Opinion
DOCKET NO. A-0443-12T3 A-3254-12T3
09-04-2014
SUSAN MEGLINO, SGM CONSTRUCTION AND LANDSCAPING LLC, A NEW JERSEY LIMITED LIABILITY COMPANY and TWELVE POINT CONSTRUCTION AND LANDSCAPING, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY, Plaintiffs-Appellants, v. WELLS FARGO BANK, N.A., Defendant-Respondent, and WELLS FARGO & COMPANY, WACHOVIA BANK, N.A.; MICHELLE MASTRANO; JANET PERRY; and KATHRYN KULPA, Defendants. SUSAN HERNANDEZ MEGLINO, SGM CONSTRUCTION AND LANDSCAPING LLC, A NEW JERSEY LIMITED LIABILITY COMPANY and TWELVE POINT CONSTRUCTION AND LANDSCAPING, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY, Plaintiffs-Appellants, v. THE STATE OF NEW JERSEY, THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, and JOAN BURKE, Defendants-Respondents.
Steven A. Weiner argued the cause for appellants in A-0443-12 (O'Toole Fernandez Weiner Van Lieu, LLC, attorneys; Mr. Weiner and Jacqueline A. Muttick, on the briefs). M. Mark Mendel, Ltd., attorneys for appellants in A-3254-12 (John J. Del Casale, on the brief). Jessica A. Goldfinger argued the cause for respondent in A-0443-12 (Greenbaum, Rowe, Smith & Davis LLP, attorneys; John D. North and Ms. Goldfinger, on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent in A-3254-12 (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Peter D. Wint, Assistant Attorney General, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Argued (A-0443-12) and Submitted (A-3254-12) Before Judges Alvarez, Ostrer and Carroll. On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6142-11 (A-0443-12), and Camden County, Docket No. L-2938-12 (A-3254-12). Steven A. Weiner argued the cause for appellants in A-0443-12 (O'Toole Fernandez Weiner Van Lieu, LLC, attorneys; Mr. Weiner and Jacqueline A. Muttick, on the briefs). M. Mark Mendel, Ltd., attorneys for appellants in A-3254-12 (John J. Del Casale, on the brief). Jessica A. Goldfinger argued the cause for respondent in A-0443-12 (Greenbaum, Rowe, Smith & Davis LLP, attorneys; John D. North and Ms. Goldfinger, on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent in A-3254-12 (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Peter D. Wint, Assistant Attorney General, on the brief). PER CURIAM
In order to understand the pending litigation, it is necessary to describe the history, as gleaned from the record, which resulted in these appeals. We combine the two related matters into one opinion.
In 2006, plaintiff Susan Meglino was the principal of SGM Construction and Landscaping LLC and Twelve Point Construction and Landscaping, and maintained accounts at defendant Wachovia Bank. Wachovia merged with defendant Wells Fargo in 2008. The only written agreement between plaintiffs and Wachovia was a standard depositor's contract.
Meglino's husband, Michael, was the president of the Oak Hollow Condominium Association (OHCA) when, in September 2006, copies of their banking records "were distributed throughout the Oak Hollow community, at a public meeting and even placed on windshields of cars parked in the community." The facsimile headers on the records belonged to the Division of Criminal Justice (DCJ), Cherry Hill.
Around that time, property owners and members of OHCA filed a complaint against the OHCA board of directors. At the end of 2007, the OHCA sued Meglino, her husband, Twelve Point, and SGM, among others, accusing them of misappropriating OHCA funds. That matter settled in April 2010.
Paul Leodori represented the OHCA. Although plaintiffs assume that he was in some fashion involved in the unauthorized dissemination of their banking information, the record does not indicate whether the responsible parties were ever identified.
A March 6, 2008 DCJ letter informed the Meglinos that they were being investigated, and that the allegations would be presented to a grand jury. Despite the warning, no indictment ensued.
In September 2008, Meglino's counsel submitted a records request to the DCJ under the Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13, but the request was "denied pursuant to [N.J.S.A.] 47:1A-1.1" as exempted criminal investigatory records. Plaintiffs received the same response to a second request made in December 2008.
A December 2008 OPRA request made to the Department of Law and Public Safety (DLPS) concerning Meglino, Twelve Point, SGM, and others did not uncover any pertinent records. Meglino received a March 12, 2009 letter from the Attorney General's office explaining that "[t]he documents in question were obtained by the Office of the Insurance Fraud [P]rosecutor [(OIFP)] under the provisions of N.J.S.A. 17:33A-10," which "authorizes the issuance of subpoenas" that are "distinct from subpoenas issued under the authority of a grand jury." The letter stated that "the production of the materials . . . were not compelled by grand jury subpoena nor were the materials the subject of testimony before a grand jury."
