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.12.12. 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