Young v. U.S. Dept. of Justice, s. 1042

• Decision Date: 30 August 1989
• Docket Number: Nos. 1042,D,1052,s. 1042
• Citation: 882 F.2d 633
• Parties: Sybil YOUNG and Roderick Young, Plaintiffs-Appellants, v. UNITED STATES DEPARTMENT OF JUSTICE, Defendant-Appellee. Sybil YOUNG and Roderick Young, Plaintiffs-Appellants, v. CHEMICAL BANK, N.A., Defendant-Appellee. ockets 88-6314, 88-6318.
• Court: U.S. Court of Appeals — Second Circuit

Page 633

882 F.2d 633

58 USLW 2120

Sybil YOUNG and Roderick Young, Plaintiffs-Appellants, v. UNITED STATES DEPARTMENT OF JUSTICE, Defendant-Appellee.

Sybil YOUNG and Roderick Young, Plaintiffs-Appellants, v. CHEMICAL BANK, N.A., Defendant-Appellee.

Nos. 1042, 1052, Dockets 88-6314, 88-6318.

United States Court of Appeals Second Circuit.

Argued May 4, 1989.

Decided Aug. 8, 1989.

As Amended Aug. 30, 1989.

Stuart Potter (Claudia Conway, Butler, Fitzgerald & Potter, New York City, of counsel), for plaintiffs-appellants Sybil and Roderick Young.

Gabriel W. Gorenstein, Asst. U.S. Atty., S.D.N.Y., New York City (Benito Romano, U.S. Atty., S.D.N.Y., Edward T. Ferguson, III, Asst. U.S. Atty., S.D.N.Y., New York City, of counsel), for defendant-appellee U.S. Dept. of Justice.

Barbara E. Daniele, Asst. Gen. Counsel, Chemical Bank, N.A., New York City, for defendant-appellee Chemical Bank, N.A.

Before FEINBERG and NEWMAN, Circuit Judges, and TENNEY, District Judge. ^*

TENNEY, District Judge:

In these cases, we examine the extent to which federal and state privacy laws restrict the ability of the federal government and banks to assist investigations in foreign countries. Plaintiffs appeal from judgments of the District Court for the Southern District of New York (John F. Keenan, Judge) dismissing these actions pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim for relief. We affirm in the case against the United States Department of Justice and modify the judgment in the case against Chemical Bank.

BACKGROUND

Appellants Sybil Young, a British citizen, and her husband Roderick, a citizen of Bermuda, operated several businesses in Bermuda. Sometime around 1981, Mrs. Young opened a checking account at a branch of Chemical Bank ("Chemical") in New York City. From 1981 to 1986, she regularly deposited large amounts of cash and traveler's checks in her Chemical account by registered mail. Chemical's management became suspicious of the size and frequency of these deposits but a background check on Mrs. Young failed to disclose any criminal history.

The deposits continued to arrive and Chemical continued to process them for some time, despite its concerns. Chemical finally refused to accept any more deposits after an incident in August 1986, when Mr. Young personally appeared at the bank with approximately $35,000 in traveler's checks for deposit to his wife's account. A Chemical officer told Mr. Young that Chemical would not accept the deposit. The discussion turned into an argument Sometime during the next two or three months, Sol Froomkin, the Attorney General of Bermuda, received information from an informant that the Youngs were violating Bermuda's currency control laws. The identity of the informant has not been revealed but the Youngs allege that it was a representative of Chemical. In any event, on the basis of this tip, Froomkin initiated an investigation into the Youngs' banking activities with Chemical.

and Mr. Young left the bank. That night he placed the checks in the night deposit slot. Chemical did not process the checks when they were discovered the next day. Instead, it mailed them back to Mrs. Young in Bermuda.

In connection with the investigation, representatives from Froomkin's office asked Chemical for information pertaining to Mrs. Young's account. They were told that Chemical would provide it only if compelled by subpoena. Froomkin telephoned the Office of the United States Attorney for the Southern District of New York for help and was referred to David Denton, the Executive Assistant United States Attorney. Denton eventually applied for, and was granted, an order from the District Court for the Southern District of New York appointing him a commissioner empowered to obtain evidence relevant to Froomkin's investigation. Under this authority, Denton obtained the account information with a court-ordered subpoena. He provided this evidence, along with other material acquired pursuant to his commission, to Froomkin, who used it to obtain an indictment against the Youngs. Eventually, the Youngs both pleaded guilty to numerous violations of Bermuda law.