In February 2009, Wachovia's Security Services Department wrote to Meglino requesting that she cease her "repeated phone calls to [the] Legal Order Processing department." Thereafter, in July 2009, plaintiffs issued a subpoena in the OHCA litigation demanding that the bank "[p]rovide all [s]ubpoenas issued to [it] by the State of New Jersey pertaining to Susan Meglino, Twelve Point . . . and/or SGM . . . for the period January 2005-June 2009."
In response, by letter dated July 21, 2009, Wells Fargo produced "various subpoenas from 2007 to 2009 initiated by OHCA via Leodori." All of them related to the OHCA litigation. The bank's cover letter stated:
We are in receipt of the subpoena served on Wachovia Bank NA for documents pertaining to the above referenced matter. Pursuant to that subpoena, please see the enclosed document for a listing of records delivered with this letter.
Basic wire information is captured on our statements. If you require detailed wire information, please contact us.
Please be aware that our search for records is limited to accounts relating to only Wachovia Bank NA.
This constitutes Wachovia Bank NA's final response to your subpoena and this matter will be closed. If you have any questions or concerns regarding our
production, please do not hesitate to contact our office.
[(emphasis added).]
According to a later certification of Wells Fargo's counsel, "[a]fter receiving plaintiffs' 2009 subpoena, a Wells Fargo Law Department paralegal, Ted Coggins, contacted a Deputy Attorney General, Joan Burke, who instructed him that since the investigation of plaintiffs was still ongoing, Wells Fargo should not disclose the subpoenas issued by the [OIFP]." The relevant August 4, 2009 e-mail from Coggins said:
I've copied everyone on this e-mail due to the fact that the subjects in this matter were previously calling and indirectly threatening certain [Legal Order Processing] associates. The issue here is should LOP turn over the Insurance Fraud subpoena to the [M]eglino[]s. The answer is no!
I've contacted the Deputy Attorney General, Joan Burke. She informed me that since the investigation is still ongoing, we should not disclose the subpoena to the [M]eglino[]s. If they want a copy of the subpoena, once the investigation has concluded, they should contact the department of Insurance Fraud directly. We should not disclose the fact that a subpoena was received by this investigative department.
When the [M]eglino[]s call regarding the subpoena, I believe a simple response should simply be, Wachovia Bank believes it has fulfilled its obligations under the subpoena.
On August 13, 2009, plaintiffs served another subpoena requiring the bank to produce "any Grand Jury Subpoenas issued to you by the State of New Jersey pertaining to Susan Meglino, Twelve Point . . . and/or SGM . . . for the period January 2005-June 2009." Despite the deputy attorney general's reported direction, on September 2, 2009 the bank released the March 10, 2008 OIFP subpoena. The bank's accompanying letter explained that it had "not received any Grand Jury subpoenas from the State of New Jersey pertaining to Susan Meglino, Twelve Point . . . and/or SGM."
Plaintiffs' counsel's April 27, 2010 letter to the bank sought an "informal explanation as to the legal basis" for the public release of the banking records because the subpoenas provided all post-dated the 2006 incident. According to Christopher Stein, the bank's senior counsel, "[i]n response to [the] inquiry, [the bank] advised [plaintiffs' counsel] that the documents he identified as having been publicly disclosed were produced pursuant to a valid subpoena and that [the bank was] not at liberty to disclose that subpoena."
In mid-July 2010, the bank requested the State provide copies of the additional subpoenas that plaintiffs sought. The State faxed the March 10, 2008 and February 24, 2006 OIFP subpoenas and an OIFP cover letter dated December 7, 2005, referring to a subpoena not included in the facsimile; on July 19, 2010, the bank sent those three items to plaintiffs' counsel. The bank explained at deposition that it could not locate the 2005 subpoena in its storage facility.
I.
As a result of this convoluted history, plaintiffs filed a complaint against Wachovia Bank and its successor, Wells Fargo, among others, for 1) tortious interference, 2) common law fraud, 3) fraudulent concealment by a fiduciary, 4) breach of contract, 5) conspiracy to violate plaintiffs' privacy, 6) conspiracy, 7) tortious abuse of process, 8) a violation of the New Jersey Civil Rights Act (CRA), N.J.S.A. 10:6-2(c), 9) tort, and 10) contempt of court. Defendants moved to dismiss plaintiffs' complaint. After hearing arguments on October 21, 2011, Judge James S. Rothschild dismissed all counts, with prejudice, save the claim for fraudulent concealment, count three.
On November 1, 2011, Wells Fargo filed its answer. Later that month, plaintiffs dismissed their claims by consent order against Wells Fargo & Company because it was not directly involved and bank employees Michelle Mastrano, Jeanette Quinones-Perry, and Kathryn Kulpa for lack of personal jurisdiction. In July 2012, plaintiffs moved for partial summary judgment; in response, defendants cross-moved for summary judgment seeking dismissal of count three. Judge Thomas R. Vena, after hearing arguments on August 24, 2012, granted Wells Fargo's motion and denied plaintiffs' motion.
