do not function as banks or money transmitters. Further, courts commonly read regulations of similar statutes in pari materia, therefore the Government’s claims to the contrary should be rejected. Thus, the accounts at issue are not “bank accounts” or “other financial accounts” under the BSA.
In its Answer, the Government argues that the District Court was correct in its determination that the accounts at issue qualify as “bank” or “other financial” accounts because the District Court correctly concluded that PokerStars, PartyPoker, and FirePay acted as banks. The Government is incorrect.
At the outset, it must be noted that the Government has conceded that neither the BSA, nor its implementing regulations, define what activities constitute the “business of banking.” Gov’t Br. at 52. Thus, the Government must also concede that the BSA has left the term undefined. In such instances, the Supreme Court has made clear, that an undefined term should receive its ordinary and natural meaning. See Fed. Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 476 (1994) (citing Smith v. United States, 508 U.S. 223, 228 (1993)). As explained within Hom’s Initial Brief, a “bank” is commonly defined to mean: “An establishment for the custody, loan, exchange, or issue of money, for the extension of credit, and for facilitating the transmission of funds.”1
1 See Merriam-Webster’s Dictionary, available at http://www.merriam-webster.com/dictionary/banking?show=1&t=1411670004 (last accessed October 3, 2014).
The ordinary and natural meaning of what it is to be a bank requires significantly more than the limited vague definition developed by the Fourth Circuit in United States v. Clines, 958 F.2d 578 (4th Cir. 1992) of holding money for others which the Government relies upon.
In addition, this Circuit has also repeatedly found that when a statute is ambiguous, its meaning may be determined in light of other statutes relating to a similar subject matter. F.P Baugh, Inc. v. Little Lake Lumber Co., 297 F.2d 692, 696 (9th Cir. 1961); Wilson v. United States, 250 F.2d 312, 320 (9th Cir. 1957). Thus, this Court should construe the ambiguity in light of how the term is defined in similar statutory and regulatory schemes.
Here, the most obvious comparison would be to the statutory and regulatory regime established by Congress and the Secretary of the Treasury with regards to FATCA. Similar to the BSA’s purposes of curbing criminal activities and tax evasion, see 31 U.S.C. § 5311, FATCA2 was enacted to prevent U.S. taxpayers’ attempts to evade the U.S. tax compliance system and evade taxes. 78 Fed. Reg. 5874 (January 28, 2013); see 156 Cong. Rec. S1745-01 (daily ed. March 18, 2010) (statement of Sen. Levin) (“[T]he HIRE Act3 contains foreign account tax compliance provisions that represent a major new and positive development in the efforts to stop offshore banks from using secrecy laws to help U.S. taxpayers evade their taxes.”). As with the BSA,
2 Codified at 26 U.S.C. §§ 1471-1474 and 6038D.
3 FATCA is a portion of the 2010 Hiring Incentives to Restore Employment (“HIRE”) Act. PL 111-147, March 18, 2010, 124 Stat. 71. FATCA compliance depends on whether an entity is a financial institution, which similar to the BSA, turns in part on whether an entity engages in the business of banking.
As explained in Hom’s Initial Brief, the Secretary of the Treasury, the same person empowered to regulate the BSA, established regulations at 26 C.F.R. § 1.1471-5(e)(2) which define “banking or similar business” to require more than the mere accepting of deposits and providing of withdrawals.4 The Treasury Department noted
4 26 C.F.R. § 1.1471-5(e)(2) states in pertinent part:
Banking or similar business—(i) In general. Except as otherwise provided in paragraph (e)(2)(ii) of this section, an entity is considered to be engaged in a banking or similar business if, in the ordinary course of its business with customers, the entity accepts deposits or other similar investments of funds and regularly engages in one or more of the following activities--
(A) Makes personal, mortgage, industrial, or other loans or provides other extensions of credit;
(B) Purchases, sells, discounts, or negotiates accounts receivable, installment obligations, notes, drafts, checks, bills of exchange, acceptances, or other evidence of indebtedness;
(C) Issues letters of credit and negotiates drafts drawn thereunder;
(D) Provides trust or fiduciary services;
(E) Finances foreign exchange transactions; or
(F) Enters into, purchases, or disposes of finance leases or leased assets.
