Opinion
4:22-mc-1-CDL-MSH
04-06-2023
LACARRIE S. LOVE, Plaintiff, v. DEPARTMENT OF DEFENSE, Defendant.
REPORT AND RECOMMENDATION
STEPHEN HYLES UNITED STATES MAGISTRATE JUDGE
Pending before the Court is Defendant Department of Defense's (“DoD's”) motion to dismiss Plaintiff Sergeant LaCarrie Love's (“Sgt. Love's”) Customer Challenges Concerning Disclosure of Records Under the Right to Financial Privacy Act (ECF Nos. 1, 2). For the reasons explained below, it is recommended that Defendant's motion be granted, and Plaintiff's motions be dismissed without prejudice.
BACKGROUND
On April 14, 2022, Defendant DoD issued two subpoenas duces tecum at the request of the United States Army Criminal Investigation Division (“CID”) regarding an ongoing investigation. Wahl Decl. ¶ 5, ECF No. 7-1. The subpoenas were issued pursuant to §6(a)(4) of the Inspector General Act of 1978 (codified as amended at 5 U.S.C. app. 3, §§ 1-13 (“IG Act”), and in accordance with the Right to Financial Privacy Act of 1978, 12 U.S.C. §§ 3401 et seq. (“RFPA”). CID Special Agent Scott Wahl personally served Sgt. Love with the subpoenas, together with the statutorily required customer notice information. Wahl Dec. ¶ 6. The subpoenas were addressed to the custodians of records at Navy Federal Credit Union (“NCFU”) and Harvest Small Business Finance (“HSBF”), and they sought certain financial records of Sgt. Love to further a CID investigation into allegations that Sgt. Love committed embezzlement of public money, property, or records, 18 US.C. § 641, conspiracy to defraud the United States, 18 U.S.C § 371, and wire fraud, 18 U.S.C. § 1343. Wahl Decl. ¶¶ 2-7; Pl.'s Mots. to Quash, Attach. 3, ECF Nos. 1-3, 2-3. Service of the subpoenas on the financial institutions is being held in abeyance pending resolution of Sgt. Love's challenge.
Both subpoenas included a “Notice to Customer,” which stated the following purpose of the subpoenas:
[t]o refute or support allegations that during the approximate period of March 2021 through the present, you fraudulently received government funds to which you were not entitled, in violation of Uniform Code of Military Justice (UCMJ) Article 121, Larceny and Wrongful Appropriation (Title 18 United States Code (U.S.C) § 641, Public money, property or records); Article 134, Wire Fraud (18 USC § 1343); Article 134, Fraud in connection with major disaster or emergency benefits (18 USC § 1040); Article 134, False Statements in connection with Loan and Credit Applications to the SBA (10 USC § 1014); and Article 81, Conspiracy (18 USC §371, Conspiracy to commit offense or to defraud United States).Pl.'s Mots. to Quash, Attach. 2, ECF Nos. 1-2, 2-2. The notices provided Sgt. Love with the procedures to follow if she wished to file a motion requesting “that such records or information not be made available.” Id. The notices informed Sgt. Love she could fill out the attached motion papers and sworn statements and file them by mailing or delivering the papers to the Clerk of the district court in Alexandria, Virginia, Richmond, Virginia, or Columbus, Georgia. Id.
On May 2, 2022, Sgt. Love filed her Customer Challenges Concerning Disclosure of Records Under the RFPA in accordance with the notices (ECF Nos. 1, 2). She challenges the subpoenas on the grounds they violate the RFPA because the law enforcement inquiry is not legitimate, and the relevance of the records has not been established. Pl.'s Mots. to Quash, Attach 1, ECF Nos. 1-1, 2-1. In her affidavits, she states only that her financial records should not be disclosed “because [her] bank records contain personal and private information that is not subject to any of the stated reasons they are seeking the records and will violate [her] privacy rights.” Id.