When Judge Vena dismissed count three against Wachovia by way of summary judgment, he observed that although "defendant intentionally withheld a 2006 subpoena from the plaintiffs, the evidence is clear that [it] did not withhold it for the purpose of disrupting the litigation." He further observed that "[w]hether the defendant followed proper discovery procedures in responding to plaintiff's 2006 subpoena, is an entirely different issue than whether or not the plaintiffs have established the elements of fraudulent concealment." "[T]he plaintiffs have [presented] no evidence either that the 2006 subpoena was material to the Oak Hollow litigation, or that the plaintiffs were damaged in that litigation by having to rely on an evidentiary record that did not contain the 2006 subpoena."
II.
On June 29, 2012, plaintiffs filed a complaint against defendants the State of New Jersey, the Attorney General, Deputy Attorney General Joan Burke, and other fictitious defendants alleging 1) a violation of the CRA and their right of privacy, 2) a violation of the CRA because of the improper release of the bank records, 3) a violation of the CRA because of tortious conduct/official misconduct, 4) official misconduct and abuse of power, 5) tortious interference, 6) conspiracy to violate plaintiffs' privacy, 7) conspiracy, 8) aiding and abetting the commission of a tort, 9) common law fraud, 10) tortious abuse of process, 11) tort, and 12) contempt of court. Burke is the deputy attorney general who allegedly informed the Wachovia paralegal that the OIFP investigation was ongoing and not to disclose the OIFP subpoenas to plaintiffs. After hearing argument on February 8, 2013, Judge Robert G. Millenky dismissed the complaint in its entirety based on his reading of State v. McAllister, 184 N.J. 17 (2005).
Judge Millenky began by reiterating that, since plaintiffs voluntarily dismissed their suit against the Attorney General and the State, the only remaining party was Burke. He noted that the State argued on behalf of Burke that she enjoyed qualified immunity with regard to each and every theory of liability asserted by plaintiffs. Under the authority of Ramos v. Flowers, 429 N.J. Super. 13 (App. Div. 2012), he concluded that a government official does not subject herself to liability "so long as his or her conduct does not violate a clearly established statutory or constitutional right."
Plaintiffs' counsel agreed during oral argument that the dismissals were pursuant to an agreement and that Burke was the only remaining defendant.
Although all agreed that Burke instructed Wachovia not to disclose the existence of the OIFP subpoena, she had no duty to plaintiffs in light of the ongoing investigation. Additionally, McAllister's "underlying reasoning justified refusal to disclose because where an investigation has [] proven to be one that is fruitful, the records would be disclosed, and alternatively where an investigation is not fruitful, those records are simply not the subject of any actual disclosure process." Accordingly, Burke was acting in accordance with well-established law; she was not violating any statutory or constitutional provision by merely continuing to preserve the secrecy to which the proceedings were entitled. The dismissal of the proceedings would not "foreclose the plaintiff[s] in this action from further activity designed to determine in the context of any other litigation which may be ongoing the circumstances under which private information may have been disclosed."
III.
On appeal, plaintiffs raise the following issues regarding Judge Rothschild's and Judge Vena's respective orders:
POINT I
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT EIGHT AS PLAINTIFFS' COMPLAINT SUFFICIENTLY PLED A CAUSE OF ACTION UNDER THE NEW JERSEY CIVIL RIGHTS ACT.
POINT II
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT TEN FOR CONTEMPT OF COURT AS THE [COUNT] SHOULD HAVE INSTEAD BEEN SEVERED OR DISMISSED WITHOUT PREJUDICE.
POINT III
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT TWO AS PLAINTIFFS' COMPLAINT SUFFICIENTLY PLED A CAUSE OF ACTION UNDER
COMMON LAW FRAUD.
POINT IV
THE COURT ERRED IN DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT OF COUNT THREE AS PLAINTIFFS[] PROVED FRAUDULENT CONCEALMENT BY A FIDUCIARY.
POINT V
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT FOUR AS PLAINTIFFS' COMPLAINT
SUFFICIENTLY PLED A CAUSE OF ACTION UNDER BREACH OF CONTRACT.
POINT VI
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT ONE AS PLAINTIFFS' COMPLAINT SUFFICIENTLY PLED A CAUSE OF ACTION UNDER TORTIOUS INTERFERENCE.
POINT VII
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT FIVE AND COUNT SIX AS PLAINTIFFS' COMPLAINT SUFFICIENTLY PLED A CAUSE OF ACTION UNDER CONSPIRACY.
POINT VIII
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT SEVEN AS PLAINTIFFS' COMPLAINT SUFFICIENTLY PLED A CAUSE OF ACTION UNDER TORTIOUS ABUSE OF PROCESS.
