Lee v. Bankers Trust Co.

Citation166 F.3d 540
Decision Date10 February 1999
Docket NumberDocket No. 98-7504
Parties14 IER Cases 1389 Let W. LEE, Plaintiff-Appellant, v. BANKERS TRUST COMPANY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Anne C. Vladeck, Vladeck, Waldman, Elias & Engelhard, New York, NY, for Appellant.

Gandolfo DiBlasi, Sullivan & Cromwell, New York, NY, for Appellee.

Leo T. Crowley, Winthrop, Stimson, Putnam & Roberts, New York, NY, for Amicus Curiae The New York Clearing House Association.

Thomas C. Baxter, Jr., Federal Reserve Bank of New York, New York, NY, for Amicus Curiae Board of Governors of the Federal Reserve System.

Before: OAKES, WALKER and McLAUGHLIN, Circuit Judges.


McLAUGHLIN, Circuit Judge:

In 1990, Bankers Trust Company ("Bankers Trust"), hired Let W. Lee as a Vice President for Global Retirement and Security Services. Later it promoted him to Managing Director. In April 1994, Bankers Trust asked Lee to work in its Global Security Services practice, and he agreed. Lee always worked in the New Jersey offices of Bankers Trust.

In Spring 1995, Lee asked two Bankers Trust employees, Harvey Plante and Gerard Callaghan, to look into Bankers Trust's older "custody credit" accounts. These accounts had been languishing unclaimed for long periods, and Lee asked Plante and Callaghan to determine whether Bankers Trust could properly keep some of this money rather than letting it escheat to the state. Plante told Callaghan and Lee that Bankers Trust had more than $3.9 million in the accounts that did not have to be escheated. Lee and Callaghan then told Plante that any non-escheatable funds that were properly documented should be transferred to a reserve account at Bankers Trust.

Plante was placed in charge of the reserve account. Lee maintains that he told Plante: (1) to clear all dealings with Bankers Trust's compliance department; (2) not to transfer any money that was not properly documented; (3) not to transfer any funds that might possibly be escheatable; and (4) to keep a detailed list of funds in the reserve account.

In March 1996, Bankers Trust became troubled by Plante's activities and questioned him about the reserve account. Shortly thereafter, Bankers Trust let Lee know that Plante claimed that Lee had told him to transfer escheatable funds into the reserve account. Lee denied this claim.

On March 21, 1996, Lee met with John Foos, John Peters and Elizabeth Hughes, all of whom worked in Bankers Trust's Securities In early June 1996, Lee claims that Richard Coffina, Head of Human Resources at Bankers Trust, told him that the firm would like him to resign. Lee did resign on June 6, 1996. The press reported that Lee left Bankers Trust amid allegations of wrongdoing. Bankers Trust never made any public statement regarding Lee's activities or the reason for his departure.

Services practice. After meeting with this trio for over five hours, Lee signed a statement prepared by Bankers Trust. Bankers Trust then ordered Lee to stay out of his office while it conducted an investigation. Lee claims that by the end of March 21st, everyone at Bankers Trust was discussing his involvement in some kind of wrongdoing.

Lee claims that after his resignation, Bankers Trust filed a "Suspicious Activity Report" ("SAR") with the United States Attorney's Office for the Southern District of New York. This claim is curious because an SAR is a confidential report that financial firms are required by law to file when they suspect illegal activities by their employees. Disclosure of even the filing of an SAR, let alone disclosure of its substance, is prohibited by law. Thus, it remains a mystery as to how Lee knows that Bankers Trust filed an SAR.

On October 30, 1996, Lee filed suit in the United States District Court for the Southern District of New York (Batts, J.), alleging that Bankers Trust defamed him through its conduct in investigating the reserve accounts. His complaint focuses on Bankers Trust's search of his office and its alleged filing of an SAR. He also asserted a claim for false imprisonment.

Bankers Trust moved to dismiss the complaint for failure to state a claim. Judge Batts granted the motion, finding that the defendant is immune from a defamation claim based on the alleged filing of an SAR, and that the other actions by Bankers Trust were not "statements" that could support a claim for defamation. She also dismissed the false imprisonment claim as frivolous. Lee now appeals, arguing that: (1) Bankers Trust does not enjoy absolute immunity from liability for statements in the SAR that it purportedly filed; (2) its other actions can support a claim for defamation; and (3) Judge Batts should have applied New York, not New Jersey law in assessing his defamation claims. Lee does not appeal the dismissal of his false imprisonment claim.

