Ameriquest Mortg. Co. v. State Atty. Gen.

• Decision Date: 06 January 2009
• Docket Number: No. 36245-7-II.,36245-7-II.
• Citation: 199 P.3d 468,148 Wn. App. 145
• Court: Washington Court of Appeals
• Parties: AMERIQUEST MORTGAGE COMPANY, Appellant, v. STATE ATTORNEY GENERAL, Respondent.

199 P.3d 468

148 Wn. App. 145

AMERIQUEST MORTGAGE COMPANY, Appellant, v. STATE ATTORNEY GENERAL, Respondent.

No. 36245-7-II.

Court of Appeals of Washington, Division 2.

January 6, 2009.

Erik Dupen Price, Lane Powell PC, Olympia, WA, Michael Alan Nesteroff, Laura Therese Morse, Lane Powell PC, Seattle, WA, Joanne N. Davies, Buchalter Nemer Fields & Younger, Irvine, CA, for Appellants.

David W. Huey, Attorney General's Office, Tacoma, WA, for Respondent.

Melissa Ann Huelsman, Law Offices of Melissa A. Huelsman, Seattle, WA, for Respondent Intervenor.

PENOYAR, A.C.J.

¶ 1 During litigation, Ameriquest Mortgage Company (Ameriquest) released a number of confidential customer loan files to the Washington State Attorney's General Office (AGO). The litigation ended in a settlement agreement. Subsequently, a Public Records Act¹ (PRA) request was made to the AGO requesting those confidential files and the AGO's work product regarding Ameriquest. The AGO willingly prepared the documents sought and notified Ameriquest of the proposed disclosure. Ameriquest sought to preliminarily enjoin the production of documents, arguing that (1) a federal act² preempted the state PRA and prohibited disclosure of information provided from Ameriquest to the AGO, and (2) the AGO decision to produce their attorney work product was arbitrary and capricious. The trial court denied the preliminary injunction; we granted discretionary review. We reverse the trial court's order as it improperly combined the preliminary injunction hearing with the permanent injunction trial. We reverse and remand to the trial court for further proceedings with the following instructions: (1) the loan customers should be notified and have an opportunity to respond; (2) the federal act does preempt the PRA regarding non-public information contained in the customer loan files; and (3) based on the record to date, the trial court was correct to deny a preliminary injunction on the attorney work product issue.

FACTS

¶ 2 In 2003, the AGO, in association with the Washington Department of Financial Institutions, began an investigation under the Consumer Protection Act, RCW 19.86, into the mortgage lending practices of Ameriquest and two related entities. During the course of the investigation, the two Washington agencies amassed a substantial number of documents that can be sorted into three categories.

¶ 3 The first category of information is that received from Ameriquest through discovery. These documents included a number of confidential customer loan files and internal Ameriquest employees' e-mails. The customer loan files included: a customer's full legal name, social security number, driver's license number, date of birth, credit (FICO) score, credit report, monthly income, sources of monthly income, employer's name, employer's address, length of employment, nature of employment, name and age of any children, checking and savings account information, identification of other assets, residential address, residential phone number, and personal wireless telephone number, as well as all terms and conditions of the customer's loan transaction.

¶ 4 The second category of information included documents provided to the AGO by third parties, including information provided by those filing complaints with the AGO's consumer resource center.³ The third category includes documents internally generated by the two agencies during the course of the investigation and prosecution of the case.

¶ 5 Two years into the investigation and prosecution of Ameriquest, in November 2005, the lawsuit between Ameriquest and 49 states and the District of Columbia settled for $325 million. The settlement agreement included a provision that "the State [was to] comply with applicable public disclosure laws and promptly provide notice to [Ameriquest] of the request" so as to afford Ameriquest "the reasonable opportunity to assert that the documents subject to the request are exempt from disclosure."⁴ Clerk's Papers (CP) at 165.

¶ 6 In February 2007, the Law Offices of Melissa Huelsman filed a request under Washington's PRA, chapter 42.56 RCW, with the AGO, requesting "all records relating to [the] investigation of Ameriquest." CP at 164. The AGO entered into discussions with Huelsman to focus the request and to prioritize the order of document production. On March 1, 2007, the AGO notified Ameriquest of its intent to disclose the information requested, including the confidential documents Ameriquest supplied, by March 15, 2007. The AGO attached a list of documents that it intended to produce, including Ameriquest's customer loan files for 35 Washington citizens and internal e-mail communications of two Ameriquest employees.⁵

¶ 7 To prevent the immediate disclosure of documents, Ameriquest filed a complaint for injunctive relief with the Thurston County Superior Court on March 9, 2007. Huelsman (Intervener) filed a motion to intervene in the proceedings. All three parties stipulated to, and the trial court entered, a temporary restraining order preventing the release of the disputed documents.