POINT IX
THE COURT ERRED IN DISMISSING WITH PREJUDICE COUNT NINE AS PLAINTIFFS' COMPLAINT
SUFFICIENTLY PLED A CAUSE OF ACTION UNDER PRIMA FACIE TORT.
IV.
With regard to the proceedings against Burke, plaintiffs raise the following points of error for our consideration:
POINT I
THE COURT ERRED IN EXPANDING THE BREADTH OF SECRECY.
POINT II
THE TRIAL COURT ENGAGED IN FACT FINDING.
V.
In reviewing the dismissal of claims for failure to state a claim under Rule 4:6-2(e), the court applies a de novo standard. Scheidt v. DRS Techs., Inc., 424 N.J. Super. 188, 193 (App. Div. 2012). "[T]he test for determining the adequacy of a pleading [is] whether a cause of action is suggested by the facts" and a plaintiff's ability to prove the allegations is irrelevant. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (internal quotations omitted). "The court must view the allegations with great liberality" and afford the "plaintiff . . . the benefit of every reasonable inference of fact." Donato v. Moldow, 374 N.J. Super. 475, 482-83 (App. Div. 2005). "Nonetheless, . . . in conducting [appellate] review, the essential facts supporting [the] plaintiff's cause of action must be presented in order for the claim to survive; conclusory allegations are insufficient in that regard." Scheidt, supra, 424 N.J. Super. at 193.
An appellate court uses the same standard as the trial court to review a Rule 4:46-2 grant of summary judgment. Murray v. Plainfield Rescue Squad, 210 N.J. 581, 584 (2012). It "view[s the evidence] in the light most favorable to the non-moving party" to determine whether any genuine issues of material fact exist. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523, 530 (1995). A de novo standard applies to purely legal issues. McDade v. Siazon, 208 N.J. 463, 473 (2011).
VI.
Pivotal to our discussion in both lawsuits is the Insurance Fraud Protection Act (IFPA), N.J.S.A. 17:33A-1 to -30, which authorizes the OIFP to investigate and prosecute insurance fraud. N.J.S.A. 17:33A-16, -19. The statute protects those who provide information from "civil liability for libel, violation of privacy or otherwise." N.J.S.A. 17:33A-9(b). N.J.S.A. 17:33A-11 governs the handling of documents in an insurance fraud investigation:
Papers, documents, reports, or evidence relative to the subject of an investigation under this act shall not be subject to public inspection except as specifically provided in this act. . . . Such papers, documents, reports, or evidence shall not beAlthough plaintiffs do not challenge the bank furnishing records to the OIFP, they contend that the bank was required to respond honestly to the July 2009 subpoena or, in the alternative, employ a more formal process to avoid releasing the 2005 and 2006 OIFP subpoenas during the ongoing OIFP investigation. However, the IFPA is clear that documents such as the OIFP subpoenas should "not be subject to public inspection" without the commissioner's permission or notice and a hearing, neither of which occurred. Therefore, unquestionably, by statute the bank was not obligated to release the earlier OIFP subpoenas to plaintiffs prior to the close of the OIFP's investigation.
subject to subpoena, unless the commissioner consents, or until, after notice to the commissioner and a hearing, a court of competent jurisdiction determines that the commissioner would not be unnecessarily hindered by such subp[o]ena. Division investigators and insurance company fraud investigators shall not be subject to subp[o]ena in civil actions by any court of this State to testify concerning any matter of which they have knowledge pursuant to a pending insurance fraud investigation by the division, or a pending claim for civil penalties initiated by the commissioner.
[(emphasis added).]
VII.
Dismissal of the CRA Claims
Plaintiffs assert that the bank deprived them of their right to privacy under the state constitution and state law because the bank "acted in a manner intended to thwart [p]laintiffs' attempt to investigate the manner by which their right of privacy was violated through the public dissemination of their confidential banking records." Their argument on this count, count eight, relies on N.J.S.A. 10:6-2(c) of the CRA, which provides:
Any person who has been deprived of any substantive due process or equal protection rights, privileges or immunities secured by the Constitution or laws of the United States, or any substantive rights, privileges or immunities secured by the Constitution or laws of this State, or whose exercise or enjoyment of those substantive rights, privileges or immunities has been interfered with or attempted to be interfered with, by threats, intimidation or coercion by a person acting under color of law, may bring a civil action for damages and for injunctive or other appropriate relief.
The CRA was modeled on 42 U.S.C.A. § 1983. "The elements of a substantive due process claim under the CRA are the same as those under § 1983." Filgueiras v. Newark Pub. Sch., 426 N.J. Super. 449, 468 (App. Div.), certif. denied, 212 N.J. 460 (2012). The purpose of § 1983 is to provide a mechanism by which individuals can vindicate their rights; it does not create a right in itself. See Filgueiras, supra, 426 N.J. Super. at 468-69. A § 1983 claim requires the identification of 1) a state actor who has allegedly caused a deprivation and 2) a right, privilege, or immunity allegedly being interfered with by the actor. See id. at 468.