(emphasis added). that “the final regulations clarify that accepting deposits is necessary but not sufficient to create depository entity status.” 78 Fed. Reg. 5874, 5888. Instead, “an entity that accepts deposits must also engage in one or more of the enumerated banking or financing activities (adapted from [26 U.S.C. §] 864’s and [26 U.S.C. §] 954(f)’s active banking, financing, and similar business rules).” Id. The Treasury Department further explained “[t]he final regulations also provide that, to be treated as a depository institution, an entity needs to engage on a regular basis in one or more such activities.” Id.
The Government ignores these arguments in their entirety. Rather, in its Answer, the Government posits that this Court cannot glean incite as to what “engage in the business of banking” means from the regulatory definition of “banking or similar business” found at 26 C.F.R § 1.1471-5(e)(2) because the doctrine of in pari materia does not allow for a comparison of regulations to statutes. Gov’t Br. at 58-59. The Government provides absolutely no support in the form of case law, legislative history, or otherwise, that the definition of engaging in the business of banking under FATCA is narrower than the BSA. The Government is woefully incorrect on both fronts.
As noted by the dearth of case law supporting its position, the Government cites to nothing that stands for its proposition that a court may not refer to regulations, especially regulations promulgated by the same executive agency responsible for enforcing similarly purposed statutes, in its in pari materia analysis. It is axiomatic that courts presume Congress is aware of administrative regulations as well as statutes. Public Citizens, Inc. v. FAA, 988 F.2d 186, 194 (D.C. Cir. 1993); Marchese v. Shearson Hayden Stores, Inc., 822 F.2d 876, 878 (9th Cir. 1987). Thus, courts frequently apply the doctrine of in pari materia to regulations as well as statutes. See United States v. Louisiana Pacific Corp., 925 F. Supp. 1484, 1486 (D. Colo. 1996) construing 42 U.S.C. § 7414 and 40 C.F.R. § 51.230 in pari materia); University of Cincinnati v. Shalala, 891 F.Supp. 1262, 1271 (S.D. Ohio 1995) (applying in pari materia rule to 42 C.F.R. § 405.1885 and 42 C.F.R. § 405.1889); Paisey v. Vitale, In and For Broward County, Fla., 634 F.Supp. 741, 742-743 (S.D. Fla. 1986) (reading 34 C.F.R. § 100.7(e) in pari materia with 42 U.S.C. § 1983).
Moreover, not only do courts engage in in pari materia to compare regulations of various statutes promulgated by the same agency, but courts have also engaged in in pari materia analysis to take definitions promulgated in regulations by one agency and apply it to an undefined, identical term in the regulations of another agency. See Toyota Motor Mfg., Kentucky, Inc. v. Williams, 534 U.S. 184, 195-196 (2006) (superseded by Amendments Act of 2008, Pub.L. No. 110-325, 122 Stat. 3553 (2008)) (using in pari materia to determine the meaning of “physical impairment” and “substantially limits” by reading the American with Disabilities Act (“ADA”) in pari materia with the Rehabilitation Act of 1973, and adopting the Rehabilitation Act’s regulatory definition of “physical impairment” found at 45 C.F.R. § 84.3(j)(2)(i) promulgated by the Department of Health, Education and Welfare 5 and applying it to the same undefined term within the ADA at 42 U.S.C. § 12102(1)(a) and reading the ADA in pari materia with regulations promulgated by the Equal Employment Opportunity Commission on the meaning of “substantially limits” found at 29 C.F.R. § 1630.2(j)(1)); Iberra v. Texas Employment Comm’n, 598 F. Supp. 104 (E.D. Tex. 1984) (reading regulation from Department of Health and Human Services in pari materia with 26 U.S.C. § 3304 and the regulations of the Department of Labor); United States v. Biocic, 730 F. Supp. 1364, 1365 (D. Md. 1990) aff’d 928 F.2d 112 (4th Cir. 1991) (applying the in pari materia principle to 36 C.F.R. § 251.93 and 50 C.F.R. § 27.83 to define the term “indecency”); United States v. Olesen, 196 F.Supp. 688, 690 (S.D. Cal. 1961) (holding that because 50 C.F.R. § 10.3(b)(9) did not define the term “area” when prohibiting certain hunting practices, the federal regulation “must be held to be in pari materia with the State regulation”). Thus, any argument that FATCA and its implementing regulations cannot be read in pari materia with the BSA and FBAR filing obligations, especially in light of the similar purposes of each (to curb and aid in the discovery of tax evasion) and the fact the same agency is in charge of promulgating regulations for each (Department of the Treasury), should be rejected by this Court. Therefore, this Court must construe the BSA (and its implementing regulations) with FATCA and interpret the concept of “engaging in the business of banking” similarly.
