Court Opinion

ID: 75340
Source: CourtListenerOpinion
Date Created: 2010-04-26 09:10:25+00
Date Added: 2024-06-11T13:27:12.252691
License: Public Domain

[PUBLISH]

                IN THE UNITED STATES COURT OF APPEALS

                         FOR THE ELEVENTH CIRCUIT

                             _____________________

                                  No. 00-11949
                             _____________________

                       D.C. Docket No. 96-01971-CV-ASG

MARIA DEL CARMEN MIRANDA DE VILLALBA,

                                                                  Plaintiff-Appellant,
                                       versus

COUTTS & CO. (USA) INTERNATIONAL,

                                                                  Defendant-Appellee.

                             _____________________

                   Appeal from the United States District Court
                       for the Southern District of Florida
                            _____________________
                                 (May 11, 2001)

Before EDMONDSON, FAY and NEWMAN*, Circuit Judges.

NEWMAN, Circuit Judge:

_____________________________

       *Honorable Jon O. Newman, U.S. Circuit Judge for the Second Circuit, sitting by
designation.
      This appeal concerns the scope of the provision of the Right to Financial

Privacy Act of 1978 (“RFPA”) that insulates a financial institution from liability for

certain disclosures to a government authority concerning possible law violations. See

12 U.S.C. § 3403(c). Maria Villalba appeals from a judgment of the District Court for

the Southern District of Florida (Alan S. Gold, District Judge), dismissing, on motion

for summary judgment, her suit under the RFPA against Defendant-Appellee Coutts

& Co. USA. We conclude that the disclosure was permissible under the RFPA and

therefore affirm.

                                          Background

      Plaintiff-Appellant Maria Villalba resides in Colombia and is a citizen of both

Colombia and Spain. She maintains an account with Defendant-Appellee Coutts &

Co. USA (“Coutts”), a Florida corporation. Coutts is a subsidiary of National

Westminster Bank PLC, and is an “Edge Act corporation,” authorized to engage in

foreign banking.1

      In May 1996, the United States filed an in rem complaint against $200,000 in

accounts at Coutts and other financial institutions. The accounts at Coutts were

controlled by Villalba and her relatives. The Government's complaint alleged that the

         1
           An “Edge Act corporation” is a corporation formed for the purpose of “engaging in international
  or foreign banking or other international or foreign financial operations . . . either directly or through
  the agency, ownership or control of local institutions in foreign countries.” 12 U.S.C. § 611.

                                                 2
funds in the accounts were obtained from money laundering. The District Court for

the Southern District of New York (David G. Trager, District Judge) immediately

issued a civil arrest warrant for the funds, and the warrant was faxed to Coutts. The

warrant ordered Coutts to “arrest, attach and seize the Property until further order of

the Court.”

      A day or two after these warrants were executed, according to a deposition of

the Assistant U.S. Attorney (“AUSA”) handling the forfeiture action, “someone” at

Coutts told the AUSA that Villalba had unsuccessfully attempted to wire transfer

money out of her account at Coutts; the AUSA “believe[d] the number given was

$500,000.” Coutts denies that this disclosure ever occurred. Moreover, according to

Coutts, the only known attempted transfer of seized funds occurred three days after

Coutts received the warrant, when Villalba sought to transfer $75,000. In July 1996,

Villalba and several of her relatives filed this civil action in the Southern District of

Florida, alleging that Coutts’s disclosure of the alleged $500,000 withdrawal attempt

violated the RFPA, and other laws. The RFPA prohibits bank employees from

disclosing customers’ financial information to the governmental authorities without

customer authorization, subject to various exceptions. After dismissal of the original

complaint and reinstatement following a prior appeal to this Court, see Villalba v.

Coutts & Co. (USA), 156 F.3d 185 (11th Cir. 1998) (table), the complaint has been

                                           3
narrowed to include only a claim by Villalba against Coutts under the RFPA.

      Coutts sought summary judgment on the ground that, even if the alleged

disclosure of an attempted $500,000 wire transfer had occurred, it is protected from

liability by 12 U.S.C. § 3403(c), which provides:

             Nothing in this chapter shall preclude any financial
             institution, or any officer, employee or agent of a financial
             institution, from notifying a Government authority that
             such institution, or officer, employee, or agent has
             information which may be relevant to a possible violation
             of any statute or regulation. Such information may include
             only the name or other identifying information concerning
             any individual, corporation, or account involved in and the
             nature of any suspected illegal activity. . . . Any financial
             institution, or officer, employee, or agent thereof, making
             a disclosure of information pursuant to this subsection,
             shall not be liable to the customer under any [federal or
             state law].

