Stoutt v. Banco Popular De Puerto Rico

• Decision Date: 24 July 2001
• Docket Number: No. CIV. 97-2819(DRD).,CIV. 97-2819(DRD).
• Citation: 158 F.Supp.2d 167
• Parties: Palmer Paxton STOUTT, et al. Plaintiff, v. BANCO POPULAR DE PUERTO RICO, et al. Defendant.
• Court: U.S. District Court — District of Puerto Rico

158 F.Supp.2d 167

Palmer Paxton STOUTT, et al. Plaintiff, v. BANCO POPULAR DE PUERTO RICO, et al. Defendant.

No. CIV. 97-2819(DRD).

United States District Court, D. Puerto Rico.

July 24, 2001.

Harry Anduze-Montano, San Juan, PR, Raul S. Mariani-Franco, San Juan, PR, for plaintiffs.

Humberto Guzman-Rodriguez, Martinez, Odell & Calabria, Hato Rey, PR, for defendant.

OPINION AND ORDER

DOMINGUEZ, District Judge.

The above captioned diversity action was filed on December 4, 1997, by plaintiff Palmer Paxton Stoutt ("Stoutt") against defendant Banco Popular de Puerto Rico ("BPPR"). Plaintiff, alleging unlawful arrest, malicious prosecution and illegal incarceration, seeks compensatory damages under Article 1802, the general torts statute of the Puerto Rico Civil Code, 31 P.R. LAWS ANN. § 5141 (1956). Plaintiff also seeks redress alleging that the criminal prosecution instigated by BPPR has caused considerable damage to plaintiff's commercial good standing and prestige. Finally, plaintiff alleges that defendant is liable for defamation for instigating the publication of false allegations regarding plaintiff's bank account with BPPR.

Defendant, BPPR, alleges as an affirmative defense immunity from any liability since the actions were taken pursuant to the reporting requirements of the Annunzio Wylie Act. See Pub.L. No. 102-550 (codified as amended in scattered sections of the United States Code). The Act, under its "safe harbor" provision 31 U.S.C § 5813(g)(3), provides that reporting financial institutions are immune from liability "under any law or regulation of the United States or any constitution, law, or regulation of any state ..." for disclosures made pursuant to its requirements. Such immunity would bar Plaintiff's federal and civil law claims. However, in the Opposition to defendant's motion for Summary Judgment, plaintiff alleges that such immunity can only be granted if the disclosure was made in good faith. Defendant disagrees.

Pending before the court is a motion for summary judgment filed by defendant, BPPR, pursuant to Rule 56 of the Federal Rules of Civil Procedure and Local Rule 311.12 and plaintiff Stoutt's opposition thereto. (Docket Nos. 75 & 89).

I. BACKGROUND

Plaintiff Stoutt is a resident of Tortola, British Virgin Islands. Stout is also President and Chief Executive Officer of Rancal International, Inc. and Rancal Corporation Limited, plaintiffs in this matter. Defendant, BPPR, is a banking institution organized and existing under the laws of the Commonwealth of Puerto Rico with its principal place of business in Puerto Rico.

The relevant facts stated in the light most favorable to the non-movant are as follows. On or about June 1995, Stoutt entered into negotiations with BPPR to secure a loan for a term of five years and in the amount of $1,500,000. Prior to these negotiations, Stoutt and BPPR had a long standing commercial relationship. Through a letter dated June 23, 1995, from José Enrique Guzmán ("Guzmán"), Manager for a branch of BPPR, Stoutt was informed that the loan he requested would be approved should he secure sufficient collateral. After meeting with bank officials in late June 1995, and having preliminary loan approval, Stoutt proceeded to attempt to secure United States Treasury Bills as collateral to be deposited in an acceptable security firm.

Attempting to secure the required collateral, Stoutt was referred to, and in July 1995 contacted, Brian Schmidt ("Schmidt") from Euro-Atlantic Securities in Chicago. Schmidt suggested leasing ten million dollars in U.S. Treasury Bills. He explained that such a lease would secure the needed collateral for the loan with BPPR, while at the same time allow the remainder to be invested. The investment of the remaining Treasury Bills would supposedly produce enough money to pay for the substantial monthly lease cost. The cost of leasing the U.S. Treasury Bills was $300,000.00 monthly. Since Euro-Atlantic required evidence of sufficient funds for a good-faith deposit of $300,000.00, Stoutt contacted Guzmán, from BPPR, to secure a line of credit in that same amount. On July 21, 1995, Guzmán sent Stoutt a letter indicating that the required line of credit had been approved by BPPR.

