Court Opinion

ID: 154850
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:05:50+00
Date Added: 2024-06-11T09:54:24.557254
License: Public Domain

F I L E D
                                                               United States Court of Appeals
                                                                       Tenth Circuit
                                      PUBLISH
                                                                      MAY 28 1997
                    UNITED STATES COURT OF APPEALS
                                                                    PATRICK FISHER
                                                                           Clerk
                               TENTH CIRCUIT

 LARRY O. ANDERSON, Lieutenant
 Colonel (Retired); ALBERTA
 ANDERSON,

             Plaintiffs-Appellants,                   No. 96-1352

 v.

 LA JUNTA STATE BANK,

             Defendant-Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF COLORADO
                      (D.C. No. 95-WY-3273-CB)

Submitted on the briefs:

Alison Ruttenberg, Denver, Colorado, and Denis H. Mark and William C. Waller,
Jr. of Waller and Mark, P.C., Denver, Colorado, for Plaintiffs-Appellants.

Gregory B. Kanan and Jennifer C. Robinson of Rothgerber, Appel, Powers &
Johnson LLP, Denver, Colorado, for Defendant-Appellee.

Before PORFILIO and LOGAN, Circuit Judges, and BURRAGE, District Judge. *

      *
             Honorable Michael Burrage, Chief Judge, United States District
Court for the Eastern District of Oklahoma, sitting by designation.
BURRAGE, District Judge.

      Plaintiffs Larry O. Anderson and his wife, Alberta, appeal from an order of

the district court granting La Junta State Bank’s motion for summary judgment. 1

Plaintiffs brought this action pursuant to 12 U.S.C. §§ 3401-3422, the Right to

Financial Privacy Act (RFPA), alleging that the Bank had violated their rights

under the Act.

      In 1993, the Air Force began an investigation of Mr. Anderson, then an

active duty lieutenant colonel in the Air Force, for violations of various

provisions of the Uniform Code of Military Justice, including theft of

nonappropriated funds. An investigating agent met with the Bank’s senior vice

president and asked him to produce plaintiffs’ bank records. The vice president

pulled up the information on his computer screen and, without permitting the

investigator to view the screen, informed him that plaintiffs’ records contained

nothing relevant to the investigation as only Mr. Anderson’s military pay check

was being deposited into their account. The investigators later subpoenaed

plaintiffs’ bank records.

      1
             After examining the briefs and appellate record, this panel has
determined unanimously to grant the parties’ request for a decision on the briefs
without oral argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. The
case is therefore ordered submitted without oral argument.

                                         -2-
      Plaintiffs thereafter commenced this action. They initially alleged the Bank

had violated the RFPA because plaintiffs were not afforded the opportunity to

challenge the subpoenas issued pursuant to the RFPA. However, in their response

to the Bank’s motion to dismiss or for summary judgment, plaintiffs asserted that

the Bank had violated the RFPA when it orally released information in response

to the investigator’s oral request. The Bank responded to this allegation and the

district court addressed the claim in its order. Therefore, plaintiffs’ appeal on this

issue is properly before the court. 2

      The RFPA was enacted in response to a pattern of government abuse in the

area of individual privacy and was intended “to protect the customers of financial

institutions from unwarranted intrusion into their records while at the same time

permitting legitimate law enforcement activity by requiring federal agencies to

follow” established procedures when seeking a customer’s financial records.

Neece v. IRS, 922 F.2d 573, 575 (10th Cir. 1990) (quotation omitted). However,

“[t]he most salient feature of the [RFPA] is the narrow scope of the entitlements

it creates” by limiting the kinds of customers to whom the RFPA applies and the

types of records it protects. SEC v. Jerry T. O'Brien, Inc., 467 U.S. 735, 745

(1984). Thus, the RFPA seeks to strike a balance between the customers’ right of

      2
             Plaintiffs dropped their other claim before the district court and do
not argue it on appeal.

                                          -3-
privacy and the need of law enforcement agencies to obtain financial records

pursuant to legitimate investigations.

      Under the RFPA, the government 3 may have access to, or obtain copies of,

information contained in a customer’s financial records from a financial

institution only if the customer authorizes the disclosure, the government obtains

an administrative or judicial subpoena or summons, or the records are sought

pursuant to a search warrant or formal written request. See 12 U.S.C. § 3402.

