Jose Daniel Ruiz Coronado v. Bankatlantic Bancorp

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 99-12108 ELEVENTH CIRCUIT
AUGUST 18, 2000
________________________
THOMAS K. KAHN
D.C. Docket No. 96-07115-CV-JAG CLERK
JOSE DANIEL RUIZ CORONADO,
Plaintiff-Appellant,
versus
BANK ATLANTIC BANCORP, INC.,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Southern District of Florida.
_________________________
(August 18, 2000)
Before TJOFLAT, MARCUS and CUDAHY*, Circuit Judges.
CUDAHY, Circuit Judge:
BankAtlantic Bancorp, Inc. (BankAtlantic) responded to grand jury subpoenas by
producing the bank records of nearly 1100 international customers. Coronado, one
*
Honorable Richard D. Cudahy, U.S. Circuit Judge for the Seventh Circuit sitting by
designation.
of these customers purporting to represent a class including the others, filed this
lawsuit against BankAtlantic for unlawful disclosure of financial information,
claiming that BankAtlantic’s disclosure violated federal and state law.
BankAtlantic claimed immunity under the Annunzio-Wylie Anti-Money
Laundering Act’s (Annunzio-Wylie Act or Act) safe harbor provision, 31 U.S.C. §
5318(g)(3), because their disclosure was made pursuant to the grand jury
subpoenas. The district court initially granted BankAtlantic’s motion to dismiss,
but this court reversed and remanded. See Lopez v. First Union Nat’l Bank of
Florida, 129 F.3d 1186, 1196 (11th Cir. 1997). On remand, the case proceeded to
discovery, and Coronado filed several motions to compel disclosure of copies of
the grand jury materials as well as information on BankAtlantic’s internal
operations. The district court denied these motions. BankAtlantic then moved for
summary judgment, and the district court granted that motion. Coronado appeals.
I. Facts and Disposition Below
A. General Background
In February of 1995, BankAtlantic acquired MegaBank, a Dade County
commercial bank, in order to create an international division. MegaBank’s
international division was headed by Piedad Ortiz, and after the acquisition, she
2
became Vice President of BankAtlantic’s international division. Ortiz had
overseen approximately 1100 accounts at MegaBank, and she continued this
supervision at BankAtlantic. Shortly after acquiring MegaBank, BankAtlantic
conducted an internal audit of its new international division, and this audit revealed
suspicious practices. A private pouch service made regular deliveries addressed to
“BankAtlantic, International Division, Attention Ms. Piedad Ortiz.” These
pouches, which were uninsured, contained large amounts of checks, money orders
and negotiable instruments along with deposit and transfer instructions. The
pouches originated from a private courier service—discretely located in the back of
another business—in Bogota, Columbia, and the checks and other instruments
transported in the pouches were from various locations in the United States,
including New York and New Jersey. BankAtlantic discovered that Ortiz and her
assistant, Lucia Ramirez (who had also joined BankAtlantic as part of the
MegaBank acquisition), were responsible for initiating and maintaining this pouch
service.
The BankAtlantic audit also revealed that Ortiz and her assistant were
approving new accounts that were missing required customer identification
documentation and allowing personal accounts to be used as unregistered money
exchange facilities (in probable violation of Florida law). Further, BankAtlantic
3
discovered, among other irregularities, that letters of authorization were missing
for numerous wire transfers and that no currency transaction reports were filed
when bearer instruments in excess of $10,000 arrived in the pouches from Bogota.
There were millions of dollars flowing into and out of these Columbia-based
accounts each month.
BankAtlantic became suspicious that its new international division, as
headed by Ortiz, was facilitating money laundering and bank fraud. BankAtlantic
took these suspicions to federal law enforcement officials in June of 1995. At this
point, the bank provided general information regarding its suspicions along with
customer names and account numbers for only five accounts obviously connected
with this questionable activity. BankAtlantic did not disclose the contents of any
incoming or outgoing wire transfers at this time.
The federal government investigated this suspected money laundering and
bank fraud, and sometime in the spring of 1996, three grand juries were impaneled.
These grand juries—sitting in the Southern District of Florida, the Eastern District
of New York and the District of New Jersey—investigated individuals and
organizations in Florida, New York and New Jersey for the suspected laundering
of Columbian drug money. In the late spring, the grand juries issued and served
subpoenas on BankAtlantic demanding that it produce copies of account
4
documents, records and information regarding the 1100 accounts under the
oversight of Ms. Ortiz in the international division.