The DoD filed a response to Sgt. Love's motions on May 20, 2022, requesting the Court deny her motions and order the subpoenas enforced. Def.'s Resp., ECF No. 4. Sgt. Love did not respond. On September 6, 2022, Sgt. Love was ordered to either pay the filing fee or move the Court to proceed in forma pauperis if she wished to maintain her action. Order 1, Sept. 6, 2022, ECF No. 5. Sgt. Love Paid the $49.00 filing fee on September 19, 2022. On December 5, 2022, the Court entered an order directing Defendant to recast its May 20, 2022, response (ECF No. 4) as a motion to dismiss, as the initial response was not a dispositive motion upon which the Court could rule. Order 1-2, Dec. 5, 2022, ECF No. 6. Defendant complied with the Court's order and filed a motion to dismiss Sgt. Love's challenges on December 15, 2022. Def.'s Mot. to Dismiss, ECF No. 7. Thereafter, the Court ordered Sgt. Love to respond to Defendant's motion within 21 days. Text-only order, Dec. 5, 2022, ECF No. 8. Sgt. Love did not respond to the motion or the Court's order.
On February 7, 2023, the undersigned filed a Report and Recommendation (“R. & R.”) recommending that Defendant's motion to dismiss be granted (ECF No. 9). The next day, the Court received Sgt. Love's motion for an extension of time to respond to Defendant's motion to dismiss (ECF No. 11). The motion was signed on January 5, 2023, and was stamped “received” by the United States Attorney's Office on January 10, 2023. Pl.'s Mot. for Ext. 1-2, ECF No. 11. However, the motion was not sent to the Clerk's office and docketed until after the R. & R. was filed. The Court withdrew its R. & R., granted Sgt. Love's motion for an extension, and allowed her an additional thirty days to respond to Defendant's motion to dismiss. Order 1-2, Feb. 8, 2023, ECF No. 12.
Despite being given additional time, Sgt. Love did not respond to Defendant's motion to dismiss or the Court's Order. Thus, on March 20, 2023, the Court entered an Order to Show Cause, giving Sgt. Love fourteen days to respond and show the court why her complaint should not be dismissed for failure to comply with the Court's orders. Order to Show Cause 1-2, ECF No. 13. In lieu of responding, Sgt. Love filed a second motion for an extension of time, which the Court received on March 20, 2023 (ECF No. 14). In the motion, which was signed March 10, 2023, Sgt. Love stated she was “finding a way to afford an attorney,” and “due to time limitations,” she had not had “the opportunity to consult with an attorney.” 2d Mot. for Ext. 2, ECF No. 14. The Court denied this second motion. Text-only Order, ECF No. 15. Defendant DoD's motion to dismiss is ripe for review.
DISCUSSION
Defendant DoD moves for dismissal, arguing (1) Sgt. Love's motions should be dismissed for failing to meet the requirements set forth in 12 U.S.C. § 3410(a); and (2) there is no basis for quashing the subpoenas because CID's investigation is a “legitimate law enforcement inquiry” under the RFPA, there is a reasonable belief Sgt. Love's records are relevant to the investigation, and the DoD has substantially complied with the RFPA. Def.'s Mot. to Dismiss 10-16, ECF No. 7. The Court agrees and recommends that Defendant's motion be granted.
I. Motion to Dismiss Standard
When the Court considers a 12(b)(6) motion to dismiss, it must accept as true all facts set forth in the plaintiff's complaint and consider only the pleadings and the exhibits attached thereto. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007); Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 959 (11th Cir. 2009). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). The complaint must include sufficient factual allegations “to raise a right to relief above the speculative level” and “a formulaic recitation of the elements of a cause of action will not do[.]” Twombly, 550 U.S. at 555. Although the complaint must contain factual allegations that “raise a reasonable expectation that discovery will reveal evidence of” the plaintiff's claims, id. at 556, “Rule 12(b)(6) does not permit dismissal of a well-pleaded complaint simply because ‘it strikes a savvy judge that actual proof of those facts is improbable.'” Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir. 2007) (quoting Twombly, 550 U.S. at 556).