5 Department of Health, Education and Welfare is the same agency which oversaw the ADA. The only argument the Government makes in opposition to the adoption FATCA’s definition of the business of banking is its unsupported assertion that FATCA’s definition is narrower. Such a conclusion is soundly rejected by FATCA’s legislative history. As explained by Sen. Levin in discussing Congress’ intention is drafting FATCA, “it is clearly intended that the definition of foreign ‘financial institution’ be applied broadly, to include banks, securities firms, money services businesses, money exchange houses, hedge funds, private equity funds, commodity traders, derivative dealers, and any other type of financial firm that holds, invests, or trades assets on behalf of itself or another person.” 156 Cong. Rec. S1745-01 (daily ed. March 18, 2010) (statement of Sen. Levin). FATCA makes clear, even a broad definition must have boundaries. Such should also be the case here.
B. The Secretary’s conclusion in bringing suit that the accounts at issue are “bank” or “other financial accounts” is entitled to no deference as it is a position solely taken for litigation.
In its Answer Brief, the Government argues that “[t]he Treasury’s interpretation of the regulation that an entity may be engaged in the business of banking for purposes of the FBAR requirements” is entitled to deference. Gov’t Br. at 54. The Government is wrong.
The Government confuses the Secretary’s position taken for litigation, i.e. that the accounts in this case qualify as bank account or other financial accounts, with the concept of a legislative or interpretative rule of the agency. As explained by the Supreme Court:
Despite the novelty of this interpretation, the Secretary contends that it is entitled to deference. . . Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-844, 104 S.Ct. 2778, 2781-2783, 81 L.Ed.2d 694 (1984). We have never applied the principle of those cases to agency litigating positions that are wholly unsupported by regulations, rulings, or administrative practice. To the contrary, we have declined to give deference to an agency counsel’s interpretation of a statute where the agency itself has articulated no position on the question, on the ground that Congress has delegated to the administrative official and not to appellate counsel the responsibility for elaborating and enforcing statutory commands.”
Bowen v. Georgetown University Hospital, 488 U.S. 204, 212 (1988) (emphasis added, internal citations and quotations omitted).
Put simply, the Government has not and cannot cite to any rule, regulation, interpretative guidance or manual which reflects that the Secretary has interpreted the BSA and FBAR reporting requirements to include online poker accounts. In fact, the Government can cite to nothing other than its own complaint and administrative record in this case for such a position. Such a position is nothing more than a “convenient litigating position” or “post hoc rationalization” of an ambiguous regulation and thus should receive no deference.6 Bowen, 488 U.S. at 212-213.
6 Moreover, such a position lacks due process. Here, because the Secretary has promulgated nothing which stands for the position that the FBAR requirement of the BSA is triggered by online poker accounts or that said poker companies should be considered to be banks or money transmitters, Hom had no notice that his actions could constitute violative conduct. In essence, the Government’s position would charge Hom with guessing what conduct violates the law. Further, for rules to have the force and effect of law they must conform to the APA. United States v. Fifty-Three Eclectus Parrots, 685 F.2d 1131, 1136 (9th Cir. 1982). Without such proper C. The Government reversal of position regarding casinos and currency exchanges should be rejected.
In its Answer, the Government argues that this Court should find that the District Court did not err in its determination that the accounts at issue were “other financial accounts” because PokerStars and PartyPoker operated as casinos with revenues in excess of $1,000,000 or currency exchanges. However, the Government through its own affirmative conduct in the trial court waived any such arguments. As such, this Court should reject the Government’s shifting litigating position. Moreover, even if such arguments could be raised at the appellate level, the District Court still would have erred in granting summary judgment based on such newly asserted reasons.
1. For the Court to affirm, the issue must have been properly raised below.
As explained by the Supreme Court:
As the prevailing party, the appellee was of course free to defend its judgment on any ground properly raised below whether or not that ground was relied upon, rejected, or even considered by the District Court.
Washington v. Confederated Bands and Tribes of Yakima Indian Nation, 439 U.S. 463, 478 n. 20 (1979) (emphasis added); see also Fireman’s Fund Ins. Co. v. United States, 909 F.2d 495, 499 (Fed. Cir. 1990) (“Where the grounds urged in support of the judgment have
promulgation, Hom would in essence face liability for violating a general policy that he was not legally obligated to comply with in the first place. not been presented to and passed upon by the trial court, we prefer not to address them in the first instance.”) (citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989)).