The federal investigation was centered on these 1100 accounts that Ortiz had
supervised at MegaBank and later at BankAtlantic, and on June 5, 1996, the United
States Department of Justice, in conjunction with Columbian law enforcement
agencies, announced the arrest of several individuals: Ortiz and Ramirez1 were
arrested upon suspicion that they were committing bank fraud to facilitate the
illegal movement of funds by individuals in Columbia. Also on June 5, Judge
Davis of the Southern District of Florida issued a ten-day ex parte temporary
restraining order freezing the 1100 accounts in BankAtlantic’s international
division. On June 11, 1996, Judge Davis released the funds in some accounts, and
then, on June 23, the district court issued a seizure warrant to freeze the remaining
accounts until further court order. A supplemental order directed the Drug
Enforcement Agency (DEA) to physically seize all of the frozen funds (subject to
certain exceptions not relevant here). Accordingly, BankAtlantic turned the funds
over to the DEA on August 1, and on August 8, forfeiture proceedings were
commenced against many of the accounts. About six months after the initial
1
On June 14, 1996, a federal grand jury indicted both Ortiz and Ramirez for making false
entries in the books and records of BankAtlantic to keep the bank unaware of the currency
transfer operation from Columbia.
5
seizure, the government agreed to release between 400 and 600 of the
accounts—there is no evidence in the record suggesting why—and the funds were
returned to these account holders with full interest in December of 1996.
B. Coronado’s Account and Lawsuit
Coronado opened his account with BankAtlantic on May 13, 1996—almost
a year after BankAtlantic first reported suspicious activity to the federal
government and, as it turned out, about three weeks before Ortiz’s arrest. Ortiz
had opened the account for Coronado using instruments drawn on United States’s
banks that had been shipped from Bogota, Columbia, to Miami via the private
courier service. Coronado’s initial deposit consisted of four checks in odd
amounts that totaled exactly $5000 in value, and subsequent deposits were
comprised of checks, travelers’ checks and money orders drawn on banks in New
York and New Jersey. Once the amount Coronado had on deposit grew to a little
less then $46,000, $45,500 was wire transferred to a Swiss bank account. The day
after the transfer, new deposits began. BankAtlantic had not mentioned Coronado
in its initial disclosure to federal authorities in 1995 (recall, he did not open his
account until 1996), but Coronado’s account information and the records of the
wire transfer to Switzerland were turned over to the grand jury pursuant to the
1996 subpoenas. On June 5, 1996, Coronado’s account was frozen along with the
6
other 1100 that Ortiz had supervised, but his account was not among those released
on June 11. Instead, his funds were seized pursuant to the district court orders, and
forfeiture proceedings were commenced against Coronado’s account on August 8.
His account was eventually released, along with the 400 to 600 others, pursuant to
the agreement with the government, and his funds were returned (with interest)
before the end of 1996.
Months earlier, on September 30, 1996, Coronado had filed this lawsuit
against BankAtlantic, purportedly representing a class consisting of himself and
the other 1100 holders of accounts in BankAtlantic’s international division. In his
complaint, Coronado alleged that BankAtlantic violated the Electronic
Communications Privacy Act (ECPA), 18 U.S.C. § 2510 et seq., the Right to
Financial Privacy Act (RFPA), 12 U.S.C. § 3401 et seq., and Florida law by
disclosing account information and records to the grand juries. Before class
certification, BankAtlantic moved to dismiss Coronado’s complaint under Federal
Rule of Civil Procedure 12(b)(6), and the district court granted that motion,
dismissing Coronado’s complaint with prejudice exclusively on the ground that
BankAtlantic was immune from suit under the Annunzio-Wylie Act’s safe harbor
provision, 31 U.S.C. § 5318(g)(3). On appeal, this court reversed and remanded
because the allegations in Coronado’s complaint, taken in the light most favorable
7
to Coronado, did not establish grounds for BankAtlantic’s immunity. See Lopez,
129 F.3d at 1194-96. On remand, the case proceeded through a few months of
discovery, with Coronado making motions to compel BankAtlantic’s production of
copies of the grand jury subpoenas and documents turned over to the grand juries
as well as to compel production of other BankAtlantic information. The district
court denied all these motions, and in June of 1998, BankAtlantic moved for
summary judgment. The district court granted BankAtlantic’s motion, again on the
ground that the bank was shielded by the safe harbor provisions of the Annunzio-
Wylie Act. Coronado again appeals.