Plaintiffs first allege that their cause of action under the CRA "was dismissed prematurely," in that they established a cause of action upon which relief could be granted. They assert that the bank's deceptive response to their subpoena constitutes a "deprivation of substantive due process, actionable under the []CRA." The asserted deprivation is the unwarranted governmental intrusion into their personal lives that occurred when the bank records were disseminated to the community. In addition, they allege that the bank was a state actor for purposes of relief because the bank misrepresented the existence of the subpoenas at the direction of the State.
In this case, the bank, understanding the potentially sensitive nature of the subpoenaed information, contacted the Attorney General for instructions on how to proceed. As permitted by the IFPA, the Attorney General instructed the bank not to release the earlier subpoenas until the OIFP concluded its investigation. A year later, the bank again contacted the state and, because the investigation was over, obtained permission to release the subpoenas.
The bank initiated the contact with the Attorney General. It could have, assuming the relevant subpoenas were located, chosen not to follow the state's explicit instructions. However, the circumstances were such that choosing to defy the State's directions would place the bank in a legal quandary. Although N.J.S.A. 17:33A-11 does not explicitly mention banks or bank records, attempting to compel the release of information during an OIFP investigation would violate the IFPA. As we have said, the statute states: "[E]vidence relative to the subject of an investigation under this act shall not be subject to public inspection except as provided in this act . . . [] unless the commissioner consents, or until, after notice to the commissioner and a hearing . . . ." N.J.S.A. 17:33A-11. Thus, despite the fact that the bank's method of withholding the subpoenas was less than ideal, the bank acted under color of state law. Its conduct had its source in state authority and was a result of the state's coercive power. The bank gained no benefit from withholding the information; it would have not gained anything by virtue of initiating potentially expensive or protracted court proceedings to disclose the information to the depositor.
Regardless, the asserted deprivation of plaintiffs' right to privacy in their bank records is not equivalent to the bank's conduct in this case. Other than complying with the state subpoena and the subsequent instruction from the attorney general's office not to disclose records, the bank was not involved in the dissemination of the information. Therefore, the bank neither deprived nor interfered with plaintiffs' right to privacy. And, that is ultimately what N.J.S.A. 10:6-2(c) prohibits, deprivation and interference with rights. See Perez v. Zugami, LLC, 217 N.J. 502, 517 (2014).
It is not even clear from this record how the bank's initial failure to supply the information "thwarted" plaintiffs' investigation. Plaintiffs claim that the privacy right includes the right to investigate a violation of that privacy, and pose the question: "of what value is a right if the protection of that right is accorded no standing?" Nonetheless, omitting the OIFP subpoenas did not deprive plaintiffs of their right to privacy. Such a broad interpretation would mean that whenever a party is deprived of a right, anyone in the line of actors leading to the deprivation who (1) has important information about the cause of the violation and (2) refuses to cooperate would be deemed to have engaged in deprivation. This reading does not comport with the definition of deprivation and is simply overbroad.
Even accepting the premise that a privacy right includes the right to investigate a violation, plaintiffs were not deprived of that right because the bank, as soon as it could, admittedly later than requested, provided the OIFP subpoenas. At most, the bank delayed plaintiffs' investigation of the violation by one year — from 2009 to 2010. As a practical matter, the Attorney General had already informed plaintiffs in 2008 that they were being investigated. They knew in 2006 that the leaked documents came from the DCJ Cherry Hill office from the facsimile headers on their disseminated bank records. Had the headers in the disseminated records belonged to the bank, perhaps plaintiffs' argument might have some merit. But, the headers were from DCJ.
Nothing indicates that the bank actively engaged in conduct that interfered with plaintiffs' right to privacy with the records. That conduct was the incidental outgrowth of the bank's compliance with a subpoena issued in the insurance fraud investigation.
This brings us to McAllister. In that case, our Supreme Court, while acknowledging an account holder's interest in the privacy of his or her bank records, also acknowledged "circumstances [that] arise that justify State intrusion upon that interest." McAllister, supra, 184 N.J. at 33.
The McAllister Court addressed whether an account holder should receive notice prior to the issuance of a grand jury subpoena for his or her bank records. Id. at 37-43. Ultimately, the Court decided not to impose a notice requirement because "[c]rimes involving corruption and fraud depend on secrecy and misinformation. Those who commit them, when confronted, hide behind walls of silence, making detection difficult." Id. at 39. The concern is that "unscrupulous individuals" might "drain the account, flee the jurisdiction, or otherwise frustrate the investigation." Id. at 39-40. Furthermore, defense counsel might move to quash as a method of obtaining discovery. Id. at 40.