Stoutt then went about securing the ten million dollars in U.S. Treasury Bills as collateral. After signing the Treasury Bill Assignment Contract, plaintiff met with Guzmán to finalize the transaction and secure the $300,000.00 good-faith deposit. Subsequently, when presented with the signed final documents, Guzmán allegedly proposed that instead of using the previously granted line of credit, plaintiff was to deposit a check from Rancal International, against which the wire transfer for the deposit would be effectuated. The check from Rancal International, though without sufficient funds at that time, would be covered once the Treasury Bills were deposited in plaintiff's account. After the check from Rancal International was deposited with BPPR, a wire transfer for the initial $300,000.00 good-faith deposit was made from BPPR to a Citibank account in New York in the name of Lenco Securities Corporation.

After Euro-Atlantic received the initial deposit, the firm was to release the U.S. Treasury Bills to Stoutt by depositing them in an account that had been arranged with La Jolla Capital. La Jolla Capital would then transfer $800,000.00 to Rancal International's account from which the initial check drawn for $300,000.00 would be covered. The entire transaction was designed to move quickly ensuring that no overdraft in Rancal International's account would occur. In any case, plaintiff avers that Guzmán requested him to sign a blank promissory note to cover the overdraft. After delays in the opening of the account with La Jolla Capital, Stoutt discovered that the initial deposit had been sent to William Avent and John Dilworth. Said deposit was supposed to be held in an escrow account until the Treasury Bills were deposited in Stoutt's account.

On September 5, 1995, BPPR was informed that the check deposited by plaintiff, against which BPPR effectuated a $300,000.00 wire-transfer, did not have sufficient funds for clearance. As a result, plaintiff's account with BPPR had a $300,000.00 overdraft. On September 18, 1995, fearing any action for check kiting,¹ plaintiff wrote BPPR, explaining that the Treasury Bill transaction had not been completed as expected and, therefore, the Rancal International account had insufficient funds to cover the check made to BPPR. However, plaintiff explained that he was to receive the funds by September 22, 1995. On September 26, 1995, plaintiff again wrote to BPPR clarifying that he expected to resolve the matter within forty-eight hours.

Apparently, by the end of September 1995, plaintiff realized that the Treasury Bill transaction had been a sham and decided to retain a Chicago counsel to recover the $300,000.00 deposit from Euro-Atlantic Securities. Plaintiff further complained with the Securities Exchange Commission and the National Association of Securities Dealer. On October 11, 1995, plaintiff received notice from his counsel informing him that the wire transfer would be completed a day later. Stoutt immediately wrote BPPR on the same date, informing that the wire transfer to his account would be completed within a day and he therefore could satisfy the overdraft. However, on October 13, 1995, plaintiff again wrote defendant explaining that his efforts to recuperate the $300,000.00 had been fruitless, that there had been no foul play intended on his part, and requesting more time to secure the money.

As plaintiff alleges, Guzmán, in a memo to BPPR superiors, presented inaccurate and incomplete information as to the nature of the $300,000.00 wire transfer. Guzmán's memo to superiors, failed to indicate the knowledge of the transactions that, as Plaintiff alleges, had been previously arranged and discussed with Guzmán. BPPR subsequently reported the transaction to their security division. After an investigation, on November 13, 1995, defendant filed a Report of Apparent Crime with the Federal Bureau of Investigation and the office of the U.S. Attorney. On November 15, 1995, BPPR officials met with FBI agent Anne Costello who, using the allegedly incomplete information provided by Guzmán, by then a former employee, decided that there was apparent bank fraud due to check kiting. After interviewing several of the parties allegedly involved, Special Agent Costello, on December 4, 1995, arrested Stoutt. Thereafter, on December 5, 1995, the FBI issued a news release as to the complaint filed against Stoutt. On February 7, 1996, Assistant U.S. Attorney Joseph Frattallone filed a motion to dismiss the case against plaintiff, Stoutt, because of insufficient evidence.

Plaintiff avers that had defendants provided the FBI accurate and/or complete information about how and why the wire transfer to New York was effectuated, no criminal changes would have resulted. As explained by Special Agent Costello in her deposition, none of the interviews conducted outside of bank personnel contributed to a finding of probable cause for the filling of the criminal charges. Therefore, plaintiff alleges that only information that was inaccurate or incomplete, as reported by defendant's official, Guzmán, led to the prosecution and filing of criminal charges for check kiting. Plaintiff alleges that BPPR encouraged the FBI to criminally prosecute Stoutt and to issue a press release which was detrimental to plaintiff's reputation.

Defendant now moves the Court to grant Summary Judgment, based on the "safe harbor" provisions of the Annunzio Wylie Act, which grants immunity from disclosures by financial institutions of suspicious transactions or possible violations of law.

II. SUMMARY JUDGMENT STANDARD

The function of summary judgment is "to pierce the boilerplate of the pleadings and examine the parties' proof to determine whether a trial is...