II. Discussion
In his brief on appeal, Coronado identifies three issues we must decide: (1)
whether the Annunzio-Wylie Act provides BankAtlantic with immunity from his
claims under federal and state law; (2) whether Coronado was entitled to partial
summary judgment that BankAtlantic had violated the RFPA and the ECPA; and
(3) whether the district court erred in denying Coronado’s motions to compel
discovery. We review the first two issues de novo, see Ross v. Clayton County,
Ga., 173 F.3d 1305, 1307 (11th Cir. 1999), and review the discovery issue for
abuse of discretion, see Leigh v. Warner Brothers, Inc., No. 99-10087, 2000WL
8
679162, at *7 (11th Cir. May 25, 2000).
A. Immunity Under the Annunzio-Wylie Act
In 1992, Congress enacted the Annunzio-Wylie Anti-Money Laundering Act
in order to facilitate cooperation between domestic financial institutions and the
United States government to stop the global movement of drug money. Large
criminal enterprises depend on their ability to conceal the proceeds of their
criminal endeavors, and the Annunzio-Wylie Act seeks to make concealment much
more difficult by encouraging financial institutions to disclose suspicious activity
and cooperate with law enforcement efforts. But, because disclosure of financial
information—either spontaneously or after a request from the government—could
possibly lead to litigation with disgruntled customers like Coronado, the Annunzio-
Wylie Act granted immunity to banks making disclosures. The safe-harbor
provision, to this end, reads in its entirety as follows:
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). The plain language of this section supplies “an affirmative
defense to claims against a financial institution for disclosing an individual’s
9
financial records or account-related activity.” Lopez, 129 F.3d at 1191. Few
courts have had the opportunity to examine this section in detail, but we recently
explained in Lopez that § 5318(g)(3) grants to financial institutions “immunity
from liability for three different types of disclosures: (i.) A disclosure of any
possible violation of law or regulation, (ii.) A disclosure pursuant to § 5318(g)
itself, or (iii.) A disclosure pursuant to any other authority.” Id.. These safe
harbors are not limited to currency transactions, and any one of them provides a
disclosing bank complete immunity. See id. at 1192.
BankAtlantic claims, and Coronado does not dispute, that the grand jury
subpoenas it received were facially valid and properly served. BankAtlantic
argues, quite simply, that because it only disclosed information pursuant to these
subpoenas, it disclosed information in accordance with “other authority” and has
immunity under the Annunzio-Wylie Act’s safe harbor (iii). In Lopez, we
explained § 5318(g)(3)’s third safe harbor and the meaning of “any other
authority” as follows:
The “other authority” must be legal authority, because authority
means “[r]ight to exercise powers,” Black’s Law Dictionary 133 (6th
ed. 1991), and in our system based on rule of law, the right to exercise
power is derived from law, e.g. statutes, regulations, court orders, etc.
Hence, for a financial institution’s disclosure to fall within the
confines of the third safe harbor, the financial institution must be able
to point to a statute, regulation, court order, or other source of law that
specifically or impliedly authorized the disclosure. If it cannot do so,
10
the disclosure is not entitled to the protection of the [third] safe
harbor.
Lopez, 129 F.3d at 1193-94. In Lopez, by way of example, we explained that
“[c]learly a disclosure in response to a seizure warrant is protected by the third safe
harbor.” Id. at 1194. However, we also explained that a government agent’s
“verbal request” for information is not “other authority” because there is no
“statute or regulation which gives a government official’s verbal request to access
an individual’s financial records the force of law.” Id. Lopez did not explicitly
address grand jury subpoenas, but we believe that these are properly considered
“other authority” for the purposes of § 5318(g)(3).
A federal grand jury has extremely broad investigatory powers and, unlike a
federal agent making a verbal request, “may compel the production of evidence or
the testimony of witnesses as it considers appropriate.” United States v. Calandra,
414 U.S. 338, 343 (1974). A grand jury has the power to compel the production of
evidence because “a federal grand jury subpoena is issued under the authority of a
court.” Doe v. DiGenova, 779 F.2d 74, 80 (D.C. Cir. 1985). More specifically:
under Federal Rule of Criminal Procedure 17(a), the clerk of a district court is
authorized to issue blank subpoenas (marked with the seal of the court) to a
prosecutor working with a grand jury. See DiGenova, 779 F.2d 80 n.12. If a
recipient of a grand jury subpoena does not produce the evidence sought, the
11
recipient that disobeyed the subpoena (which is essentially an order of the court), is
in contempt, see 28 U.S.C. § 1826; FED. R. CRIM. P. 17(g), and may be fined or
imprisoned, see 28 U.S.C. § 1826. Thus, unlike, for example, a mere verbal
request from a government agent, there is a legal mechanism to enforce grand jury
subpoenas. They possess the “force of law” because they are issued under the
authority of a federal district court, and disobedience can lead to a legal sanction.
