Summary
In Daniels, a civil proceeding decided just five months ago, the Court noted that a depositor's motion to quash a subpoena issued by a third party bank had indeed been considered by a Magistrate Judge in that case.
Summary of this case from People v. LommaOpinion
MOTION SEQ. NO.: 002 INDEX NO.: 22575/09
09-22-2011
LISA DANIELS, LISA DANIELS, ESQ., and LISA DANIELS on behalf of Z.S.D., a minor, Z.E.D., a minor, and Z.H.A.D., a minor, Plaintiffs, v. JP MORGAN CHASE BANK, N.A., Defendant.
SHORT FORM ORDER
Present:
HON. F. DANA WINSLOW,
Justice
The following papers read on this motion (numbered 1-2):
NOTICE OF MOTION TO DISMISS..................................................1
AFFIDAVIT IN OPPOSITION.............................................................2
Memoranda of Law:
- Chase's Memorandum of Law in Support
of its Motion to Dismiss Plaintiff's Complaint..........................A
- Reply Memorandum of Law in Further Support
of Chase's Motion to Dismiss......................................................B
Plaintiffs LISA DANIELS, LISA DANIELS, ESQ., LISA DANIELS on behalf of Z.S.D., a minor, LISA DANIELS on behalf of Z.E.D., a minor, and LISA DANIELS on behalf of Z.H.A.D., a minor (collectively "Plaintiffs") bring this action against JPMORGAN CHASE BANK, N.A. ("Defendant or "CHASE") predicated upon the allegedly wrongful release of Plaintiffs' bank account information in response to a subpoena. CHASE moves to dismiss the action pursuant to CPLR §3211(a)(l) and CPLR §3211(a)(7).
BACKGROUND
The undisputed facts are as follows. At all relevant times, LISA DANIELS and her minor children maintained a total of nine accounts with the Hewlett, Nassau County, New York branch of CHASE (collectively, the "Accounts"):
LISA DANIELS:
(1) personal checking account,
(2) home mortgage,
(3) savings account;
LISA DANIELS. ESQ.:
(4) business operating checking account;
Z.S.D.:
(5) NY Uniform Transfer to Minor's Act ("UTMA") Savings Account,
(6) High School Checking account.
Z.E.D:
(7) NY UTMA Savings Account,
(8) High School Checking account.
Z.H.A.D.
(9) NY UTMA Savings Account.
The Accounts were governed by an Account Agreement, which contains a privacy policy pertaining to the management of account information (the "Privacy Policy"). In relevant part, the Privacy Policy states that account information may be shared with third parties:
To protect against fraud.[Aff in Support, Exh. A, pp.42-44].
To respond to a subpoena.
• To service your account.
To report to a credit bureau.
• With your consent.
On or about August 10, 2009, a subpoena duces tecum (the "Subpoena") was issued to CHASE in connection with a support proceeding in the Family Court of the State of New York, County of Nassau, entitled Daniels v. Spector, Docket Number F-04808-07/07 ACHIJ (the "Support Proceeding"). The Subpoena sought production of "[a]ny and all checks and statements for Lisa Daniels, account no. [xxxxxxxx5865], from January 1, 2007 to the present" and was originally made returnable to the office of counsel for Eric M. Spector, respondent in the Support Proceeding.
By letter dated August 14, 2009, CHASE notified LISA DANIELS of its receipt of the Subpoena and its intention to provide the requested documents unless it received, within ten (10) days of the letter, a copy of a properly filed Motion to Quash or a Court Order relieving CHASE of the obligation to comply. [Aff in Opp, Exh. B.] LISA DANIELS states that upon receipt of the August 14, 2009 letter, she telephoned the "Subpoena Analyst" who signed the letter on behalf of CHASE, and, after inquiry, was informed that (i) CHASE did not intend to object to the Subpoena on the basis of improper service; (ii) CHASE "linked" all of the Accounts in its "system," and that in order to comply with the Subpoena, CHASE would have to release information from all of the linked Accounts, including Accounts not referenced in the Subpoena; (iii) the documentation would be released without redaction of information pertaining to Accounts not referenced in the Subpoena, and (iv) CHASE did not intend to object to the Subpoena on the basis that it could not respond without producing information pertaining to Accounts not referenced in the Subpoena. [Aff in Opp, ¶¶ 16 -17]
On August 24, 2009, LISA DANIELS filed a Motion to Quash the Subpoena in the Nassau County Family Court. By Order dated September 23, 2009 (the "Magistrate's Order"), Support Magistrate Diane M. Dwyer granted the motion, but only to the extent of requiring that all papers be delivered to the Court for in camera review and redaction of any information deemed to violate the rights of individuals not a party to, or subject of, the Support Proceeding. Magistrate Dwyer found that LISA DANIELS had placed her financial situation in issue by seeking modification of her child support order and producing copies of certain checks during the course of the enforcement proceeding. Magistrate Dwyer found further that "there [were] only records of one account sought pursuant to the [Subpoena]," and that LISA DANIELS had not demonstrated that the privacy rights of any individual non-party would be compromised by the production of the subpoenaed records.
