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Young v. United States Department of Justice

decided: August 8, 1989.


Appeals from final judgments of the United States District Court for the Southern District of New York (Keenan, Judge), granting defendants' motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Judgment in Young v. United States Department of Justice affirmed. Judgment in Young v. Chemical Bank, N.A. modified as stated herein.

Feinberg and Newman, Circuit Judges, and Tenney, District Judge.*fn*

Author: Tenney

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.


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 travellers 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 travellers 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, 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.

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.

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. ยงยง 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.


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, 33 L. Ed. 625, 10 S. Ct. 327 (1890); Nelson v. United States, 1 Pet. C.C. 235, 17 F.Cas. 1340, 1341 (C.C.D.Pa. 1816) (No. 10,116); Spanish Consul's Petition, 1 Ben. 225, 22 F.Cas. 854, 854 (S.D.N.Y. 1867) (No. 13,202); 4 J. Moore, J. Lucas & T. Currier, Moore's Federal Practice para. 28.09[2] (2d ed. 1989) [hereinafter Moore's].*fn1 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, 488 U.S. 1005, 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 Federal 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:

[No] 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 ...

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