See generally Calandra, 414 U.S. at 345 (“The power of a federal court to compel
persons to appear and testify before a grand jury is . . . firmly established.”).
But Coronado is quick to point out that the reach of grand jury subpoenas is
not unlimited: a federal district court has the power to quash a grand jury subpoena
requesting documents “if compliance would be unreasonable or oppressive,” see
FED. R. CRIM. P. 17(c), and a grand jury “may not itself violate a valid privilege,
whether established by the Constitution, statutes, or the common law.” Calandra,
441 U.S. at 346. Also, Congress has the power to limit grand jury subpoenas by
enacting statutes, see Gelbard v. United States, 408 U.S. 41, 52 (1972) (holding
that, under 18 U.S.C. § 2515, a witness called before a grand jury can refuse to
answer questions based on information obtained in violation of Title III of the
Omnibus Crime Control and Safe Streets Act of 1968). Coronado argues that the
account records demanded in the grand jury subpoenas here were “privileged”
12
under the ECPA and therefore outside the reach of the grand jury. His argument is,
essentially, that because § 2703(a) of the ECPA states that “[a] governmental entity
may require the disclosure . . . of the contents of an electronic communication, that
is in electronic storage in an electronic communications system for one hundred
and eighty days or less, only pursuant to a warrant under the Federal Rules of
Criminal Procedure,” and because grand jury subpoenas are not warrants, the grand
juries lacked the power to compel production of his account information.
Therefore, BankAtlantic’s disclosure pursuant to a grand jury subpoena violated
this provision of the ECPA, and it cannot use the shelter of the Annunzio-Wylie
Act’s safe harbor, Coronado concludes.
Coronado’s argument begs the question. The question here is not whether
the government or the grand jury obtained evidence in violation of the ECPA, but
whether BankAtlantic is liable to Coronado for its disclosure. BankAtlantic was
subpoenaed merely as a witness, and long-standing grand jury policy and practice
suggests that we do not want witnesses (who are not even targets of the grand jury)
testing the limits of the grand jury’s authority. The Supreme Court has emphasized
that “a witness may not interfere with the course of the grand jury’s inquiry.”
Calandra, 414 U.S. at 345. Further, as a witness, BankAtlantic was “not entitled to
urge objections of incompetency or irrelevancy, such as a party might raise,” id.,13
nor was BankAtlantic entitled “to challenge the authority of the court or of the
grand jury, provided they have a de facto existence and organization.” Blair v.
United States, 250 U.S. 273, 282 (1919) (holding that witnesses could not refuse to
testify or produce documents on the ground that the relevant criminal statute was
unconstitutional). See also Calandra, 414 U.S. at 345. “[A witness] is not entitled
to set limits to the investigation that the grand jury may conduct.” Blair, 250 U.S.
at 282. Thus, even if the ECPA technically deprived the grand jury of the authority
to demand the account records from BankAtlantic, BankAtlantic—as a
witness—was not in a position to test the limits of the grand jury’s authority.
BankAtlantic was presented with facially valid subpoenas from three federal grand
juries investigating money laundering. Forcing a bank to challenge a facially valid
grand jury subpoena in order to avoid liability to one (or more) of its customers
would fly in the face of both the Annunzio-Wylie Act’s clear intent to encourage
cooperation with money laundering investigations and the more general policy
favoring the “effective and expeditious discharge of the grand jur[ies’] duties.”
Calandra, 414 U.S. at 349-50. We believe it proper to label grand jury subpoenas,
like search warrants or court orders, “legal authority” under Lopez, and we find
that a grand jury subpoena qualifies as “other authority” under the Annunzio-Wylie
Act’s third safe harbor. BankAtlantic’s disclosure, therefore, is covered by the
14
third safe harbor.
Having determined that BankAtlantic is protected by § 5318(g)(3)’s third
safe harbor, it remains only to determine the scope of the immunity granted by the
statute. This is a straight-forward determination. Section 5318(g)(3) states that a
qualified bank “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.” 31 U.S.C. §
5318(g)(3) (emphasis added). This immunity is very broad.2 As we recently
reiterated in Lopez, “the adjective ‘any’ is not ambiguous; it has a well-established
meaning” and, “[r]ead naturally, . . . has an expansive meaning, that is, one or
some indiscriminately of whatever kind.” 129 F.3d at 1192 (citations omitted).
