Raikos v. Bloomfield State Bank
| Decision Date | 06 January 1989 |
| Docket Number | No. IP 88-84-C.,IP 88-84-C. |
| Citation | 703 F. Supp. 1365 |
| Parties | John D. RAIKOS, Plaintiff, v. BLOOMFIELD STATE BANK and Internal Revenue Service of the United States, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
Edward B. Hopper, II, Hopper & Cobb, Indianapolis, Ind., for plaintiff.
Edward W. Najam, Jr., Bloomington, Ind., for defendant, Bloomfield State Bank.
Peter Sklarew, Trial Atty., Tax Div. Dept. of Justice, Washington, D.C., Jeffrey L. Hunter, Asst. U.S. Atty., Office of the U.S. Atty., Indianapolis, Ind., for defendant I.R.S.
ORDER ON DEFENDANTS' MOTIONS TO DISMISS
This Right to Financial Privacy Action comes before the Court on the separate motions to dismiss filed by defendant Bloomfield State Bank and defendant Internal Revenue Service. The issues raised have been fully briefed and are ready for resolution. For two alternative and separate reasons, the Court hereby rules in favor of the defendants. First, the action was not timely filed and must be dismissed. Second, assuming arguendo that the action is not time-barred, the defendants are nonetheless entitled to summary judgment as a matter of law because the Right to Financial Privacy Act does not proscribe the conduct complained of in this case.1
The plaintiff's complaint and an affidavit of the plaintiff dated February 1, 1985, reveal the following facts:
During the years 1978 through 1981, plaintiff John D. Raikos was a customer of Bloomfield State Bank, maintaining various accounts in that institution. Some time prior to September of 1981, the Internal Revenue Service began a routine audit of Mr. Raikos' financial status for the purpose of checking his tax liabilities. During the course of this audit, I.R.S. agent Charles Jordan visited the Bloomfield Bank seeking information concerning Raikos' financial dealings with the bank. In response to this informal request, the president of the bank, Mr. Jack Wikle, assembled and furnished various bank records to I.R.S. agent Jordan. This informal disclosure of the plaintiff's financial information occurred some time after September 1, 1981, but prior to October 6, 1981.
Thereafter Raikos received a copy of a formal summons executed by I.R.S. agent Jordan dated October 6, 1981. This summons directed the president of the Bloomfield Bank to appear before I.R.S. agent Jordan with all documents relating to the tax liability of Raikos. This summons, however, was issued after the documents in question were already turned over to the I.R.S.
Subsequently, the I.R.S. instituted a lengthy investigation of Mr. Raikos' tax liabilities. Their examination led to an indictment in this Court, filed as cause number IP84-111-CR. During the defense of the criminal case, Raikos filed a sworn affidavit on February 1, 1985, in support of various motions to dismiss. One of the arguments raised in his defense was that the I.R.S. had allegedly violated the Right to Financial Privacy Act, 12 U.S.C. §§ 3401-3422, by obtaining his bank records without notice to him.
In the 1985 affidavit, Raikos declared that he had learned certain information through discovery in the criminal action. In particular, Raikos had discovered that I.R.S. agent Jordan had visited Bloomfield Bank two times and talked to the bank president. During one of these meetings, Jordan "obtained the pertinent bank records from Bloomfield State Bank without any legal process, summons or subpoena. ..."
Finally, Raikos affirmed in his 1985 affidavit that he had talked with agent Jordan as early as 1981 about these matters. Specifically, Raikos stated the following in his affidavit:
During October 1981 ... agent Jordan related to me over coffee that without my knowledge, on his own, had had been down in Greene County ... and he happened to pass by Bloomfield State Bank and went in to see and talk with Jack Wikle about my case. I was upset that he would do so without any legal process whatever and telephoned Mr. Stan Barkley to complain. Mr. Barkley then informed me that Revenue Agent Jordan had made two trips and had already obtained the records from bank president Jack M. Wikle....
See 1985 Raikos Affidavit, ¶¶ 20-22. The criminal prosecution proceeded and Raikos eventually pled guilty to a false filing charge.
On January 25, 1988, Raikos filed the present civil action against the I.R.S. and Bloomfield Bank, alleging that both defendants violated the Right to Financial Privacy Act by informally seeking and disclosing his financial records without proper notice to him. Raikos seeks a wide array of damages including compensatory damages of $2,000,000, punitive damages of $500,000, and costs and attorney's fees.