II. The Right to Financial Privacy Act
The RFPA authorizes the federal government to obtain financial records through an administrative subpoena in certain circumstances.
A Government authority may obtain financial records under section 3402(2) of this title pursuant to an administrative subpenaor summons otherwise authorized by law only if-
(1) there is reason to believe that the records sought are relevant to a legitimate law enforcement inquiry;
(2) a copy of the subpena or summons has been served upon the customer or mailed to his last known address on or before the date on which the subpena or summons was served on the financial institution together with . . . notice which shall state with reasonable specificity the nature of the law enforcement inquiry[;] and
(3) ten days have expired from the date of service of the notice or fourteen days have expired from the date of mailing the notice to the customer and within such time period the customer has not filed a sworn statement and motion to quash in an appropriate court, or the customer challenge provisions of section 3410 of this title have been complied with.12 U.S.C. § 3405. The RFPA provides customers a method to challenge a request for records by filing a motion to quash or an application to enjoin the administrative subpoena in the proper court within ten days of service or within fourteen days of the mailing of a subpoena. 12 U.S.C. § 3410(a). The motion or application must contain an affidavit or sworn statement:
(1) stating that the applicant is a customer of the financial institution from which financial records pertaining to him have been sought; and
(2) stating the applicant's reasons for believing that the financial records sought are not relevant to the legitimate law enforcement inquiry stated by the Government authority in its notice, or that there has not been substantial compliance with the provisions of this chapter.Id. § (a)(1), (2). Then, if the court finds the customer complied with subsection (a), the court orders the government entity seeking the records to file a sworn response. Id. § (b). In evaluating a customer challenge, a court may quash a subpoena:
[i]f the court finds that the applicant is the customer to whom the records sought by the Government authority pertain, and that there is not a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the records sought are relevant to that inquiry, or that there has not been substantial compliance with the provisions of this chapter[.]Id. § (c). If, however, the court finds “there is a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the records sought are relevant to that inquiry,” the court “shall deny the motion . . . and . . . order such process enforced.” Id. The process described in 12 U.S.C. § 1310 is the sole judicial remedy available to a customer to oppose disclosure of financial records. Id. § (e). See also SEC v. Jerry T. O'Brien, Inc., 467 U.S. 735, 745 (1984) (“A customer's ability to challenge a subpoena is cabined by strict procedural requirements[.] Perhaps most importantly, the statute is drafted in a fashion that minimizes the risk that customers' objections to subpoenas will delay or frustrate agency investigations.”).
The Court notes that the statute incorrectly spells “subpoena” as “subpena.” See 12 U.S.C. § 3405.
12 U.S.C. § 1310 has been interpreted to provide three grounds on which an administrative subpoena can be quashed under the RFPA: “(1) the agency's inquiry [was] not a legitimate law enforcement inquiry; (2) the records requested [were] not relevant to the agency's inquiry; or (3) the agency [did] not substantially compl[y] with the RFPA.” Stehn v. U.S. Dep't of Defense, No. 7:12-mc-1 (HL), 2012 WL 3860562, at *2 (M.D. Ga. Sept. 5, 2012) (quoting Sandsend Fin. Consultants v. Fed. Home Loan Bank Bd., 878 F.2d 875, 882 (5th Cir. 1989)). Here, Sgt. Love's motions are facially deficient, and she has not shown the existence of any of the grounds for which the subpoenas could be quashed; therefore, her motions should be dismissed.