After their convictions, the Youngs initiated separate actions against the United States Department of Justice (the "Government") and Chemical, claiming that each had violated the Right to Financial Privacy Act, 12 U.S.C. Secs. 3401-22 (1983 & Supp.1988) ("RFPA" or the "Act") by failing to comply with certain provisions that the Youngs assert should have regulated the release of Mrs. Young's account information to the Government. In the action against Chemical, the Youngs also asserted claims based on confidentiality theories. The district court dismissed both lawsuits. It held that the Government was merely serving as a "conduit" for the Bermuda government when it obtained the account information and was, therefore, not a "government authority" within the meaning of the Act. The court also found, as a matter of New York State law, that appellants had no cause of action against Chemical arising from an alleged breach of confidentiality. The Youngs appeal from both dismissals.

DISCUSSION

A. Applicability of the RFPA to Court-Appointed Commissioners

Persons involved in foreign legal proceedings, who seek evidence located in the United States, may obtain it using letters rogatory or less-cumbersome requests for court-appointed commissioners, the ancient tools of international litigation. See United States v. Mosby, 133 U.S. 273, 282, 10 S.Ct. 327, 831, 33 L.Ed. 625 (1890); Nelson v. United States, 17 F. Cas. 1340, 1341 (C.C.D. Pa. 1816) (No. 10,116); Spanish Consul's Petition, 22 F. Cas. 854, 854 (S.D.N.Y. 1867) (No. 13,202); 4 J. Moore, J. Lucas & T. Currier, Moore's Federal Practice p 28.09 (2d ed. 1989) [hereinafter Moore's ]. ¹ Private individuals may be appointed commissioners, see In re Letter of Request for Judicial Assistance from the

Tribunal Civil de Port-au-Prince, Republic of Haiti, 669 F.Supp. 403, 407 (S.D.Fla.1987), but, as in this case, foreign governments typically turn to law-enforcement authorities for help in criminal matters. See, e.g., In re Request for Assistance from Ministry of Legal Affairs of Trinidad and Tobago, 848 F.2d 1151, 1152 (11th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 784, 102 L.Ed.2d 776 (1989) [hereinafter Trinidad and Tobago ]; In re Request for International Judicial Assistance (Letter Rogatory) From the Federative Republic of Brazil, 700 F.Supp. 723, 725 (S.D.N.Y.1988) [hereinafter Republic of Brazil ]. These cases require us to determine the applicability of the RFPA to law-enforcement officials who have been designated commissioners in such circumstances.

1. Scope of the RFPA

The RFPA provides, in pertinent part:

[N]o Government authority may have access to or obtain copies of, or [sic] the information contained in the financial records of any customer from a financial institution unless ... such customer has authorized such disclosure ... [or] such financial records are disclosed in response to a judicial subpena which meets the requirements of ... this title....

12 U.S.C. Sec. 3402. The RFPA defines a "government authority" as "any agency or department of the United States, or any officer, employee, or agent thereof." Id. Sec. 3401(3). Were there no other circumstances for us to consider, we would have to find that Denton, as a Justice Department employee, fell within this definition. The district court found, however, that Denton was not specifically acting in that capacity when he obtained this information from Chemical. The specific question before us, therefore, is whether the RFPA applies when persons who would otherwise qualify as "government authorities" under the RFPA are appointed commissioners and, in that capacity, seek to obtain information from financial institutions with court-ordered subpoenas. We hold that it does not.

Initially, we note that Congress never considered the question before us when it enacted the RFPA. For example, the Act does not contain a single reference to commissioners or letters rogatory, and nothing in the legislative history suggests that Congress weighed the possible impact of the Act on either of these procedures. Our determination of how broadly to construe the RFPA is made somewhat difficult by the absence of a clearly articulated purpose behind it. Certainly, a significant motivating factor for Congress was the Supreme Court's decision in United States v. Miller, 425 U.S. 435, 440, 96 S.Ct. 1619, 1622, 48 L.Ed.2d 71 (1976), in which the Court held that bank customers have no reasonable expectation of privacy, under the fourth amendment, in bank records of their accounts. See H.R.Rep. No. 1383, 95th Cong., 2d Sess. 34 (1978) [hereinafter H. Rep.], reprinted in 1978 U.S.Code Cong. & Admin.News 9273, 9306 [hereinafter Code News]. The House Report accompanying the Act, for example, specifically disapproved of the Miller Court's failure to "acknowledge the sensitive nature of these records...." Id.

Nevertheless, it would be reading too much into the Act to conclude that Congress intended to cloak bank records with an impenetrable veil of privacy in all contexts. As the House Report explains:

[The Act] is intended to protect the customers of financial institutions from unwarranted intrusion into their records while at the same time permitting legitimate law enforcement activity. Therefore, [it] seeks to strike a balance between customers' right of privacy and the need of law enforcement agencies to obtain financial records pursuant to legitimate investigations.

H. Rep. at 33, reprinted in Code News at 9305. Congress determined that the best way to protect financial records from unwarranted governmental intrusion without crippling legitimate criminal investigations was to regulate the government's access. Yet, it observed that grand jury subpoenas, the mechanism of disclosure in Miller, have always been subject to judicial review. It ...