On or about March 21 or 22, 2010, CHASE delivered documents to the Family Court pursuant to the September 23, 2009 Order. Plaintiffs allege that these documents included deposit slips and information pertaining to all of the Accounts. This, according to Plaintiffs, exceeded the scope of the Subpoena, which specifically demanded only statements and checks from LISA DANIELS, account number [xxxxxxxx5865].
The Court refers to the motion and opposition papers for a detailed account of the procedural history culminating in the service of the Amended Verified Complaint, dated January 28, 2011 (the "Complaint"), which is the subject of the motion at bar. The Complaint alleges eight causes of action: (1) Gross Negligence - Account Linking; (2) Gross Negligence - Failure to Object to the Subpoena; (3) Gross Negligence - Producing Deposit Slips; (4) Gross Negligence - Documents Produced ex parte; (5) Gross-Negligence (seeking punitive damages); (6) Breach of Contract; (7) Gross-Negligence -Administration of Bank Accounts; (8) Deceptive Business Practices (violation of General Business Law §349).
In their opposition, plaintiffs essentially concede that CHASE cannot be held liable for complying with the Subpoena and Magistrate's Order. [Aff. In Opp. ¶¶ 18-19.] According to plaintiffs, the crucial wrong committed by CHASE was the failure to object to the Subpoena in the first instance - the failure to advise the Magistrate that the Accounts were linked and could not be de-linked for purposes of responding to the Subpoena, and the failure to inform the Court that CHASE could not respond to the Subpoena without disclosing private account information that was not subject to the Subpoena. Plaintiffs maintain that this constituted a breach of fiduciary duty and a breach of CHASE's contractual obligation to protect the private information of account holders.
CHASE seeks to dismiss the Complaint pursuant to CPLR §3211on grounds that that: (i) the negligence claims fail because the parties' relationship is governed by contract; (ii) the contract claims fail because plaintiffs' do not cite any contract provision that has been breached; (iii) the GBL §349 and punitive damages claims fail because the conduct alleged does not concern the public at large.
DISCUSSION
In a motion to dismiss pursuant to CPLR §3211, the Court must assume the truth of the facts alleged, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362, 366; Leon v. Martinez, 84 N.Y.2d 83, 87-88; Sanders v. Winship, 57 NY2d 391, 394; Morone v. Morone, 50 NY2d 481, 484 Morris v. Gianelli, 71 A.D.3d 965; Dinerman v. Jewish Board of Family & Children's Services, Inc., 55 A.D.3d 530. Affording the Complaint a liberal construction, as it must, the Court nonetheless finds that plaintiffs do not have a legally cognizable cause of action.
Gross Negligence.
To maintain the causes of action sounding in negligence, plaintiffs must allege facts which, if taken as true, manifest a breach of duty independent of contract. Clark-Fitzpatrick, Inc. v. Long Island Railroad Co., 70 NY2d 382; Roslyn Savings Bank, 266 AD2d at 273. In the case at bar, the survival of plaintiffs' negligence claims depends on a single issue of law: to what extent does a bank have a legal duty to shield a depositor's account information from disclosure in response to a subpoena issued in connection with judicial proceedings?
It is well settled that the relationship between a bank and its depositors is contractual. Roslyn Savings Bank v. National Westminster Bank USA, 266 AD2d 272; Bank Leumi Trust Co. Of NY v. Block 3102 Corp., 180 AD2d 588. No fiduciary relationship is created by the maintenance of checking, savings or loan accounts. Roslyn Savings Bank v. National Westminster Bank USA, 266 AD2d 272; Bank Leumi Trust Co. Of NY v. Block 3102 Corp., 180 AD2d 588. Thus, plaintiffs' assertion of a fiduciary duty to protect their privacy interest is unavailing.