I. Defamatory Statements in the SAR

In his complaint, Lee alleged that Bankers Trust defamed him in an SAR filed with the United States Attorney for the Southern District of New York. While refusing to confirm or deny the filing of an SAR, Bankers Trust counters that it has immunity for any allegedly defamatory statements made in such a filing. Lee recognizes that Bankers Trust enjoys some immunity for statements in an SAR, but argues that this immunity extends only to statements made in good faith. Lee is incorrect.

This Court reviews de novo a district court's decision to dismiss a complaint for failure to state a claim, taking all factual allegations as true and construing all reasonable inferences in the plaintiff's favor. See Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir.1997). Dismissal is proper only "if 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir.1994) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

The regulations promulgated under the Annunzio-Wylie Act (the "Act"), 31 U.S.C. § 5318(g), require financial institutions like Bankers Trust to file an SAR "no later than thirty (30) days after the initial detection of a known or suspected violation of federal law, a suspected transaction related to money laundering activity, or a violation of the Bank Secrecy Act." 12 C.F.R. § 208.20(d) (1997). Institutions are prohibited from acknowledging filing, or commenting on the contents of, an SAR unless ordered to do so by the appropriate authorities. See 12 C.F.R. § 208.20(j) & (g).

SAR filers are protected from civil liability by the "safe harbor" provision of the Act, which provides:

Liability for disclosures. Any financial institution that makes a disclosure of any possible violation of law or regulation or a disclosure pursuant to this subsection or any other authority, and any director, officer, employee, or agent of such institution, shall not be liable to any person under any law or regulation of the United States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure or for any failure to notify the person involved in the transaction or any other person of such disclosure.

31 U.S.C. § 5318(g)(3) (Supp.1998). The safe harbor provision applies, regardless of whether the SAR is filed as required by the Act or in an excess of caution. See 12 C.F.R. § 208.20(k) (1998) (to be recodified at 12 C.F.R. 208.62(k) (1999)).

Although the regulation does not say so, Lee argues that there is immunity only where the disclosures in the SAR were made in good faith. We disagree.

It is axiomatic that the plain meaning of a statute controls its interpretation, see Greenery Rehabilitation Grp., Inc. v. Hammon, 150 F.3d 226, 231 (2d Cir.1998), and that judicial review must end at the statute's unambiguous terms. See Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 66 L.Ed.2d 633 (1981). Legislative history and other tools of interpretation may be relied upon only if the terms of the statute are ambiguous. See Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1073 (2d Cir.1993).

The plain language of the safe harbor provision describes an unqualified privilege, never mentioning good faith or any suggestive analogue thereof. The Act broadly and unambiguously provides for immunity from any law (except the federal Constitution) for any statement made in an SAR by anyone connected to a financial institution. There is not even a hint that the statements must be made in good faith in order to benefit from immunity. Based on the unambiguous language of the Act, Bankers Trust enjoys immunity from liability for its filing of, or any statement made in, an SAR.

Our conclusion based on the language of the Act is bolstered by a common sense appraisal of the safe harbor provision's place within the Act. Financial institutions are required by law to file SARs, but are prohibited from disclosing either that an SAR has been filed or the information contained therein. See 12 C.F.R. § 208.20(k) (1998). Thus, even in a suit for damages based on disclosures allegedly made in an SAR, a financial institution cannot reveal what disclosures it made in an SAR, or even whether it filed an SAR at all.

Under plaintiff's theory, he can allege, on information and belief, that a bank filed an SAR containing allegedly defamatory statements that were not made in good faith. If the bank sought summary judgment, it would then have to establish that the statements in the SAR were made in good faith, but it would be prohibited by law both from disclosing the filing or the contents of an SAR. It flies in the face of common sense to assert that Congress sought to impale financial institutions on the horns of such a dilemma.

Finally, although the safe harbor provision is unambiguous, and does not require resort to legislative history, the history of the Act demonstrates that Congress did not intend to limit protection to...

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