A. Requirements of 12 U.S.C. § 3410(a)
A customer who seeks to quash a subpoena issued pursuant to the RFPA must include an affidavit or sworn statement stating the “records sought are not relevant to the legitimate law enforcement inquiry . . . or that there has not been substantial compliance with the [RFPA.]” 12 U.S.C. § 3410(a)(2). If a customer's affidavit is facially insufficient, it can be dismissed without further analysis. See Hancock v. Marshall, 86 F.R.D. 209, 211 (D.D.C. 1980) (“The relevant legislative history is clear in its intention to require adjudication of a customer's motion only when his affidavit presents a prima facie case of impropriety.”). If the motion does not provide reasons why the records sought are not relevant to a legitimate law enforcement inquiry, the motion should be denied. See Theurer v. Dep't of Def., No. 7:13-CV-142-FL, 2013 WL 5327471, at *3 (E.D. N.C. Sept. 20, 2013) (denying a motion to quash under the RFPA partly because the movant did not explain why the information requested was not relevant to a legitimate law enforcement inquiry).
Here, Sgt. Love does not present a prima facie case of impropriety in her motions. She merely states her financial records should not be disclosed “because [her] bank records contain personal and private information that is not subject to any of the stated reasons they are seeking the records and will violate [her] privacy rights.” Pl.'s Mots. to Quash, Attach. 1. Sgt. Love's bare assertion fails to explain why a search of her bank records is not relevant to a legitimate law enforcement inquiry, and she has not stated any facts indicating that an inquiry into her financial records would be improper. See Hancock, 86 F.R.D. at 211 (citing H.R. REP. NO. 95-1383, at 53-54 (1978), as reprinted in 1978 U.S.C.C.A.N. 9273, 9325) (RFPA does not require “a detailed evidentiary showing or require that the customer prove there is no legitimate law enforcement purpose for the government's attempt to obtain [her] records. However, it does require the customer to state facts to support [her] position.”) Therefore, Sgt. Love's motions could be dismissed on this ground alone.
B. Defendant's Compliance with the RFPA
Because Sgt. Love's affidavit is facially insufficient, her motions could be dismissed without further analysis. Nevertheless, the Court will proceed to discuss Defendant's compliance with the terms of the RFPA and the three grounds on which a subpoena can be quashed under the RFPA. Defendant argues that, along with being facially insufficient, Sgt. Love's motions should be dismissed because the law enforcement inquiry is legitimate, the records sought by the DoD are relevant to that inquiry, and the DoD has substantially complied with the requirements of 12 U.S.C. § 3410. The Court agrees.
1. Legitimate law enforcement inquiry
First, the subpoenas are clearly related to a legitimate law enforcement inquiry, and Sgt. Love does not refute this. The investigation and inquiry began on March 21, 2022, after a review of persons in the Fort Benning, Georgia area using Federalpay.org and the Paycheck Protection Program (“PPP”), a program established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that provides small businesses with funds to pay payroll costs including benefits, interest on mortgages, rent, and utilities. Wahl Decl. ¶ 4. The CID's review focused on persons who applied for PPP loans using a Fort Benning address as the location of their business, were approved for $10,000 or more in PPP loans, and had a connection to the U.S. Army. Id. Based on these criteria, Sgt. Love was identified because she received loan payments in total of $38,042 in 2021, which was a fraud indicator requiring further inquiry. Id.
Based on that information, the CID conducted an open-source search and found an Instagram account tied to Sgt. Love titled “solovelybeauty, LLC,” but no public records or UCC filings in Sgt. Love's name. Id. ¶ 5b. Federalpay.org identified Sgt. Love as a “sole proprietorship” entity in the “all other personal services industry.” Id.; Def.'s Mot. to Dismiss, Exs. 1, 2, ECF No. 7-1. The lender was identified as HSBF for two $19,021 loans, both paid in full or forgiven. Id.
Sgt. Love was advised of and waived her rights on March 21, 2022, and admitted she received the PPP loan in 2021. Wahl Decl. ¶ 5c. She stated someone assisted her in filling out and filing the application, and she gave that person $1,000 as a “thank you” for their help. Id. She admitted she did not read the application or believe she was qualified to receive the loan before applying. Id. Finally, she stated the loan was disbursed into her NFCU account. Id. Sgt. Love provided CID with an email chain regarding her PPP loan application, which included a forwarded email from the alleged co-conspirator. Id. ¶ 5d, Def.'s Mot. to Dismiss, Ex. 3.