Although plaintiffs have a constitutional right to privacy in their banking records, no precedent establishes a constitutional right to discover whether a government agency has lawfully obtained such private banking records. If an account holder does not have the right to be notified prior to release that the State seeks, by a grand jury subpoena, his or her banking records, by analogy, an account holder should not be allowed to compel a bank to produce an OIFP subpoena while an investigation is pending. The very harm intended to be avoided by N.J.S.A. 17:33A-11 and McAllister would ensue — the potential frustration of an investigation. The rationale behind the decision in McAllister applies to OIFP civil investigations, i.e., that it is necessary to prevent interference with an ongoing investigation.
Plaintiffs were merely attempting to determine who wrongfully disclosed their banking records instead of trying to uncover details about the state's investigation into their affairs. Nonetheless, their understandable motivation does not avoid the impact of the statute designed to shroud such investigations with secrecy. Once the investigation concluded, the subpoenas become accessible, because "[t]he commissioner shall not detain subpoenaed records after an investigation is closed" and such records should be "returned to the persons from whom they were obtained." N.J.S.A. 17:33A-11.
VIII.
Plaintiffs also argue that the contempt count, count ten of the complaint, was erroneously dismissed. They argue that the original court that could have issued Rule 1:10-3 relief to litigant was deprived of the opportunity to do so because of the bank's willful misrepresentation regarding the OIFP subpoenas. Rule 1:10-3 provides that "[n]otwithstanding that an act or omission may also constitute a contempt of court, a litigant in any action may seek relief by application in the action." The purpose of civil contempt, however, is to compel a recalcitrant party to comply. Anyanwu v. Anyanwu, 339 N.J. Super. 278, 290 (App. Div.), certif. denied, 170 N.J. 388 (2001).
During the OHCA litigation, the bank informed plaintiffs that OIFP had subpoenaed the bank records. As a result of the bank's July 2009 response, plaintiffs were also aware that the bank had received subpoenas initiated by Leodori and none from OIFP. Therefore, not only did plaintiffs have the opportunity to challenge the bank's omission before the trial court in the OHCA case, the bank also complied with those requests that did not implicate any investigation. Since the bank acted on the State's instruction, it was not fully capable of complying with the subpoena. A Rule 1:10-3 application may not have had the sought-after effect as the bank was not fully capable of compliance. See Abbott ex rel. Abbott v. Burke, 206 N.J. 332, 492 (2011) (Hoens, J., dissenting).
IX.
Plaintiffs further allege that they are entitled to monetary damages under count three of their complaint because in reliance on defendants' false statements they continued their investigation into the disclosure of the bank records. They claim that they "waiv[ed] the deposition . . . of a bank representative," which "likely would have resulted in discovery of the cover-up and negated the need for a subsequent investigation and this current lawsuit."
First, we observe the obvious. This ligation was filed long after plaintiffs were specifically informed of the subpoenas issued by the OIFP. Despite the outrageous nature of the dissemination of plaintiffs' bank records to the community, plaintiffs have not been able to identify one action taken by the bank which affirmatively advanced the goal of the person or persons who wrongfully obtained the records, copied them, and distributed them.
The elements of common-law-fraud are as follows: "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 172-73 (2005) (internal quotation marks omitted). Even if, for the sake of argument, we agree with plaintiffs that they meet the first four elements, they clearly do not meet the fifth. The bank's conduct, as a result of direction by state government, did not include the public dissemination of the information, which is the real source of harm, and, therefore, of damages.
X.
According to plaintiffs, "[t]he trial court erred by holding that [p]laintiffs were required to prove a special relationship between the parties as a condition precedent to asserting" a fraudulent concealment by a fiduciary claim as found in count three. They attribute the court's error to the fact that "[t]he argument below took the flavor of a spoliation theory which may have led the court to excessively narrow its focus." Instead, plaintiffs explain that the "wrongdoing . . . is fraudulent concealment in the broadest sense of the term." The bank responds that it owed no fiduciary duty as a general matter and no particular fiduciary duty could arise from the subpoena.
"When a bank accepts a deposit from a depositor for either a checking or savings account, a creditor-debtor relationship typically is established." Pagano v. United Jersey Bank, 143 N.J. 220, 233 (1996); see T & C Leasing, Inc. v. Wachovia Bank, N.A., 421 N.J. Super. 221, 228-29 (App. Div. 2011). "The virtually unanimous rule is that creditor-debtor relationships rarely give rise to a fiduciary duty." United Jersey Bank v. Kensey, 306 N.J. Super. 540, 552 (App. Div. 1997), certif. denied, 153 N.J. 402 (1998). Kensey, however, lists three circumstances under which a fiduciary-type relationship arises: 1) a principal-agent relationship, 2) a relationship where the specific circumstances indicate that one of the parties has specially placed trust and confidence in the other, and 3) "contracts or transactions" which are inherently fiduciary and require full disclosure and good faith. See id. at 551. Kensey describes the second category as comprising "decisions holding banks and other lending institutions liable to their customers for gross acts of misconduct and deceit," and the "common thread running through them is that the lender encouraged the borrower to repose special trust or confidence in its advice, thereby inducing the borrower's reliance." Id. at 553-55.
