Flowers v. First Hawaiian Bank

• Decision Date: 02 July 2002
• Docket Number: No. 00-15635.,00-15635.
• Citation: 295 F.3d 966
• Parties: Marshall Kenneth FLOWERS, Plaintiff-Appellant, v. FIRST HAWAIIAN BANK, Schofield Branch, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

295 F.3d 966

Marshall Kenneth FLOWERS, Plaintiff-Appellant, v. FIRST HAWAIIAN BANK, Schofield Branch, Defendant-Appellee.

No. 00-15635.

United States Court of Appeals, Ninth Circuit.

Argued November 6, 2001.

Submitted May 17, 2002.

Filed July 2, 2002.

COPYRIGHT MATERIAL OMITTED

Marshall Kenneth Flowers, Honolulu, HI, Pro Se, for the appellants.

Patsy H. Kirio, Honolulu, HI, for the appellee.

Robert D. McCallum, Jr., Assistant Attorney General, Washington, D.C.; Edward H. Kubo, Jr., United States Attorney, Honolulu, Hawaii; and Anthony J. Steinmeyer, Civil Division, Department of Justice, Washington, D.C., for the amicus curiae.

Appeal from the United States District Court for the District of Hawaii; Samuel P. King, Senior District Judge, Presiding. D.C. No. CV-99-00335-SPK.

Before THOMPSON, O'SCANNLAIN and BERZON, Circuit Judges.

OPINION

THOMPSON, Senior Circuit Judge.

Marshall Kenneth Flowers and his wife Anna Flowers (collectively the "Flowers") brought suit pro se under the Right to Financial Privacy Act ("RFPA"), 12 U.S.C. §§ 3401-3422, against the defendant First Hawaiian Bank ("the Bank"). They alleged that the Bank violated the RFPA by producing copies of their financial records to the United States Army, pursuant to a subpoena, without first obtaining a certificate of compliance from the Army as required by the RFPA. See id. §§ 3403(b), 3407, 3411.

The primary issue in this case is whether such a certificate was required, or whether the Bank's production of the Flowers' financial records pursuant to the subpoena was exempt from the RFPA. The Army had issued the subpoena during an Article 32 proceeding. An Article 32 proceeding, in general terms, is an investigative proceeding that is required under Article 32 of the Uniform Code of Military Justice (UCMJ) before a general court-martial may be convened. The district court held that the Bank did not violate the RFPA because its conduct in response to the Army's Article 32 subpoena was within the RFPA's exemption for information disclosed in the course of litigation between the government and a private citizen. See id. § 3413(e). The bank also contended that the RFPA's exemption for information disclosed pursuant to a grand jury subpoena applied, see id § 3413(i), but the district court did not reach that question. The court granted judgment on the pleadings in favor of the Bank, and denied the Flowers' motions for reconsideration and leave to amend.

We have jurisdiction under 28 U.S.C. § 1291, and we reverse. Because subpoenas are not authorized in Article 32 proceedings, the subpoena was not lawfully issued. When the Bank complied with the subpoena without obtaining a certificate of compliance from the Army, it acted at its peril and it is not entitled to the protection of the RFPA exemptions on which it relies. Accordingly, judgment on the pleadings was inappropriate. We also conclude that the district court should have granted the Flowers' motion for leave to amend. The Flowers' challenge to the denial of their motion for reconsideration is moot.

I Facts and Proceedings

"A judgment on the pleadings is properly granted when, taking all the allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law." Nelson v. City of Irvine, 143 F.3d 1196, 1200 (9th Cir.1998). All facts alleged in the Flowers' complaint are, therefore, taken as true.

This case arose while Mr. Flowers was a Sergeant Major in the United States Army stationed at the Schofield Barracks in Hawaii. In April 1998, the Army charged Sergeant Major Flowers with larceny under the UCMJ. Article 32 of the UCMJ provides that an investigative proceeding must be conducted before convening a general court-martial. 10 U.S.C. § 832. The proceeding must "include inquiry as to the truth of the matter set forth in the charges, consideration of the form of charges, and a recommendation as to the disposition which should be made of the case in the interest of justice and discipline." Id. Further, in the proceeding, an accused is entitled to counsel and some discovery, and has the right to cross-examine witnesses. Id. See generally United States v. Samuels, 10 C.M.A. 206 (1959); United States v. Bramel, 29 M.J. 958 (A.C.M.R.1990); Commander Edward M. Byrne, Military Law 81-87 (2d Ed.1975); Charles A. Shanor & L. Lynn Hogue, Military Law 146-47 (2d Ed.1996).