This Circuit has wholeheartedly adopted this approach. See Mansourian v. Regents of University of California, 602 F.3d 957, 974 (9th Cir. 2010) (“UCD next urges this court to conclude that the §1983 claim . . . is precluded by the doctrine of qualified immunity. The defendants, however, did not raise a qualified immunity defense in any of their dispositive motions before the district court. Our discretion to affirm on grounds other than those relied on by the district court extends to issues raised in a manner providing the district court an opportunity to rule on it.”) (emphasis added) (citing Proctor v. Vishay Intertechnology, Inc., 584 F.3d 1208, 1226 (9th Cir. 2009); Washington, supra.). Both the Supreme Court and this Circuit have made clear, for the Court to affirm on different grounds, those grounds must have been raised in the trial court. Such a case does not exist here.
Here, rather than raise the issue of whether PokerStars and PartyPoker acted as casinos with revenues over $1,000,000 or currency exchanges, the Government expressly disavowed such a position in its motion practice. See Gov’t Reply to Opp’n to Mot. for Summary Judgment p. 11 (Trial Dkt. # 38) (“The United States has not argued, and is not arguing, that the entities and the accounts at issue are from insured banks or casinos (or even card rooms) licensed by a State.”); Id. at n. 9 (“Section 5312(a)(2)(X) does not use the term ‘card room’ and instead includes a casino, gambling casino, or gaming establishment under the laws of any State. . . . In any event, the United States is not relying on this definition of “financial institution” because the accounts at issue, and the companies who operate the online poker gambling sites or intermediary bank, are all foreign and thus would not qualify as being licensed by any State.”); Id. at 12 (“The United States’ argument is that Firepay, PartyPoker, and PokerStars are ‘financial institutions’ under Section 5312(a)(2) as either a ‘commercial bank’ or ‘a licensed sender of money or any other person who engages as a business in the transmission of funds.”) (emphasis added). As explained below, such statements constitute a waiver of these positions in their entirety.
In this case, the Government did not properly raise the issue of whether the entities maintaining the accounts at issue qualified as or acted like casinos with revenues in excess of $1,000,000 or currency exchanges. Thus, such arguments cannot be considered by this Court and cannot form the basis to affirm the decision below.
2. The Government waived its arguments regarding casinos and currency exchanges below. Thus, this Court cannot now consider such arguments.
The Government’s actions in the trial court below constitute an express waiver of the arguments that the entities at issue are either casinos with revenues greater than $1,000,000 or currency exchanges. Thus, this Court should not consider the Government’s new and contradictory arguments.
Here, the key distinction is between the concepts of “waiver” and “forfeiture” of an argument. A party waives its argument “when it strategically withholds it or intentionally chooses to relinquish it.” Alvarez v. Tracy. – F.3d –, 2014 WL 6871570, *6
(9th Cir. Dec. 8, 2014) (holding appellee Indian tribe deliberately waived its nonexhaustion argument and defense, and thus such positions could not be asserted or considered by the appellate court, when the tribe strategically withheld the argument or alternatively intentionally chose to relinquish such argument in the trial court) (citing Wood v. Milyard, -- U.S. --, 132 S.Ct 1826, 1833-1835 (2012)); see also United State v. Jaimes-Jaimes, 406 F.3d 845, 847 (7th Cir. 2005) (“Waiver is the intentional relinquishment of a known right. Forfeiture is the failure to timely assert a right.”) (internal citations removed); United States v. Garcia, 580 F.3d 528, 541 (7th Cir. 2009) (“The line between waiver and forfeiture is often blurry. . . .The distinction is not always easy to make, and the important concern is whether a defendant chose, as a matter of strategy, not to present an argument.”).
In cases of waiver, the appellate court is precluded from review. See Wood v. Milyard, 132 S.Ct. at 1830 (“A court is not at liberty, we have cautioned, to bypass, override, or excuse a State’s deliberate waiver. . . .”) (citing Day v. McDonough, 547 U.S. 198, 202, 210 n. 11 (2006)); Jaimes-Jaimes, 406 F.3d at 847 (“Waiver precludes appellate review. . . .”) (internal citation omitted); Garcia, 580 F.3d at 541 (“Waiver is the intentional relinquishment of a known right, and it precludes appellate review altogether.”).
As explained in detail above, in the trial court, the Government systematically and repeatedly disavowed arguments that the entities at issue acted as casinos, currency exchanges, or any other potential “foreign financial institution” other than a 15bank or money transmitter. Thus, the Government has waived arguments to the contrary and appellate review of such issues is precluded. Alvarez, supra; Wood, supra; Jaimes-Jaimes, supra; Garcia, supra.