The only category into which the parties' relationship potentially fits is the second. No specific case either supports or rejects a subpoena as a source of a fiduciary duty. The issue is whether plaintiffs have demonstrated circumstances in which they have specially placed their trust in the bank.
Clearly, plaintiffs placed no more trust in the bank than any other depositor who opens an account. Although plaintiffs, as depositors, rightly expected the bank to protect their privacy, the bank disclosed plaintiffs' records in response to State-issued subpoenas and withheld the information at the State's direction. The bank's omission cannot be characterized as a "gross act[] of misconduct and deceit." See id. at 554.
The Supreme Court characterized the elements of fraudulent concealment in the litigation context thus:
(1) That defendant in the fraudulent concealment action had a legal obligation to disclose evidence in connection with an existing or pending litigation;
(2) That the evidence was material to the litigation;
(3) That plaintiff could not reasonably have obtained access to the evidence from another source;
(4) That defendant intentionally withheld, altered or destroyed the evidence with purpose to disrupt the litigation;
(5) That plaintiff was damaged in the underlying action by having to rely on an evidential record that did not contain the evidence defendant concealed.
[Rosenblit, supra, 166 N.J. at 406-07.]
In this case, the subpoena itself would be the logical source of the legal obligation. Plaintiffs have offered no evidence that the 2005 and 2006 OIFP subpoenas were material to the OHCA and therefore cannot satisfy the second element. Plaintiffs' claim that "[t]he right of a litigant to investigate apparent discovery abuses is always material to the litigation" is unsupported.
As to the third element, plaintiffs could only have obtained the subpoenas from the bank or the State. Plaintiffs' OPRA request failed; however, upon being informed that the OIFP issued a 2008 subpoena, the record does not indicate that plaintiffs attempted to obtain more information from the OIFP pursuant to the notice and hearing process in N.J.S.A. 17:33A-11.
With respect to the fourth element, although the bank intentionally withheld the subpoenas, it did not do so to disrupt the litigation or plaintiffs' investigation into the leak. It acted to comply with the State's instructions. Finally, plaintiffs have not identified any harm to them in the OHCA litigation stemming from the omission of the 2005 and 2006 subpoenas.
XI.
It is undisputed that the depository agreement is the only contract between plaintiffs and Wachovia. From that document plaintiffs contend that the bank violated the covenant of good faith and fair dealing, alleging breach of contract under count four. The claim is based on the bank's alleged role in failing to protect their right to privacy. They argue that the contract clause found in the depository agreement regarding legal processes, although silent as to the honesty of responses, did not mean defendants could respond dishonestly. Defendants counter that by following the State's instruction, it acted precisely within the confines of that provision in the agreement.
Unquestionably, every New Jersey contract contains an implied covenant of good faith and fair dealing. Kalogeras v. 239 Broad Ave., L.L.C., 202 N.J. 349, 366 (2010). "Good faith conduct is conduct that does not violate community standards of decency, fairness or reasonableness." Brunswick Hills Racquet Club v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005) (internal quotation marks omitted). "The covenant of good faith and fair dealing calls for parties to a contract to refrain from doing anything which will have the effect of destroying or injuring the right of the other party to receive the benefits of the contract." Id. at 224-25 (internal quotation marks omitted).
The privacy clause in the contract reads: "Wachovia is dedicated to protecting your privacy and providing you with the highest level of service. We want you to understand how we gather and may share customer information at Wachovia, the choices you have, and how we protect that information in everything we do." (Footnote omitted). Section 27 of the "General Rules Governing Deposit Accounts" addresses "Legal Process Affecting Accounts":
If we receive any document that appears or is purported to be legal process issued out of any court or governmental agency, you hereby authorize us to accept and comply with it, no matter how it was received by us. You hereby direct us not to contest on
your behalf any such document or legal process and that we may take action to comply with such process as we determine to be appropriate in the circumstances without liability of us to you . . . .
The bank's response did not violate the contract with plaintiffs. Its July 2009 response stated that "Wachovia believes that we have fulfilled all obligations required under subpoena." The OIFP verbally instructed the bank that those subpoenas were not to be released during the ongoing investigation. The IFPA supports this instruction. The bank acted as it "determine[d] to be appropriate in the circumstances."