      The District Court agreed and granted summary judgment in favor of Coutts.

                                      Discussion

      Villalba contends initially that the District Court erred in permitting the section

3403(c) defense to be asserted for the first time on motion for summary judgment.

We disagree. A court may consider an affirmative defense that did not appear in the

answer, if the plaintiff has suffered no prejudice from the failure to raise the defense

in a timely fashion. See Hassan v. United States Postal Service, 842 F.2d 260, 263

(11th Cir. 1988). Coutts's answer included as an affirmative defense the safe harbor

                                           4
provision of the Annunzio-Wylie Anti-Money Laundering Act, 31 U.S.C.

§ 5318(g)(3). This provision insulates a financial institution from liability for

disclosures “of any possible violation of law or regulation or a disclosure pursuant to

this subsection or any other authority.” Id. Whether or not this provision covers a

disclosure pursuant to section 3403(c) (the District Court thought it did not), the two

provisions are sufficiently similar that the late assertion of section 3403(c) could not

realistically cause prejudice to a plaintiff who was timely alerted to a section

5318(g)(3) defense.

      The initial question on the merits of the section 3403(c) defense is whether

there was a factual dispute that Coutts “suspected illegal activity.” 31 U.S.C. §

3403(c). Villalba contends that since Coutts denied that the disclosure was made, by

its “own admission, it never had such a 'suspicion.'” Brief for Appellant at 13.

However, a business entity like Coutts is entitled to contend in the alternative that it

is unaware of any disclosure made by its employees, but that if the alleged disclosure

was made, the employee making it indisputably had a basis for reasonable suspicion

of illegal activity.2 That basis exists here where a depositor attempts to wire a large

amount of funds out of an account that has been frozen by court order because of

         2
          Villalba contends that the insulation of section 3403(c) is available only where the disclosure
  is made on the basis of a subjective suspicion of illegal activity; Coutts counters that only objectively
  reasonable suspicion is required. We need not resolve that dispute because, for purposes of this appeal,
  we will assume that subjective suspicion is required.

                                                5
suspected money-laundering.

      The requisite suspicion is not precluded, as Villalba contends, by the fact that

Coutts did not file a Suspicious Activity Report (“SAR”), as required by 31 C.F.R. §

103.18(b)(3) (2001). A bank is obliged “immediately [to] notify, by telephone, an

appropriate law enforcement authority in addition to filing timely a SAR.” Id. If the

wire transfer attempt was disclosed (which must be assumed for purposes of the

summary judgment motion), no reasonable jury could fail to find, on the undisputed

circumstances, that the person making the immediate disclosure had a reasonable

suspicion of illegal activity, leaving the failure subsequently to file an SAR without

sufficient probative force to preclude such a finding. Whether the failure to file the

SAR was due to neglect or a mistaken belief that it was not required because the

Government was already initiating action is irrelevant to the justification for the

alleged disclosure.

      The further issue on the merits is whether the extent of the alleged disclosure

exceeded the scope of the information section 3403(c) permits to be revealed. Even

if we assume, as Villalba contends, that disclosure is limited to the name of the

individual and “the nature of any suspected illegal activity,” 12 U.S.C. § 3403(c)

(emphasis added), we agree with the District Court that the alleged mention of the

$500,000 amount of the requested wire transfer did not go beyond the “nature” of the

                                          6
suspected activity. What made the request indisputably suspicious was its size, and

we would be trifling with the statute if we construed it to permit disclosure of request

to transfer “a very large amount,” but not “a $500,000 amount.” See Bailey v. USDA,

59 F.3d 141, 143 (10th Cir. 1995) (disclosure of withdrawal and deposit records can

qualify as information about “nature of the suspected illegal activity,” where these

amounts are necessary to show grounds for the bank’s suspicion). The congressional

concern for privacy was sufficiently observed by not revealing any details of the

purported recipient of the funds requested to be wired.

                                     Conclusion

      The judgment of the District Court is AFFIRMED.

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