3. Even if the Government did not waive such arguments, courts have recognized exceptions to the “for any reason” rule where due process concerns exist or where a movant did not establish that the nonmovant’s defense fails and thus did not shift the burden.
Even if the Government did not waive its new and contrary arguments, the “for any reason” rule is not absolute. Thus, for the reasons set forth below, because this case would fall into both recognized exceptions, this Court should not hear the Government’s new arguments.
Generally speaking, courts have recognized two exceptions to the “for any reason” rule.
The first exists “where due process constraints require some notice at the trial level, which was omitted, of the basis that would otherwise support an affirmance, such as when a totally omitted affirmative defense might, if available for consideration, suffice to affirm a judgment[.]” Liberty Nat. Life Ins. Co. v. University of Alabama Health Servs. Found., P.C., 881 So.2d 1013, 1020 (Ala. 2003) (citing Ameriquest Mortgage Co. v. Bentley, 851 So.2d 458 (Ala. 2002)); Reeder v. Kansas City Bd. of Police, 733 F.2d 543, 548 (8th Cir. 1984); Griffith v. State of Colo. Div. of Youth Services, 17 F.3d 1323, 1328 (10th Cir. 1994); Coweta Cty v. Simmons, 507 S.E. 2d 440 (Ga. 1998). 16
The second exists “where a summary-judgment movant has not asserted before the trial court a failure of the nonmovant’s evidence on an element of a claim or defense and therefore has not shifted the burden of producing substantial evidence in support of that element.” Liberty Nat. Life Ins. Co., 881 So.2d at 1020 (citing Recotr v. Better Houses, Inc., 820 So.2d 75, 80 (Ala. 2001) (in turn quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986))). Here, both exceptions exist.
As to the first exception, similar to the court’s rationale in Ameriquest, the Government’s totally omitted arguments at the trial level that the entities at issue functioned as casinos with revenues greater than $1,000,000 or currency exchanges are arguments that, in and of themselves, if available for consideration, suffice to affirm the judgment. Thus, due process necessitates that this Court reject these arguments raised only for the first time at the appellate level and in direct contradiction of the Government’s prior pleadings.
As to the second exception, the party seeking summary judgment bears the initial burden of showing the absence of a genuine issue of fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970); Zoslaw v. MCA Distribution Corp., 693 F.3d 870, 883 (9th Cir. 1982), cert. denied, 460 U.S. 1085 (1983). After the movant meets this burden by presenting evidence which, if uncontroverted, would entitled it to a directed verdict at trial, the respondent must set forth specific facts that demonstrate that there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). When the party seeking summary judgment meets its burden, summary judgment will 17 be granted unless there is significant probative evidence tending to support the opponent’s legal theory. See First Nat’l Bank v. Cities Service Co., 391 U.S. 253, 290 (1968); Commodity Futures Trading Com. v. Savage, 611 F.2d 270 (9th Cir. 1979).
Here, by failing to raise these arguments in the trial court, the Government, as movant on summary judgment, never shifted the burden to Hom, as the nonmoving party, to establish by significant probative evidence a genuine issue for trial. As such, the new and contrary arguments cannot serve as the basis for affirming the judgment below. Consequently, this Court must reject such arguments.
4. Assuming arguendo that Court could consider these new arguments, the District Court still erred in granting summary judgment.
Assuming arguendo that this Court could consider the Government’s new arguments, a point which Hom does not concede, the Government is still incorrect in its assertion that the District Court did not err in granting summary judgment.
As to the Government’s casino argument, the Government can point to no evidence in the record that would establish that either PokerStars or PartyPoker have revenues in excess of $1,000,000. While the Government may postulate that such a distinction is irrelevant, such a determination is critical to assessing whether the entities at issue are considered “financial institutions.” As the BSA makes clear, not all casinos are considered “financial institutions.” Instead, only those licensed “casino[s], gambling casino[s], or gaming establishment[s] with an annual gaming revenue of more than $1,000,000” are considered “financial institutions” under 31 U.S.C. § 18
5312(a)(2)(X). Without a determination that PokerStars or PartyPoker have revenues in excess of $1,000,000 a curious result emerges: the BSA would have significantly broader construction in its foreign application than in its domestic application. It is clear, the Secretary has determined that only those casino entities with revenues in excess of $1,000,000 pose a significant enough risk to money laundering to necessitate their regulation. The Government points to nothing which would signify that this was Congress’ intent. Thus, a material issue of fact remains and reversal and remand are proper.
