Walker v. S.W.I.F.T. Scrl, 1:07cv635.

• Decision Date: 18 October 2007
• Docket Number: No. 1:07cv635.,1:07cv635.
• Citation: 517 F.Supp.2d 801
• Parties: Ian WALKER and Stephen Kruse, Plaintiffs, v. S.W.I.F.T. SCRL, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

517 F.Supp.2d 801

Ian WALKER and Stephen Kruse, Plaintiffs, v. S.W.I.F.T. SCRL, Defendant.

No. 1:07cv635.

United States District Court, E.D. Virginia, Alexandria Division.

October 18, 2007.

COPYRIGHT MATERIAL OMITTED

Gordon Samuel Woodward, Jr., Schnader Harrison Segal & Lewis LLP, Washington, DC, for Plaintiffs.

Peter Hugh White, Mayer Brown LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

In this transferred federal question case, two individuals, for themselves and on behalf of a putative class, seek damages and injunctive relief against a supplier of financial messaging services for violations of the First and Fourth Amendments of the U.S. Constitution, the Right to Financial Privacy Act, 12 U.S.C. §§ 3401, et seq. (RFPA), and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. (ICFDBPA). These violations allegedly occurred in the course of defendant's response to administrative subpoenas issued by the United States Department of the Treasury under the International Emergency Economic Powers Act, 50 U.S.C. § 1701, et seq. (IEEPA).

Filed originally in the Northern District of Illinois, the case was transferred to this district pursuant to 28 U.S.C. § 1404(a). Prior to transfer, the transferor court granted in part and denied in part defendant's motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. In passing, the Illinois district court found that plaintiffs had standing to assert their claims. Following transfer, defendant filed a motion in this district seeking reconsideration of the denial in part of its motion to dismiss and plaintiffs filed an opposition. As the issues raised by the motion and opposition have been fully briefed and argued, the motion is now ripe for disposition.

For the reasons that follow, reconsideration of the Illinois district court's ruling on the motion to dismiss is premature, as it is first necessary to consider the jurisdictional issue of plaintiffs' standing. A review of this issue reflects that the complaint¹ fails to allege sufficient facts to support standing, and hence the complaint must be dismissed without prejudice. Plaintiffs will be given leave to file an amended complaint that satisfies standing, provided they can do so in accordance with Rule 11, Fed.R.Civ.P.

I.

Plaintiffs Ian Walker and Stephen Kruse are private individuals who are office workers residing in Washington, D.C. and Chicago, Illinois, respectively. According to the complaint, each plaintiff has completed numerous domestic financial transactions since September 11, 2001, and at least one international financial transaction since that date. Yet absent from the complaint is any allegation identifying any specific transactions or the financial institutions plaintiffs used in connection with these transactions.

Defendant S.W.I.F.T. SCRL (the Society for Worldwide Interbank Financial Telecommunication, or SWIFT) is an international cooperative consortium of banks, brokers, and investment managers. Based in Brussels and with its `principal American place of business in northern Virginia, SWIFT supplies secure standardized messaging services to financial institutions. Quoting from SWIFT's website, the complaint describes the SWIFT consortium as follows:

"Defendant SWIFT is the financial industry-owned co-operative supplying secure, standardized messaging services and interface software to 7,800 financial institutions in more than 200 countries. SWIFT's worldwide community includes banks, broker/dealers and investment managers, as well as their market infrastructures in payments, securities, treasury and trade.'"

Additionally, the complaint notes that most of the eleven million transactions per day handled by SWIFT are international in nature in that they involve communication across national borders.