Among other functions, the IG Act authorizes the Office of the Inspector General (“OIG”) to “investigate fraud, waste, and abuse uncovered as a result of other contract or internal audits, as the Inspector General considers appropriate[.]” 5 U.S.C. app. 3 § 8(c)(4) (emphasis added). Section 6(a)(4) specifically authorizes the OIG to carry out its functions by “requir[ing] by subpoena the production of all information, documents, reports, answers, records, accounts, papers, and other data in any medium (including electronically stored information, as well as any tangible thing) and documentary evidence necessary[.]” An allegation of fraud and embezzlement of public funds by a member of the United States military represents the kind of “fraud, waste, and abuse” contemplated by the IG Act. Further, the RFPA itself defines “law enforcement inquiry” as a lawful investigation “inquiring into a violation of, or failure to comply with, any criminal . . . statute[,]” which would include an investigation into fraud and embezzlement. 12 U.S.C. § 3401(8); see 18 U.S.C. §§ 641, 371, and 1343.
Based on the foregoing, the Court concludes that CID's investigation into Sgt. Love's PPP loan is a “legitimate law enforcement inquiry,” as required by 12 U.S.C. § 3405. The declaration of CID Special Agent Scott Wahl, which includes details about the allegation that Sgt. Love defrauded the United States by improperly receiving PPP loan disbursements, along with the clear statutory authority supporting the investigatory methods used “is sufficient to establish that there is a legitimate law enforcement inquiry.” See Stehn, 2012 WL 3860562, at *2.
2. Reasonable belief the records are relevant to the investigation
Second, the financial records subpoenaed are relevant to the CID's inquiry.
For purposes of an administrative subpoena, the notion of relevancy is a broad one. An agency can investigate merely on the suspicion that the law is being violated, or even just because it wants assurance that it is not. So long as the material requested touches a matter under investigation, an administrative subpoena will survive a challenge that the material is not relevant.Sandsend, 878 F.2d at 882 (citations and internal quotation marks omitted); see also SEC v. Marin, 982 F.3d 1341, 1355-56 (11th Cir. 2020) (applying the relevancy standard from Sandsend); cf. Flatt v. U.S. SEC, No. 10-60073-MC, 2010 WL 1524328, at *4 (S.D. Fla. Apr. 14, 2010).
Sgt. Love contends the records requested are not entirely relevant because the financial information “contain[s] personal and private information that is not subject to any of the stated reasons they are seeking the records” and that enforcement of the subpoena will “violate [her] privacy rights.” Pl.'s Mots. to Quash. However, the Wahl declaration establishes a reasonable belief that the records sought are relevant to the law enforcement inquiry. Specifically, the financial records “touch on a matter under investigation,”- whether Sgt. Love violated the provisions of 18 U.S.C. §§ 641, 371, and 1343. As Agent Wahl states in his declaration, the records could show Sgt. Love's receipt of the loan, which could prove or disprove a violation of the law. Wahl Decl. ¶ 7a. Further, the records could provide evidence of any payment made to the alleged co-conspirator. Id. Finally, the loan application records from HSBF could establish intent through claimed revenue amounts, tax forms, and documents, and could prove or disprove her statements regarding the loan application process. Id. ¶ 7b.
It is immaterial that Sgt. Love has not been formally charged with any of the crimes being investigated, so long as the records requested “touch” on a legitimate law enforcement inquiry. Sandsend, 878 F.2d at 882. Here, the records sought are highly relevant to the investigation, as they could prove or disprove Sgt. Love's improper application for and receipt of a PPP loan-the entire basis of the CID investigation. Though Sgt. Love might feel the requests infringe on her privacy, that does not mean they are not relevant to the investigation.