With this factual background at hand, the Court will first address the statute of limitations issue, and will then discuss whether the Financial Privacy Act applies to this type of informal disclosure of bank records to the I.R.S.
Relying on the 1985 affidavit submitted by Raikos in his defense of the criminal charges, defendants argue that this Court lacks subject matter jurisdiction because the plaintiff's action was not commenced within three years of discovery of the alleged violation of the Financial Privacy Act. For the reasons set forth below, the Court agrees and finds the cause untimely.
In 1978, Congress passed the Right to Financial Privacy Act, which is codified at 12 U.S.C. §§ 3401-3422. The Act prohibits financial institutions from disclosing customer information to most federal government authorities absent the consent of or formal notice to the customer. 12 U.S.C. §§ 3402, 3403. Certain exclusive remedies are created for improper disclosure of such records, including recovery of damages caused by violation of the Act, punitive damages, and attorney's fees. 12 U.S.C. § 3417. By allowing recovery from not only the disclosing financial institution but also from the government agency to whom disclosure is made, the Act operates as a limited waiver of sovereign immunity that otherwise prevents suit against the United States.
Actions to enforce any provision of the Act can only be brought in an appropriate United States district Court "within three years from the date on which the violation occurs or the date of discovery of such violation, whichever is later." 12 U.S.C. § 3416. Where, as here, Congress has specifically imposed conditions upon suit against the sovereign, such conditions must be scrupulously followed. Coleman v. U.S. Bureau of Indian Affairs, 715 F.2d 1156, 1161 (7th Cir.1983); N.E.C. Corp. v. United States, 806 F.2d 247, 249 (Fed.Cir. 1986). When a statute authorizes recovery from the sovereign and contains a limitations period, that limitations provision constitutes a condition on the waiver of sovereign immunity that must be met. United States v. Mottaz, 476 U.S. 834, 106 S.Ct. 2224, 90 L.Ed.2d 841 (1986).
Thus, the three year limitations period established by Congress in the Act goes to both the subject matter jurisdiction of this Court and the limited nature of the waiver of sovereign immunity provided by the Act. Cf., Szyka v. U.S. Secretary of Defense, 525 F.2d 62, 65 (5th Cir.1975). As such, the waiver of immunity must be strictly construed. Library of Congress v. Shaw, 478 U.S. 310, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986); Lojuk v. Quandt, 706 F.2d 1456 (7th Cir.1983).
Where the subject matter jurisdiction of the Court is challenged by the defendants, the plaintiff "has the burden of supporting the allegations of jurisdictional facts by competent proof." Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir.1979); Western Transportation Co. v. Couzens Warehouse & Distributors, Inc., 695 F.2d 1033, 1038 (7th Cir.1982); Buxton v. Lovell, 559 F.Supp. 979, 983 (S.D.Ind.1983). The plaintiff must support his jurisdictional allegations by a preponderance of the evidence in order to invoke the limited jurisdiction of this Court. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 184, 56 S.Ct. 780, 782-83, 80 L.Ed. 1135 (1936); Haisten v. Grass Valley Medical Reimbursement Fund, 784 F.2d 1392, 1396 (9th Cir.1986); Terpstra v. Farmers and Merchants Bank, 634 F.Supp. 47, 49 (N.D. Ind.1985).
In this case, then, plaintiff bears the burden of establishing that his civil action was filed within three years of discovery of the violations of the Act. In his complaint he claims that he did not discover the violation until February 4, 1985. If he could prove this, the present lawsuit filed on January 25, 1988, would be timely and jurisdiction would exist.
It is clear, however, that the impact of Raikos' 1985 affidavit cannot be avoided. In that sworn court document, Raikos affirmed under penalties of perjury that he first became aware of the informal disclosure of his bank records during discovery in the criminal action. As early as October of 1981, Raikos had spoken with I.R.S. agent Jordan and learned that Jordan "had already obtained the records" from the bank. Moreover, Raikos even raised the issue of the Financial Privacy Act during the defense of the criminal action.
Based on this evidence, the Court is compelled to find that Raikos discovered the violations upon which the present action is based some seven years ago. His own sworn affidavit proves that he had learned of the violations in late 1981. He simply cannot sustain his burden of proof on this jurisdictional issue by now renouncing the statements contained in the 1985 affidavit. His present assertion that he did not discover the violations until 1985 simply belies his prior affirmations. Accordingly, because the present action was not filed within three years of his discovery of the violations, this Court is powerless to entertain the suit.
Assuming arguendo that this Court did have subject matter jurisdiction over the action, the end result...
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