If no fiduciary duty exists, the question becomes whether or not there exists an ordinary duty of care arising from the confidential nature of the relationship between the bank and its customers. To what extent do depositors have a privacy interest in their bank account records, such as would give rise to a duty on the part of the bank to object to or challenge a subpoena that is arguably defective or overbroad? Neither party has cited authority on this question, and the Court believes that it is a matter of first impression.
The United States Supreme Court has held that "bank records of a customer's accounts are 'the business records of the banks' in which the customer 'can assert neither ownership nor possession' and that the customer has no legitimate 'expectation of privacy' in the contents of original checks, deposit slips or other documents voluntarily conveyed to banks and exposed to their employees." Matter of Norkin v. Hoey, 181 AD2d 248, 250, quoting United States v. Miller, 425 US 435. The Miller decision dealt with a motion to quash a subpoena issued in conjunction with a Grand Jury investigation. In that context, the Miller court held that the bank customer had no standing to challenge a subpoena for bank records (on the ground that it would violate the customer's constitutional privileges against unreasonable search and seizure). See also Democratic County Committee of Bronx County v. Nadjari, 52 AD2d 70.
The post-Miller development of New York law regarding the privacy of bank records, and the right of bank customers to challenge subpoenas issued to third-party banks, is outlined in Matter of Norkin, 181 AD2d at 250-255. The Norkin court recognized an "underlying discomfort with the facial unfairness of depriving a bank customer of any recourse, including standing, for disclosure of financial information concerning the customer's personal bank accounts which are widely believed to be confidential." Id., at 253. Norkin cited the concurring opinion of Justice Kassal in People v. Doe, 96 AD2d 1019, which noted that only the customer, and not the bank, had any real motivation to challenge the disclosure of financial records. Matter of Norkin, 181AD2d at 254.
As noted in Norkin, a few New York courts have implied that a depositor (as opposed to a loan customer) may have standing to object to a subpoena of his or her bank account information in the context of a wholly civil proceeding between private parties. See Matter of Norkin, 181 AD2d at 254; Siskin v. 221 Sullivan St. Realty Corp., 162 AD2d 356; In re Estate of Rutherford, 26 Misc.3d 1235(A). In fact, in the case at bar, plaintiffs were not denied standing to contest the Subpoena on their own behalf. Their motion to quash was heard by Magistrate Dwyer. Still, a depositor's standing to challenge a subpoena seeking third-party bank records, and accordingly, the existence of an underlying privacy interest in those records, has not been affirmatively declared in this State.
In the context of tort liability, there has been some suggestion of a legitimate privacy interest, and a corresponding duty on the part of a bank, to keep a customer's banking transactions confidential. In Young v. United States Dept. Of Justice, 882 F2d 633, 640-644, the Second Circuit suggested (but declined to decide) that a developing State law breach-of-confidence cause of action might apply in banking relationships. See also Graney Dev. Corp. v. Taksen, 92 Misc.2d 764, aff d 66 AD2d 1008. A bank's duty of confidentiality has not been determined or defined, however, in any controlling decision known to this Court. Further, to the extent that such duty exists, it is not breached by disclosure in compliance with a judicially authorized subpoena. LCR Technologies Inc. v. HSBC BANK USA, N.A., 37 AD3d 766. The Court declines to construct a brand new duty to object to a subpoena, on the foundation of a privacy right that has not fully matured in New York jurisprudence. To the extent that such privacy right exists, it has been held to support the right of the depositor (the motivated party) to challenge a subpoena, rather than to impose a duty upon the bank to do so.
The Court believes that a breach of duty could arise from a bank's failure to notify an account-holder of a subpoena for bank records, or other conduct which defeats the account-holder's ability to object to disclosure. In the case at bar, however, LISA DANIELS had the opportunity to, and did, challenge the Subpoena on her own behalf, and purportedly on behalf of her minor children. Although no conflict of interest is apparent here, the Court notes that unless a parent can adequately represent her minor children's interests as distinct from her own, an independent representative such as a guardian ad litem must also be notified on behalf of the minor children.