3. Substantial compliance with the RFPA
Third and finally, the Court finds the DoD substantially complied with the terms of the RFPA, which-along with relevance to a legitimate law enforcement inquiry- requires that:
(2) a copy of the subpena or summons has been served upon the customer or mailed to his last known address on or before the date on which the subpena or summons was served on the financial institution together with . . . notice which shall state with reasonable specificity the nature of the law enforcement inquiry[.]12 U.S.C. § 3405. Sgt. Love does not challenge the DoD's compliance with the RFPA, and the Court cannot discern any issues with their procedures. First, copies of the subpoenas were personally served on Sgt. Love on April 20, 2022. Wahl Decl. ¶ 6. The subpoenas still have not been served on the financial institutions-NFCU and HSBF- pending the outcome of Sgt. Love's challenge. Id.
When Sgt. Love was personally served, she was provided “(1) Notices to Customer; (2) Subpoena; (3) Appendix A; (4) Statement of Customer Rights Under the Financial Privacy Act of 1978; (5) Instructions for Completing and Filing Motion and Sworn Statement; (6) blank Motion Forms; (7) Customer's Sworn Statement for Filing a Challenge in the United States District Court; and (8) blank Certificates of Service.” Id. Sgt. Love does not deny the DoD followed the procedural requirements of the RPFA. In fact, she was able to timely file a challenge to the subpoenas given the information provided to her. Thus, the DoD has substantially complied with the RFPA, and the subpoenas cannot be quashed on that ground. See Sandsend, 878 F.2d at 882.
III. Plaintiff's Failure to Comply
Finally, the Court notes that Sgt. Love was warned that “[f]ailure to respond to [the Court's Orders] may result in the dismissal of Plaintiff's Complaint for failure to comply.” Order to Show Cause 2. Sgt. Love did not respond to the Court's order, but rather filed another motion for an extension of time to respond (ECF No. 14). Sgt. Love's lack of compliance with Court orders provides another basis for dismissal of her complaint. See Fed. R. Civ. P. 41(b); Brown v Tallahassee Police Dep't, 205 Fed.Appx. 802, 802 (11th Cir. 2006) (per curiam) (“The court may dismiss an action sua sponte under Rule 41(b) for failure to prosecute or failure to obey a court order.”) (citing Fed.R.Civ.P. 41(b) and Lopez v. Aransas Cnty. Indep. Sch. Dist., 570 F.2d 541, 544 (5th Cir. 1978)).
CONCLUSION
For the reasons explained above, it is RECOMMENDED that Defendant's motion to dismiss (ECF No. 7) be GRANTED and Plaintiff's Customer Challenges Concerning Disclosure of Records Under the Right to Financial Privacy Act (ECF Nos. 1, 2) be DISMISSED WITHOUT PREJUDICE.
Pursuant to 28 U.S.C. § 636(b)(1), the parties may serve and file written objections to this Recommendation, or seek an extension of time to file objections, WITHIN FOURTEEN (14) DAYS after being served with a copy hereof. The parties may seek an extension of time in which to file written objections, provided a request for an extension is filed prior to the deadline for filing written objections. Any objection is limited in length to TWENTY (20) PAGES. See M.D. Ga. L.R. 7.4. The district judge shall make a de novo determination of those portions of the Recommendation to which objection is made. All other portions of the Recommendation may be reviewed for clear error.
The parties are hereby notified that, pursuant to Eleventh Circuit Rule 3-1, “[a] party failing to object to a magistrate judge's findings or recommendations contained in a report and recommendation in accordance with the provisions of 28 U.S.C. § 636(b)(1) waives the right to challenge on appeal the district court's order based on unobjected-to factual and legal conclusions if the party was informed of the time period for objecting and the consequences on appeal for failing to object. In the absence of a proper objection, however, the court may review on appeal for plain error if necessary in the interests of justice.”