A commanding officer initiates an Article 32 proceeding by appointing an investigating officer. The investigating officer need not be a lawyer. Major Larry A. Gaydos, A Comprehensive Guide to the Military Pretrial Investigation, 111 Mil. L.Rev. 49, 59 (1986). The investigating officer produces a written report recommending whether the charges should be referred to a general court-martial. Rules for Courts-Martial (RCM) 405(j); Shanor & Hogue, supra, at 147.

The personnel present at an Article 32 proceeding are somewhat different from those present at a court-martial. Only the investigating officer, defendant, and defense counsel need be present. "Government counsel" may also be present to represent the government, but such presence is not required. Gaydos, supra, at 58-68 & n. 97. In comparison, at a court-martial, the government is represented by a lawyer, the "trial counsel," who serves as the military prosecutor. 10 U.S.C. § 838.

The investigating officer for the Article 32 proceeding in the present case was Major Timothy M. Ryan. The more significant figure, however, was the government counsel, Captain John Ohlweiler.

On June 19, 1998, while the Article 32 proceeding was pending, Captain Ohlweiler issued a subpoena to the Bank's Schofield branch requesting all bank records for an account held jointly by the Flowers. The subpoena stated on its face that it was a subpoena in an Article 32 proceeding.

Approximately two weeks later, Sergeant Major Flowers received a letter from the Bank informing him of the subpoena and enclosing a copy. That notice did not inform the Flowers of their rights under the RFPA. See 12 U.S.C. § 3407(b). The responsibility for providing such notice rests with the government authority that issues the subpoena. See id.¹

In late July or early August, the Bank produced the Flowers' financial records in accordance with the subpoena. Sometime thereafter, the charges against Sergeant Major Flowers were dropped.

On May 7, 1999, the Flowers filed a pro se complaint against the Bank in the district court alleging that the Bank's production of their financial records violated the RFPA's requirement that financial records be produced by a financial institution only after that institution has received from the governmental authority requesting the records a certificate of compliance with the RFPA. See 12 U.S.C. § 3411. The Bank filed an answer denying it had violated the RFPA, and moved for judgment on the pleadings. The Flowers responded and the district court heard oral argument.

The central issue in contention was whether the Bank's response to the Article 32 subpoena fit within one of the RFPA's exemptions provided by 12 U.S.C. § 3413. The exemptions allow a financial institution to produce a customer's financial records without obtaining a certificate of compliance from the requesting governmental authority when the records are sought in connection with litigation between a governmental authority and the customer, id. § 3413(e), or are sought in connection with grand jury proceedings, id. § 3413(i). In a published opinion, Flowers v. First Hawaiian Bank, 85 F.Supp.2d 993 (D.Haw.2000), the district court held that the Article 32 proceeding was within the governmental litigation exemption provided by § 3413(e), and entered judgment on the pleadings in favor of the Bank.

The Flowers moved for reconsideration. They also moved for leave to amend their complaint to add the United States Army as a defendant and to clarify that Captain Ohlweiler was government counsel, not trial counsel, in the Article 32 proceeding. It is a little unclear, but the Flowers may also have sought permission to amend the allegations of their complaint concerning damages. The district court denied these motions. It concluded that no grounds for reconsideration were presented and that further amendment would be futile. This appeal followed.

After argument, we asked the United States, including the Army, to submit an amicus brief addressing the merits of this case, and in particular the legality of the Article 32 subpoena. We have received and considered that brief, as well as a responsive brief from the Flowers.

II The Right to Financial Privacy Act

We review de novo the district court's judgment on the pleadings. Weeks v. Bayer, 246 F.3d 1231, 1234 (9th Cir. 2001). We also review de novo issues of statutory interpretation. Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir.2001).

It is not disputed that Sergeant Major Flowers, as a member of the armed services when the circumstances in this case occurred, is protected by the RFPA. United States v. Dowty, 48 M.J. 102, 109 (1998) (holding that the RFPA covers financial records of members of the armed services); see also 32 C.F.R. §§ 504.1-.2 (regulations applying the RFPA to military investigators). Nor is there any dispute that ordinarily, if a government authority requests or subpoenas a bank customer's financial records, then, to protect itself from liability, a bank is required to obtain a certificate of compliance with the RFPA from the governmental agency requesting the records before producing them. 12 U.S.C. § 3411; see also id. § 3407. Unless exempt under other provisions of the RFPA, a violation of this requirement entitles the customer to $100 per violation, attorney fees and costs, and actual and punitive damages. Id. § 3417.

Here, the Bank did not obtain a certificate of compliance from the Army. As a result, the issue is whether the subpoena issued by the Army in the Article 32 proceeding triggered...