“Any person” certainly includes Coronado, and “any law or regulation” includes
the ECPA, the RFPA and Florida law. (In fact, § 5318(g)(3) immunizes
BankAtlantic from suit under every source of law except the United States
Constitution.) Because BankAtlantic disclosed Coronado’s account records and
information pursuant to facially valid grand jury subpoenas, BankAtlantic is
2
There is no official legislative history for the Annunzio-Wylie Act, but in a letter written
after the passage of the Act, Chairman of the House Subcommittee on Financial Institutions, and
sponsor of the Act, Congressman Frank Annunzio explained in a letter that the immunity
provisions of the Act sought “to provide the broadest possible exemption from civil liability for
the reporting of suspicious transactions. . . .” Cong. Rec. E57-02 (1993).
15
immune from any lawsuit arising from these disclosures.3 Therefore, the district
court properly granted BankAtlantic’s motion for summary judgment.
B. Discovery
In his remaining argument, Coronado contends that the district court
improperly denied his motions to compel discovery because the denials inhibited
his ability to defend against BankAtlantic’s motion for summary judgment.
Specifically, Coronado contends that BankAtlantic should have been compelled to
(1) provide him with copies of the bank’s FedWire Funds Transfer System
contracts, (2) provide copies of all documents describing the bank’s computer
accounting system, (3) provide copies of the grand jury subpoenas and documents
produced to the grand juries and (4) allow Coronado to depose Frank Greico, a
member of BankAtlantic’s upper management, about the contents of the grand jury
subpoenas and documents produced. Coronado cites little if any legal authority for
the allegedly “required” disclosure of any of these materials. Despite his
protestations, we find that the district court did not abuse its discretion by denying
these motions.
As Coronado concedes in his brief, the FedWire contracts and information
3
Our determination that BankAtlantic is immune under the Annunzio-Wylie Act eliminates
any need to address Coronado’s second argument on appeal (that he is entitled to summary
judgment on his ECPA and RFPA claims).
16
on BankAtlantic’s computer system were only relevant to establishing his claim
under the ECPA. But, given that BankAtlantic is immune under the Annunzio-
Wylie Act, Coronado’s claim under the ECPA is not viable. Hence, any possible
abuse of discretion in denying Coronado’s motion to compel production of this
information was harmless. See Dykes v. Depuy, Inc., 140 F.3d 31, 42 (1st Cir.
1998).
Coronado’s other two motions to compel sought production of grand jury
materials. Coronado claims that he wanted access to these materials to determine
whether BankAtlantic really complied with the subpoenas as it claims.
BankAtlantic could not turn over the documents, nor could Mr. Greico answer
deposition questions about the grand jury, because it is illegal for them to do so.
See 18 U.S.C. § 1510(b)(2) (making it a crime for a bank to directly or indirectly
notify a customer of the contents of a grand jury subpoena or information furnished
to a grand jury pursuant to a subpoena). The only way Coronado could have
obtained grand jury materials was through a court order pursuant to Federal Rule
of Criminal Procedure 6(e)(3)(C)(i), but he never sought such an order. Even if he
had, a district court has “substantial discretion” in balancing the need for disclosure
with the need for grand jury secrecy. Douglas Oil Co. of California v. Petrol Stops
Northwest, 441 U.S. 211, 223 (1979).
17
Here, Coronado’s need for disclosure was tied to his desire to verify
BankAtlantic’s strict compliance with the subpoenas. Frank Greico and a
government investigator each filed an affidavit stating that the information
submitted by BankAtlantic was limited to that which was responsive to the
subpoenas, and the district court gave Coronado an opportunity to depose both on
their affidavits before it granted summary judgment. Additionally, to verify for
itself the accuracy of the affidavits, the district court reviewed the subpoenas and
the documents provided to the grand juries in camera. We believe this procedure
appropriately balanced the need for grand jury secrecy with Coronado’s needs as a
litigant. See Young v. United States, 406 F.2d 960, 961 (D.C. Cir. 1969) (noting
that an in camera inspection is the proper way to maintain the secrecy of grand
jury proceedings and meet the needs of litigation). Therefore, the district court did
not abuse its discretion by denying Coronado’s motion to compel production of the
grand jury materials.
III. Conclusion
For the foregoing reasons, we reject Coronado’s arguments on appeal and
AFFIRM the judgment of the district court.
18