Plaintiffs assert that if CHASE had supported their motion, or interposed its own motion to quash, the Magistrate would have been informed about the potential release of non-party account information, and would have decided differently. Insofar as the record shows that LISA DANIELS questioned CHASE about the "linkage" problem prior to filing her motion to quash, the Court finds it incredible that LISA DANIELS did not bring the issue to the Magistrate's attention and that Magistrate Dwyer did not take such concerns into account when she ordered that the bank records be delivered for in camera review and redaction of any material deemed to violate the privacy interests of any nonparty.
Plaintiffs' argument that the Magistrate had no more right to view private account information than any other person is hardly worth discussion. Congress has expressly mandated that bank records be maintained because of their usefulness in criminal, tax, and regulatory investigations or proceedings. See 12 U.S.C. § 1829b(a)(l). Similarly, the disclosure of bank records in the context of Family Court proceedings serves a legitimate governmental interest. That interest was particularly compelling in the context of the Support Proceeding. Insofar as LISA DANIELS' financial condition was at issue, Magistrate Dwyer had reason to consider the potential flow of money between "linked" accounts, particularly insofar as all of the accounts were either owned or controlled by LISA DANIELS (including the UTMA custodial accounts), with the exception of two accounts in the name of LISA DANIELS' minor children who were, themselves, in LISA DANIELS' custody and control.
Accepting as true all of the facts alleged by plaintiffs, the Court finds that plaintiffs do not have a prima facie cause of action for gross negligence or even ordinary negligence. The facts do not manifest a breach (either reckless or careless) of a legally cognizable duty apart from contract, or any injury resulting from such breach.
Breach of Contract.
The Privacy Policy governing the release of account information to third parties permits disclosure in response to a subpoena. Plaintiffs' seem to argue that CHASE's delivery of documents was not in response to the Subpoena - that CHASE breached the Privacy Policy by providing material outside the scope of the Subpoena (i.e., information from Accounts other than the Account specifically identified in the Subpoena).
The Court believes that the scope of the Subpoena, and the documents deemed to be responsive or otherwise necessary and relevant to the Support Proceeding were matters squarely before Magistrate Dwyer. This Court, on the record presented here, is in no position to second-guess her determination. Insofar as the records were produced directly to the Magistrate pursuant to the Magistrate's Order, CHASE is insulated from liability for any asserted breach of contract based upon such disclosure. Cf., LCR Technologies, 37 AD3d 766.
Plaintiffs point to no provision of the Account Agreement or Privacy Policy that expressly obligates CHASE to challenge a subpoena which the account holder believes to be defective, overbroad or otherwise in violation of a legal or contractual right. The Court does not find such obligation to be implicit in the Privacy Policy or essential to its function. Accordingly, the Court declines to read such obligation into the Account Agreement or to create an obligation not contemplated by the parties.
Deceptive Business Practices.
Plaintiffs allege that CHASE has engaged in deceptive business activity, in violation of General Business Law ("GBL") §349, by "linking accounts without the ability to 'delink' those accounts should it be necessary to effectuate their contractual obligations to account holders and without notifying account holders of those risks or getting authorization from account holders." Complaint ^} 69, 70.
To state a claim for violation of GBL §349, a plaintiff must allege, not only that the conduct complained of was consumer-oriented, having an impact on the public at large, but also that it was deceptive or misleading in a material way and that the plaintiff has been injured as a result. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 NY2d 20; Wilner v. Allstate Ins. Co., 71 AD3d 155.
The Court notes that plaintiffs do not press this cause of action in their opposition to the instant motion to dismiss. Nor do they contest defendants' characterization of the action as a private dispute between CHASE and plaintiffs, as opposed to a matter of public concern. The Court does not find that the administrative "linkage" of bank accounts, owned or controlled by a single individual (or minors in the custody of that individual), rises to the level of materially deceptive misconduct, as contemplated by this statute. Plaintiffs have not alleged any injury resulting from the inability to "de-link" the Accounts, or the ultimate release to the Court of the minor plaintiffs' bank account records. They cite a general threat of identity theft, but under the circumstances alleged here, particularly the Magistrate's ability to redact or restrict access to certain records as necessary, that is not an actual injury, nor anything more than a remote possibility. The Court finds that plaintiff has not alleged a prima facie claim for violation of GBL §349.
CONCLUSION
The Court has considered the remaining contentions of the parties and finds them to be without merit. Based upon the foregoing, it is
ORDERED, that CHASE's motion pursuant to CPLR §3211 is granted, and the Complaint is dismissed in its entirety.
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J.S.C.