With regards to the Government’s currency exchange argument, neither 31 C.F.R. § 103.11 (2006), the regulation in effect at the time of the incidents in question, or its current version 31 C.F.R. § 1010.100 (2011), define what activities constitute “currency exchange.” Instead, 31 C.F.R. § 1010.100 (ff)(1) defines the term “dealer in foreign exchange.” Currently, the term “dealer in foreign exchange” is defined as:
A person that accepts the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more countries in exchange for the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more other countries in an amount greater than $1,000 for any other person on any day in one or more transactions, whether or not for same-day delivery.
31 C.F.R. § 1010.100 (ff)(1) (emphasis added). On its face, it is evident that neither PokerStars nor PartyPoker function as currency exchanges. 19

Here, neither company accepts money denominated in the currency one country in exchange for money denominated in the currency of another country. Instead, each accepts currency for the provision of a service, here online poker. Once the service has been used and completed, each provides back any unused or gained credits to the consumer. Here, any “currency exchange” is incidental to the provision of services. To give the Government’s argument credit would result in a boundless application of the BSA. Under the Government’s logic, any company which is located overseas which allows its customers to purchase goods online and provides refunds or credits to such consumers in a variety of currencies would be considered a “currency exchange” and trigger an FBAR reporting requirement. Such a boundless application goes beyond the purposes of the BSA itself.
Moreover, neither the BSA, nor its implementing regulations, define what “in exchange for” means. However, the definition of “currency exchange” is common at the state level. The Uniform Money Services Act7 lends support for the exclusion of businesses which provide incidental currency exchange from the definition of a currency exchange. Section 102(6) of the Uniform Money Services Act generally defines a “currency exchange” as meaning “receipt of revenues from the exchange of money of one government for money of another government.” However, § 401 of the Uniform Act specifically excludes business that may offer a small amount of
7 A uniform act designed to be implemented by the States in an effort to uniformly regulate and define certain industries which are traditionally regulated at the state level such as money services businesses and currency exchanges. Currency exchange incidental to their primary business from the act’s licensing requirements. See id. at § 401(a) (“A person may not engage in currency exchange . . .for which the person receives revenues equal or greater than [five percent] of total revenues. . . .”). States within this Circuit have adopted this approach. See Rev. Code. Wash. § 19.230.010(8)(b) (exempting from the definition of “currency exchange” “a person who provides currency exchange services for a person acting primarily for a business, commercial, agricultural, or investment purpose when the currency exchange is incidental to the transaction.”) (emphasis added).
Here, as Hom explained in his Initial Brief with regards to money transmission,8 PartyPoker and PokerStars provide its customers with a service, here the ability to play online poker. In order to procure such services, the customer must provide PartyPoker or PokerStars with cash which is used to purchase in game credits. Once the customer is done playing poker, i.e. finished using the services provided by PokerStars and PartyPoker, the entities return unused cash and winnings back to the customer in the account and currency of their choosing. There is no indication in the record that either entity is providing currency exchange services separate and apart
8 It must be noted that in its Answer Brief, the Government did not address Hom’s arguments that the District Court erred in granting summary judgment because neither PokerStars nor PartyPoker acted as money transmitters. Thus, the Government waives such an argument. See Clem v. Lomell, 566 F.3d 1177, 1182 (9th Cir. 2009) (“where appellees fail to raise an argument in their answering brief, they have waived it”) (internal citation omitted); United States v. Ford, 184 F.3d 566, 577, n. 3 (6th Cir. 1999) (“[e]ven appellees waive arguments by failing to brief them”) (internal citation omitted). from the above described scenario. Thus, any “exchange” of currency is incidental to the service each entity provides. Such actions would not classify either entity as a currency exchange under the law. As such, the Government’s position should be rejected.
5. The Government’s argument regarding the Secretary’s designation of the accounts at issue as reportable accounts is meritless, a post-hoc rationalization solely for litigation, and lacks good faith.
In its Answer Brief, the Government argues that the District Court was correct in granting summary judgment because 31 U.S.C. § 5312(a)(2)(Z) provides the Secretary with broad power to treat as a financial institution “any. . .business designated by the Secretary who cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters.” Gov’t Br. at 46-47. The Government is incorrect.
First, as explained above with regards to casinos and currency exchanges, the Government did not advance this position in the trial court, and waived it. Thus, this new unfounded position should be rejected by this Court.