Because the sufficiency of the complaint's factual allegations is at issue, it is important to focus here on these allegations. They are contained in approximately three pages of the fifteen page, four count complaint. One of these pages is devoted to quoting from websites of various foreign government agencies² to the effect that SWIFT's disclosure of financial data to the U.S. government violates various foreign laws. More to the point for the standing question at issue, the complaint cites a June 23, 2006 New York Times article reporting on the existence of the Terrorist Financing Tracking Program (TFTP), a post-9/11 initiative of the federal executive branch to track funds flowing to international terrorist organizations. To achieve this goal, the Times article noted, the Treasury Department issued administrative subpoenas pursuant to the TFTP (and presumably the IEEPA as well). The Times article also reported that SWIFT, in compliance with administrative subpoenas, had provided the government with information concerning financial transmissions SWIFT had facilitated. The article did not identify the specific financial information SWIFT disclosed, but instead reported conflicting comments from unnamed sources on this subject. Thus, the Times article quoted one unnamed person "close to the operation" as saying "[a]t first, they got everything — the entire Swift database." Yet, the article also reported that following a meeting between SWIFT and administration officials, tighter controls were imposed which limited the volume of data disclosed. The Times article is silent on the nature and extent of this putative negotiated limitation.

Plaintiff Walker filed the present suit against SWIFT on June 23, 2006 — the same day the Times article was published — in the United States District Court for the Northern District of Illinois. Plaintiff Kruse was added as a plaintiff on February 27, 2007. The complaint alleged four counts of wrongdoing. Count I alleged that SWIFT "denied Plaintiffs ... their rights to speak and receive speech privately under the First Amendment." Count II alleged that SWIFT "violated [their] reasonable expectations of privacy and denied ... their right to be free from unreasonable searches and seizures as guaranteed by the Fourth Amendment to the Constitution of the United States." Count III alleged that SWIFT violated the RFPA when it "disclosed information contained in customer financial records without reasonable description or any of the other five criteria enumerated" in the statute. Count IV alleged that SWIFT engaged in unfair, unlawful and/or fraudulent business practices in contravention of the ICFDBPA.

Defendant SWIFT filed two motions in response to the complaint: (i) a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), and (ii) a motion to dismiss on forum non conveniens grounds, which the Illinois district court construed as a motion to transfer venue pursuant to 28 U.S.C. § 1404(a). The Illinois district court ruled on the defendant's motion to dismiss for failure to state a claim, granting that motion with respect to Counts I and IV but denying it with respect to Counts II and III. Although defendant did not file a separate motion to dismiss for lack of standing under Rule 12(b)(1), the motion to dismiss for failure to state a claim raised the standing issue, and the Illinois district court ruled on that issue as well, concluding that the complaint demonstrated plaintiffs' standing. Following these rulings, the Illinois district court granted SWIFT's transfer motion and the matter was transferred to this district pursuant to 28 U.S.C. § 1404(a).³

II.

The Illinois district court, relying on the Seventh Circuit's decision in Venture Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir.1993), ruled that the Times article should be treated as part of the pleadings because it was "central to the claims in this case" and had been attached to defendant's motion to dismiss. Based on this ruling, the Illinois district court determined that the Times article could be used to "fill[]" certain "holes" in the plaintiffs' complaint. The Illinois district court's reliance on the Times article to supplement the allegations in the complaint merits further consideration.

It is certainly true, as the Illinois district court noted, that documents referred to in a complaint may, in certain circumstances, be considered part of the complaint for the purpose of evaluating a dismissal motion. See, e.g., American Chiropractic Ass'n, Inc. v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir.2004); 5A Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1327 (3d ed.2004).⁴ Yet it is important to note that this principle does not apply to any and all documents that might be referenced in a complaint; rather, this principle requires more: it requires that the referenced document be central or integral to the claim in the sense that its very existence, and not the mere information it contains, gives rise to the legal rights asserted. The cases illustrate this requirement, Thus, where a complaint in a fraud action references a document containing the alleged material misrepresentations, the referenced document may be considered part of the complaint.⁵ Similarly, a newspaper article reporting allegedly fraudulent statements by a corporate officer may be considered part of the complaint in a securities fraud action,⁶ and an allegedly libelous magazine article referred to in a complaint may be considered part of the complaint in a libel action based on that article.⁷ Importantly, the Times article does not fit within this principle; it is not `central' to plaintiffs' case in the legally relevant manner because its existence did not create the legal rights asserted. At most, it provided plaintiffs with some notice of a possible right of action.

The question then is whether the Times article may appropriately be used by plaintiffs or a court to supplement or fill holes in the...