¶ 8 Subsequently, Ameriquest filed a motion for a preliminary injunction. Ameriquest argued that the information the AGO intended to disclose to the Intervener was protected from disclosure by the Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. § 6801 et seq., and was also exempt from disclosure under several PRA exemption provisions. Ameriquest argued that disclosure of the confidential customer loan files conflicted with, and was preempted by, the GLBA. Additionally, Ameriquest argued the necessity of judicial review for the AGO's decision to waive exemptions available under the PRA. Ameriquest voiced specific concerns that the AGO's treatment of its confidential documents was not consistent with the AGO's behavior toward similarly situated companies or requests for similar types of documents.

¶ 9 Both the AGO and the Intervener opposed the motion for preliminary injunction. The AGO acknowledged the confidential nature of the documents but argued that the GLBA did not preempt the PRA. The AGO argued that the GLBA did not preempt the PRA based on the exception in the act that permits disclosure "to comply with Federal, State, or local laws, rules and other applicable legal requirements." CP at 187. In the alternative, the AGO argued that even in case of preemption, the AGO's redaction policy for "personal information" as defined by Hearst Corp. v. Hoppe, 90 Wash.2d 123, 133, 580 P.2d 246 (1978), satisfied the GLBA's prohibitions on disclosure. CP at 186-87.

¶ 10 The trial court denied Ameriquest's motion for a preliminary injunction. CP at 320-24. The trial court determined that the GLBA "does not preempt the State's law on public disclosure of documents." CP at 322. Additionally, the trial court found that Ameriquest had "no standing to assert" various exemptions to the PRA on the AGO's behalf. CP at 322. The trial court ordered the temporary restraining order to remain until the AGO completed redaction of the documents in accordance with AGO policy. The documents were to be released to the Intervener upon completion of satisfactory redaction.

¶ 11 Ameriquest filed its petition for discretionary review and emergency motion for stay, and we ultimately granted both. The information and documents in dispute have not been disclosed to the Intervener.

ANALYSIS

¶ 12 We review all agency actions taken or challenged under the PRA, RCW 42.56.030 through 42.56.520, de novo. RCW 42.56.550(3). We stand in the shoes of the trial court reviewing declarations, memoranda of law, and other documentary evidence. See Dawson v. Daly, 120 Wash.2d 782, 788, 845 P.2d 995 (1993).

I. CR 65 Violation

¶ 13 Ameriquest argues that the trial court improperly combined the preliminary injunction hearing with a trial on the merits without giving the parties the notice that CR 65(a)(2) requires. The AGO and Intervener argue that the trial court's action was proper and that Ameriquest failed to make a sufficient offer of proof establishing its intent and ability to develop evidence that would likely prove its case at a permanent injunction trial. We agree with Ameriquest.

¶ 14 Civil Rule 65 governs trial court procedure for obtaining an injunction. The process generally progresses from temporary restraining order to preliminary injunction to permanent injunction. CR 65(a)(2) provides, however, that "[b]efore or after the commencement of the hearing of an application for a preliminary injunction, the court may order the trial of the action on the merits to be advanced and consolidated" with the preliminary injunction application hearing. If a "court does not expressly state that it is consolidating the injunction hearing and a trial on the merits," though, "it may not render a final determination on the merits" at the preliminary injunction hearing. League of Women Voters of Wash. v. King County Records, Elections & Licensing Servs. Div., 133 Wash.App. 374, 382, 135 P.3d 985 (2006). The purpose of this rule, as with its federal counterpart, is to give the parties notice and time to prepare so that they will have a full opportunity to present their cases at the permanent injunction hearing. See Univ. of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) (applying Federal Rule of Civil Procedure 65(a)(2), which mirrors CR 65(a)(2)).

¶ 15 Ameriquest argues that this case is analogous to Northwest Gas Association v. Washington Utilities and Transportation Commission, 141 Wash.App. 98, 168 P.3d 443 (2007), rev. denied, 163 Wash.2d 1049, 187 P.3d 750 (2008), a recent decision from this court. In Northwest Gas, we reversed the trial court's denial of a preliminary injunction under the PRA because "the trial court did not expressly inform the parties that it was consolidating the preliminary injunction hearing with a permanent injunction trial on the merits under CR 65(a)(2)." 141 Wash. App. at 114, 168...