Second, as clear from its conspicuous absence in the Government’s Answer, the Secretary nowhere has designated PartyPoker, PokerStars, Firepay or any other online poker and gaming website as engaging in cash transactions that have a high degree of usefulness in criminal, tax, and regulatory matters. Moreover, even if the Government could cite to something, which it cannot, such a position would have to be promulgated through the rulemaking procedures of the APA to have the force and effect of law. United States v. Fifty-Three Eclectus Parrots, 685 F.2d at 1136.
Instead, at best, the Government’s position is a post-hoc rationalization for an administrative order the type of which has been repeatedly rejected by the Supreme Court. See Bowen, supra; Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962) (The courts may not accept appellate counsel’s post hoc rationalizations for agency [orders].”). Such a position reeks of bad faith9 and should be rejected by this Court.
II. THE TRIAL COURT ERRED AS A MATTER OF LAW IN ITS DETERMINATION THAT WHETHER AN ACCOUNT IS “FOREIGN” IS DETERMINED BY THE NATIONALITY OF THE HOST FINANCIAL INSTITUTION AND NOT WHERE THE PHYSICAL MONEY OF THE ACCOUNT HOLDER IS STORED.
In his Initial Brief, Hom dedicates significant portions to the argument that the District Court erred as a matter of law in its determination that the an account is considered “foreign” for FBAR reporting purposes based on the nationality of the host institution and not the geographic location of the account which maintains the physical money at issue. However, nowhere in its Answer does the Government even remotely address the merits of these arguments. Instead, the Government’s Answer focuses solely on the factual determination of the District Court that the accounts at
9 Although not apparent from the Record, the Court can take judicial notice that in the Appellant’s Tax Court case (Hom v. Comm’r, case no. 9399-11) the IRS was not only was aware of Hom’s online gambling, the IRS stipulated that the Appellant was entitled to gambling losses, properly reported on Schedule C, during tax years 2005-2008. See Second Stipulation of Settled Issues (May 7, 2012). issue are in fact foreign under the BSA and is rife with ad hominem attacks.
10 Such arguments should be rejected for numerous reasons.
First, because the Government has failed to respond and address Hom’s arguments that the District Court erred as a matter of law, the Government has waived such arguments and this Court should reverse and remand on that basis alone. See Clem, supra at 1182 (“where appellees fail to raise an argument in their answering brief, they have waived it”) (internal citation omitted); Ford, supra 184 F.3d at 577 n. 3 (“[e]ven appellees waive arguments by failing to brief them”) (internal citation omitted).
As explained in detail in Hom’s Initial Brief, the District Court’s error of law was premised on its error in assigning Chevron deference to a passing remark found in the preamble found at 76 Fed. Reg. 10235 (February 24, 2011). When viewed in its full context, the preamble addressed the issue of whether securities, pensions, and life insurance accounts which hold assets of foreign entities would be considered “foreign” accounts for FBAR purpose. Such a consideration is irrelevant to the issue
10 With regards to the Government’s ad hominem attack found at footnote 7, the Government’s comments as to Hom’s assumed logic should the facts in this case be different merely demonstrates that even the highest of appointed officials within the tax and appellate sections of the United States Department of Justice have little to no understanding of the FBAR reporting requirements within the BSA. Put simply, there is no reporting requirement of funds held in the U.S. branch of a foreign bank. However, assuming arguendo that Hom did deposit funds in such a bank and then transferred said funds overseas, Hom would have a filing obligation on such funds as, once transferred, the funds would be geographically located in a foreign account located overseas. whether an account is foreign based on the nationality of its host institution or whether the geographic location of the account maintaining the assets at issue is determinative.
Moreover, even if the preamble was relevant, it is consistent with the positions of the IRS, FinCEN, and Hom that the geographical location of account funds, and not the location of the host institution, is determinative of whether an account is “foreign” under the BSA. As explained, the general instructions found at TD F 90.22-1 and FinCEN Form 114 make clear: “The geographic location of the account, not the nationality of the financial entity institution in which the account is found determines whether it is an account in a foreign country.” Reprinted in R-099 (second column under “Account in a Foreign Country” paragraph). The holding of the District Court goes in direct contradiction of the position of the Secretary and should be rejected by this Court.
