Nathanson v. FDIC

Opinion

USCA1 Opinion

February 22, 1996       [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT


____________________


No. 95-1604



                                  RICHARD NATHANSON,



                                Plaintiff, Appellant,



                                          v.



                        FEDERAL DEPOSIT INSURANCE CORPORATION,



                                 Defendant, Appellee.



                                 ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                     [Hon. Nancy J. Gertner, U.S. District Judge]



                                 ____________________



                                        Before



                                Selya, Stahl and Lynch,

                                   Circuit Judges.
                                   ______________



                                 ____________________


Richard Nathanson on brief pro se.
            _________________

            Ann S. DuRoss, Assistant General Counsel, Robert D.  McGillicuddy,
            _____________                             _______________________

        Senior  Counsel,  and Barbara  S.  Woodall,  Counsel, Federal  Deposit
                              ____________________

        Insurance Corporation, on brief for appellee.



                                 ____________________


____________________



Per  Curiam.   In  March 1992,  plaintiff Richard  Nathanson
               ___________



          served as head of  the loan workout department at  Rockland Trust



          Company ("Rockland") and was in line for promotion to senior vice



          president.   During that period, James Moore, a bank examiner for



          the  Federal   Deposit   Insurance  Corporation   ("FDIC"),   was



          conducting a supervisory examination of Rockland.  Moore received



          the impression,  during several  discussions of problem  loans in



          the department, that plaintiff was being less than cooperative--a



          concern  that   he  voiced  to  Rockland   executives.    Shortly



          thereafter, Moore learned that plaintiff had been the subject  of



          an Apparent Crime Report ("ACR"),  filed by another bank, arising



          out of  a line of  credit in  excess of  $3 million  that he  had



          guaranteed.    See 12  C.F.R.    353  (prescribing  ACR reporting
                         ___



          requirements).  Plaintiff had earlier disclosed this debt to both



          Rockland and the FDIC--a fact of  which Moore was unaware.  In an



          ensuing discussion with  Rockland's president, Moore  recommended



          that  an  inquiry   be  conducted   into  plaintiff's   financial



          obligations;  when pressed for  further information,  he revealed



          that the  ACR had been filed  but did not disclose  its contents.



          Moore  explained   that  he   was   not  requesting   plaintiff's



          termination.   Plaintiff was nonetheless fired  from his position



          shortly thereafter. 



               Plaintiff responded by filing the instant action against the



          FDIC for  damages under the Privacy Act, claiming that disclosure



          of the ACR had been unlawful.  See 5 U.S.C.    552a(g)(1)(D).  On
                                         ___



          the basis  of the  undisputed facts recited  above, the  district


-2-



court  ended up  granting summary judgment  for defendant  on two



          independent grounds.  First,  it held that disclosure of  the ACR



          fell within the Act's "routine use" exception.  Id.   552a(b)(3);
                                                          ___



          see 53 Fed.  Reg. 7396,  7398 (1988) (FDIC  "routine use"  notice
          ___



          permitting  disclosure  of  ACRs  to, inter  alia,  "a  financial
                                                ___________



          institution  affected  by   enforcement  activities  or  reported



          criminal activities"); see, e.g., FLRA v. Department of Navy, 941
                                 ___  ____  ____    __________________



          F.2d 49, 52-53,  58 (1st Cir. 1991) (discussing  requirements for



          applying routine  use exception).  Alternatively,  it ruled that,



          even  if the  Act had  been violated,  no damages  were available



          inasmuch  as  Moore's  conduct   had  not  been  "intentional  or



          willful,"  as required by  the Act.   See 5 U.S.C.    552a(g)(4).
                                                ___



          This appeal ensued.



