Camenisch v. Umpqua Bank

• Court: District Court, N.D. California
• Decided: September 14, 2021
• Docket: 5:20-cv-05905
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 SHELA CAMENISCH, et al., Case No. 20-cv-05905-RS (AGT)

8 Plaintiffs, DISCOVERY ORDER v. 9 Re: Dkt. No. 47 10 UMPQUA BANK, Defendant. 11

12 The suspicious activity report (SAR) privilege applies to only some of the 136 documents 13 that Umpqua Bank submitted for in camera review. Umpqua has apparently objected to producing 14 some of the 136 documents based on additional, non-SAR-privilege grounds. See Dkt. 47 at 3. The 15 Court wasn’t asked to consider those objections, and so won’t overrule or sustain them or order 16 Umpqua to produce the withheld documents at this time. The bank, however, can no longer 17 withhold certain documents based on the SAR privilege. 18 A. Relevant Legal Principles 19 If a bank detects money laundering or other illegal conduct, it typically must file a SAR with 20 the appropriate federal authorities. See 12 C.F.R. § 21.11(a), (c). As relevant here, “[a] SAR, and 21 any information that would reveal the existence of a SAR, are confidential, and shall not be 22 disclosed.” Id. § 21.11(k) (Office of the Comptroller of the Currency regulation); see also 31 C.F.R. 23 § 1020.320(e) (nearly identical regulation from the Financial Crimes Enforcement Network). 24 Only one circuit court has considered the scope of this “privilege” in detail. In In re 25 JPMorgan Chase Bank, N.A., 799 F.3d 36, 39–41 (1st Cir. 2015), the First Circuit reviewed the 26 governing regulations, agency guidance, and several district court decisions. It then explained that 27 under the existing law and guidance, “the key query” to be used to determine if a document is 1 was or was not filed.” Id. at 43. 2 Umpqua cites JPMorgan Chase, but the bank also champions a somewhat broader 3 interpretation of the privilege. It suggests that once a bank begins to investigate suspicious activity, 4 any documents generated during that investigation should be protected. See Dkt. 47 at 4. The 5 problem with this approach is that it’s less faithful to the text of the governing regulations. Not 6 every document that a bank prepares during a suspicious-activity investigation “[will] reveal the 7 existence of a SAR,” 12 C.F.R. § 21.11(k), 31 C.F.R. § 1020.320(e), or otherwise “suggest, directly 8 or indirectly, that a SAR was or was not filed,” JPMorgan Chase, 799 F.3d at 43. Some bank- 9 prepared documents may simply aggregate relevant account or transactional information, flag 10 potentially suspicious activity that needs to be investigated further, or explain what steps need to be 11 taken as part of that investigation. Documents like these may reflect the bank’s due diligence, but 12 they won’t always shed light on whether or not a SAR was filed. 13 The First Circuit similarly “decline[d] Chase’s invitation to view the ‘privilege’ as extending 14 to any document that might speak to the investigative methods of financial institutions.” Id. at 44. 15 Noting that Chase’s approach “would see the bulk of a financial institution’s investigative file in a 16 particular case shielded from discovery,” the court reasoned that “Congress and/or the agencies 17 certainly would have used broader, less specific language had that been their intent.” Id. This Court 18 agrees. Consistent with the governing regulations, the key query isn’t whether a document was 19 prepared during a bank’s suspicious-activity investigation, but whether it “suggest[s], directly or 20 indirectly, that a SAR was or was not filed.” Id. at 43. 21 B. Application 22 1. The SAR privilege applies to document nos. 1–9, 20, 22, and 32. These documents are 23 Umpqua-prepared spreadsheets, investigation worksheets, related write-ups, and emails, all of 24 which are evaluative in nature. They suggest, directly or indirectly, that a SAR was or was not filed. 25 2. The SAR privilege doesn’t apply to document nos. 10–17, 19, 21, 23–31, or 33–136. 26 These documents are reports, emails, and screenshots of Umpqua’s banking system. They compile 27 account information (e.g., customer contact information, account balances, tax identification 1 They capture bank due diligence efforts, but they don’t suggest, directly or indirectly, □□□□ □ SAR 2 || was or was not filed. 3 3. The one remaining document, no. 18, is a spreadsheet that identifies suspicious-activity 4 alerts generated by an Umpqua-utilized automated alert system. Umpqua doesn’t assert that the 5 spreadsheet is protected by the SAR privilege. The bank instead represents that it has already 6 || produced a copy of the spreadsheet. 7 C. Conclusion 8 The SAR privilege applies to 12 of the 136 documents that Umpqua submitted for in camera 9 review. As to those 12 documents (nos. 1-9, 20, 22, and 32), Umpqua must withhold them. See 10 JPMorgan Chase, 799 F.3d at 39-40 (“District courts have extrapolated from the [SAR] statute and 11 regulations ‘an unqualified discovery and evidentiary privilege that . . . cannot be waived.’” q W (omission in original) (citing Whitney Nat. Bank v. Karam, 306 F. Supp. 2d 678, 682 (S.D. Tex. 5 13 || 2004))). As to the other documents, the parties must meet and confer to discuss Umpqua’s S 14 || remaining objections. 3 15 IT IS SO ORDERED. a 16 Dated: September 14, 2021

18 _—_—_— SS ALEX G. TSE 19 United States Magistrate Judge 20 21 22 23 24 25 26 27 28