Additionally, the preamble should not have been considered as the regulation was unambiguous that reportable accounts are only those located in a foreign country. 31 C.F.R. § 103.24 (2006); El Comite Para El Bienestar de Earliment v. Warmerdam, 539 F.3d 1062, 1070 (9th Cir. 2008) (“[P]reamble language should not be considered unless the regulation itself is ambiguous.”). However, even if the regulation was ambiguous, the preamble would be entitled to no deference as: 1) it would be an unreasonable interpretation of the regulation and the statute “is at odds with the available evidence of Congress’ purposes; and it reverses the [Treasury Department’s] own longstanding position. . .without providing a reasoned explanation;” Wyeth v. Levine, 555 U.S. 555, 556 (2009); and 2) would act as a legislative rule and thus be violative of the APA; Peabody Coal Co. v. Dir., Office of Workers’ Comp. Programs, 746 F.3d 1119,1125 (9th Cir. 2014); Fifty-Three Eclectus Parrots, supra. Thus, the Court should reverse the decision below and remand for further proceedings.
Second, to the extent the Government could stand on the merits of its argument, because the District Court’s factual determination was based on an erroneous interpretation of the law reversal is necessary. See Pullman-Standard v. Swint, 456 U.S. 273, 291-292 (1982) (“[f]actfinding is the basic responsibility of district courts rather than appellate courts” and “where findings are infirm because of an erroneous view of the law, a remand is the proper course. . . .”); G.M. Trading Corp. v. Comm’r, 121 F.3d 977, 980 (5th Cir. 1997) (“[f]indings of fact influenced by an erroneous view of the law are entitled to no deference”). Thus, a remand is necessary.

CONCLUSION
For the reasons set forth above, and in Hom’ Initial Brief, the judgment of the lower court should be reversed and remanded with instructions to dismiss the case below. Alternatively, this could should reverse and remand as an open question of material fact remains.
Respectfully submitted,
___________________________
Joseph A. DiRuzzo, III
Jeffrey J. Molinaro
FUERST ITTLEMAN DAVID & JOSEPH, PL
1001 Brickell Bay Drive, 32nd Floor
Miami, Florida 33131
305.350.5690 (O)
305.371.8989 (F)
jdiruzzo@fuerstlaw.com
jmolinaro@fuerstlaw.com
Pro Bono Attorneys for Appellant John C. Hom
Dated: Dec. 23, 2014

CERTIFICATE OF COMPLIANCE
I certify that, pursuant to Fed. R. App. P. 32(a)(7)(c) and 9th Circuit Rule 32-1, the foregoing Appellant’s Brief complies with the type-column limitation of Fed. R. App. P. 32(a)(7)(B) because this Brief contains 6,733 words, excluding the parts of the Brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This Brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally-spaced typeface using Microsoft Word 2010 edition in Garamond font, with a typeface of 14 points.
___________________________
Joseph A. DiRuzzo, III /s/ Joseph A. DiRuzzo, III Digitally signed by /s/ Joseph A. DiRuzzo, III
DN: cn=/s/ Joseph A. DiRuzzo, III, o=Fuerst Ittleman David & Joseph, PL, ou,
email=jdiruzzo@fuerstlaw.com, c=US
Date: 2014.12.23 16:02:10 -05'00'
Case: 14-16214, 12/23/2014, ID: 9360169, DktEntry: 26, Page 36 of 37
CERTIFICATE OF SERVICE
I certify that a copy of the foregoing was uploaded via the Court’s electronic filing system on December 23, 2014, which will provide a NEF to counsel of record and that pursuant to 9th Cir. R. 31-1, 7 paper copies of the Reply Brief will be filed pending a directive from the Clerk to do so. I certify that a paper copy of the foregoing will be mailed via U.S.P.S. on the same day the foregoing was approved by the Clerk of the Court to the following counsel for the United States:
Patrick J. Urda, Esq.
US Dept. of Justice, Tax Division, Appellate Section
PO Box 502
Washington, D.C. 20044
___________________________
Joseph A. DiRuzzo, III
29
FUERST ITTLEMAN DAVID & JOSEPH, PL
1001 BRICKELL BAY DRIVE, 32ND FLOOR, MIAMI, FL 33131 • T: 305.350.5690 • F: 305.371.8989 • WWW.FUERSTLAW.COM
/s/ Joseph A. DiRuzzo, III Digitally signed by /s/ Joseph A. DiRuzzo, III
DN: cn=/s/ Joseph A. DiRuzzo, III, o=Fuerst Ittleman David & Joseph, PL, ou,
email=jdiruzzo@fuerstlaw.com, c=US
Date: 2014.12.23 16:01:45 -05'00'
Case: 14-16214, 12/23/2014, ID: 9360169, DktEntry: 26, Page 37 of 37