               We  affirm on the  latter ground alone.   As  to the former,



          plaintiff  contends on appeal that  the court erred  in two basic



          respects:  in finding (1) that  disclosure of the  ACR was within



          the scope  of the  published exception (i.e.,  that Rockland  was



          "affected"  by the  report),  and (2)  that  such disclosure  was



          compatible  with  the  purposes  for  which  the  ACR  had   been



          collected.   It is difficult to fault either of these conclusions



          based  on the arguments before  the court.   What complicates the



          issue is a matter  that the parties inexplicably failed  to raise



          below  (but that plaintiff  has emphasized  on appeal):  the fact



          that  the  FDIC  has  elsewhere  specifically  indicated  to  the



          contrary.    See  58 Fed.  Reg.  28772,  28773 (1993)  (rejecting
                       ___



          proposal  that  ACRs   be  made  available  to  banks   that  are


-3-



considering   employing  or   doing  business   with  individuals



          mentioned therein,  on ground that "privacy  restrictions prevent



          FDIC  from sharing information in reports  of apparent crime with



          anyone   other   than   appropriate   federal   law   enforcement



          authorities").  The FDIC concedes that such commentary, published



          in connection with a 1993 revision to 12 C.F.R.    353, conflicts



          with the routine use notice at issue here.  And  while it insists



          that  the matter can be ignored because of plaintiff's failure to



          mention  it below, we think the agency is equally responsible for



          failing to alert  the court to  obviously relevant commentary  of



          its own  making.  If the appeal hinged on this question, we would



          deem it  appropriate to remand  for consideration thereof  by the



          district court in the first instance.



               Yet  such commentary, published  in 1993, has  no bearing on



          whether Moore acted in an intentional or willful fashion in 1992.



          And on the basis of the evidence presented, we agree that summary



          judgment  for  defendant is  warranted on  this  ground.   As the



          parties agree, the intentional or willful standard is a stringent



          one which is viewed as "somewhat greater than gross  negligence."



          Britt  v. Naval  Investig. Service,  886 F.2d  544, 551  (3d Cir.
          _____     ________________________



          1989)  (quoting legislative  history); accord,  e.g.,  Wilborn v.
                                                 ______   ____   _______



          Department of HHS, 49 F.3d 597, 602 (9th Cir. 1995).   In typical
          _________________



          formulations,  courts  have held  that  an  agency violates  this



          standard by  "committing the act without grounds for believing it



          to be lawful, or by flagrantly  disregarding others' rights under



          the Act," Albright v. United States, 732 F.2d 181, 189 (D.C. Cir.
                    ________    _____________


-4-



1984), or by  committing a violation  "so patently egregious  and



          unlawful that anyone undertaking the conduct should have known it



          unlawful,"  Laningham v. United States Navy,  813 F.2d 1236, 1242
                      _________    __________________



          (D.C.  Cir.  1987)  (internal  quotations  omitted);  see,  e.g.,
                                                                ___   ____



          Andrews v.  Veterans  Admin., 838  F.2d 418,  424-25 (10th  Cir.)
          _______     ________________



          (reviewing caselaw), cert. denied, 488 U.S. 817 (1988).
                               ____________



               Even with the record  construed in the light  most favorable



          to plaintiff, there is nothing to suggest that Moore acted in any



          such fashion.  The 1986 routine use notice, permitting disclosure



          of  an  ACR to  an  "affected"  institution, afforded  reasonable



          grounds for believing that his conduct was lawful.  Moore himself



          so  averred, stating  that  it was  his  understanding of  agency



          policy  to  bring   information  concerning  potential   criminal



          activity to the attention of bank officials "in order for them to



          be alerted to or correct potential problems."  And his failure to



          uncover the fact  that plaintiff had  earlier disclosed his  loan



          obligations--even   if  negligent--fell   well  short   of  being



          "somewhat greater than gross negligence." 



               In this regard, plaintiff voices two procedural  complaints:



          that  the court  resolved the  willfulness issue  (1) only  after



          earlier  announcing  that  it would  not  do  so  at the  summary



          judgment  stage, and (2) without  addressing his request that any



          such ruling be deferred pending further discovery.  Yet plaintiff



          acknowledged  below  that  defendant's  motion   to  dismiss  was



          properly converted into  one for  summary judgment.   He  himself



          filed a motion for partial summary judgment.  While he now claims


-5-



to have been  caught by surprise by the  court's ruling, he filed



          no motion for reconsideration  below.  And on appeal, he does not



          seek to vacate the judgment  on this basis.  Instead, he  pursues



          quite a  different route--arguing,  in the alternative,  that the



          evidence is  sufficient  for him  to prevail  on the  willfulness



          issue or,  at a minimum,  that a genuine  issue of fact  has been



          demonstrated in this regard.   We disagree in both respects.   We



          therefore find no error.



               Affirmed. 
               _________


-6-