Further, the financial institution may not release the requested financial records

until the government “certifies in writing to the financial institution that it has

complied with the applicable provisions” of the RFPA, including notice to the

customer of the existence of the subpoena, summons, search warrant, or request;

the nature of the government’s inquiry; and permitting the customer sufficient

time to respond to the notice. Id. §§ 3403(b), 3405-08.

      The RFPA also restricts disclosure of customers’ financial records by

financial institutions themselves. Financial institutions may not provide “any

Government authority access to or copies of, or the information contained in, the

financial records of any customer . . . .” Id. § 3403(a). One exception has been

provided: A financial institution may notify a Government authority if it believes

      3
          The Air Force is not exempt from the requirements of the RFPA. See
McDonough v. Widnall, 891 F. Supp. 1439, 1450 (D. Colo. 1995).

                                          -4-
it has “information which may be relevant to a possible violation of a statute or

regulation.” Id. § 3403(c). In such a case, the financial institution may provide

only the customer’s name or other identifying information and the nature of the

suspected illegal activity. See id.

         The issue in this case is one we have not previously addressed. We must

determine whether an oral request by a government investigator which is orally

responded to, without permitting visual inspection of the customer’s records,

violates the RFPA, absent compliance by the Government authority with the

§§ 3402, 3403 requirements. See Neece v. IRS, 96 F.3d 460, 464 n.1 (10th Cir.

1996).

         The district court held, and the bank argues, that such a disclosure does not

run afoul of the RFPA. The district court held that our decision in Bailey v.

USDA, 59 F.3d 141 (10th Cir. 1995), permitted the Bank to orally disclose the

information provided. We disagree.

         In Bailey, the bank suspected two of its customers were engaging in

questionable banking practices relating to the deposit of food stamps and the

immediate withdrawal of a corresponding amount of cash. See id. at 142. The

bank notified the government. A government investigator went to the bank and

interviewed a bank employee who told the investigator the customers’ names and

the monetary value of the transactions and showed him a log of the transactions.

                                           -5-
We held this disclosure did not violate § 3403(c) as only the “essence of the

suspected illegal activity” was revealed by the disclosure. Id. at 143.

      The district court held that the disclosure in this case was also valid as the

bank revealed even less information than had been revealed in Bailey. However,

the issue here is not how much information was provided, but who initiated the

contact. The Bank did not suspect plaintiffs of any wrongdoing. Rather, the

government initiated the contact based on suspicions arising from information

obtained from sources outside of plaintiffs’ bank records. We agree with the

district court that had the Bank suspected plaintiffs of wrongdoing and initiated

contact with the government investigators, the information disclosed would not

have violated the RFPA. However, the Bank could not respond to the

government’s inquiry and release information to the government investigator

unless the government had properly complied with the procedures set forth in the

RFPA. Cf. Duncan v. Belcher, 813 F.2d 1335, 1339 (4th Cir. 1987) (RFPA does

not insulate private accounts from government investigation, but “merely

establishes summary procedures for government investigators to follow”). Thus,

the Bank violated the RFPA.

      The Bank also argues that the RFPA permits oral disclosure of information

absent compliance with RFPA procedures. The RFPA prohibits the release of

“financial records” unless set procedures are followed. “Financial records” are

                                         -6-
defined as “an original of, a copy of, or information known to have been derived

from” a customer’s bank records. 12 U.S.C. § 3401(2). In Hunt v. SEC, 520

F. Supp. 580 (N. D. Tex. 1981), the court held that the plain meaning of the

language of § 3401(2) “clearly includes oral testimony relating to a customer’s

relationship with a bank or financial institution.” Id. at 605. We agree. The oral

disclosure here by the Bank related information derived from plaintiffs’ bank

records and was protected by the RFPA. The RFPA does not require that such

information be conveyed in writing before its disclosure can violate a bank

customer’s right to privacy in his records.

      We need not consider whether plaintiffs suffered any damages as a result of

the disclosure. If the government or a financial institution violates the RFPA, the

customer whose financial records were disclosed is entitled to $100, regardless of

the volume of records involved. Id. § 3417(a). Damages may also be awarded in

the form of any actual damages sustained as a result of the disclosure and punitive

damages if the violation is determined to have been willful or intentional. Id.

Further, if the action is successful, costs and reasonable attorney’s fees may also

be awarded. Id. We leave it for the district court in the first instance to

determine whether damages are appropriate here.

                                          -7-
      The judgment of the United States District Court for the District of

Colorado is REVERSED, and the case is REMANDED for further proceedings in

accordance with this opinion.

                                        -8-