Plaintiffs point out that the bank's corporate designee agreed that it is a "core value . . . to deal with its customers . . . with the utmost good faith and fair dealing," though the designee did not believe the July 2009 response violated this covenant. Additionally, the corporate designee agreed that "its depositors have a privacy right in banking records." But, although the bank cannot release plaintiffs' information without justification, it has no affirmative contractual duty to help plaintiffs discover how another party violated plaintiffs' privacy.
However, assuming the bank had such an implied duty to aid plaintiffs, its July 2009 response did not violate any good faith standards of fairness. The bank provided the subpoenas that it believed that it was permitted to release. The OIFP instruction justified the bank's statement that it had given its "final response" and its decision that "this matter will be closed."
XII.
Plaintiffs also contend that defendants' conduct resulted in tortious interference under count one of the complaint. "An action for tortious interference with a prospective business relation protects the right to pursue one's business, calling, or occupation, free from undue influence or molestation." Lamorte Burns & Co. v. Walters, 167 N.J. 285, 305 (2001). The elements of an act of tortious interference are as follow:
A complaint based on tortious interference must allege facts that show some protectable right — a prospective economic or contractual relationship. . . . Second, the complaint must allege facts claiming that the interference was done intentionally and with "malice." . . . Third, the complaint must allege facts leading to the conclusion that the interference caused the loss of the prospective gain. . . . Fourth, the complaint must allege that the injury caused damage.The first element includes protection of not only contractual interests but also "a party's interest in reasonable expectations of economic advantage." Walters, supra, 167 N.J. at 305. "[M]alice is defined to mean that the harm was inflicted intentionally and without justification or excuse." Printing Mart-Morristown, supra, 116 N.J. at 751.
[Printing Mart-Morristown, supra, 116 N.J. at 751; accord MacDougall v. Weichert, 144 N.J. 380, 404 (1996).]
Plaintiffs allege in count one that defendant's response "constitutes the tort of interference with legally protected rights, interference with lawful process, interference with commercial rights, and interference with an attempt to protect one's rights."
First, the confidentiality of one's bank account is not an "economic advantage," Walters, supra, 167 N.J. at 305, even under a liberal interpretation of the term, nor is it a prospective one. Second, the bank's July 2009 response was not "without justification or excuse," Printing Mart-Morristown, supra, 116 N.J. at 751, because it was forced to choose between disobeying the Attorney General's instructions and angering a depositor. Third, the bank's actions did not lead to plaintiffs losing any prospective gain. Finally, although plaintiffs experienced economic loss in continuing to investigate, any loss from choosing not to depose a bank representative is speculative.
XIII.
Plaintiffs claim the bank committed civil conspiracy, counts five and six, with the State by deceiving them regarding the OIFP subpoena as it related to their private financial data. A civil conspiracy is defined as a
combination of two or more persons acting in concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal element of which is an agreement between the parties to inflict a wrong against or an injury upon another, and an overt act that results in damage.The focus of the claim is on the wrong that serves as the foundation for the conspiracy and not the conspiracy itself. Banco Popular, supra, 184 N.J. at 177-78. Plaintiffs cite In re Allegations of Official Misconduct in Elizabeth, 233 N.J. Super. 426 (App. Div. 1989), to support their contention that issues such as public disclosure of grand jury transcripts "are decided by the courts, and a prosecutor acting alone does not possess the power to 'instruct' a third-party to defy legal process." However, OIFP subpoenas are not subject to public access by means of a subpoena unless the commissioner consents or the commissioner participates in a hearing in which the necessity for the release of the documents is established at a hearing. See N.J.S.A. 17:33A-11.
[LoBiondo v. Schwartz, 199 N.J. 62, 102 (2009) (quotation marks omitted).]
Plaintiffs' counts five and six allege that the wrongful acts underlying the conspiracy include not only the violation of plaintiffs' privacy rights but also the conduct alleged in the other counts in the complaint. But, since plaintiffs raise no actionable claims against defendant, no underlying wrongs support the conspiracy.
Even if the bank's "deception" is considered to be the underlying wrong, plaintiffs' claim still fails. Defendant and the OIFP did not agree to "inflict a wrong," LoBiondo, supra, 199 N.J. at 102 (quotation marks omitted) against plaintiffs. The Attorney General instructed defendant not to release the records during the ongoing OIFP investigation. No evidence indicates that the Attorney General instructed the bank not to pursue formal means of protecting the information or to be evasive or misleading in its response. Although the bank could have handled the situation in another fashion, the method of response was not dictated by the State. No civil conspiracy occurred.
XIV.
Plaintiffs also characterize defendant's deliberately false responses to the July 2009 subpoena as an abuse of process in count seven. "To be found liable for malicious abuse of process, a party must have performed additional acts after issuance of process which represent the perversion or abuse of the legitimate purposes of that process." Hoffman v. AsSeenOnTV.com, Inc., 404 N.J. Super. 415, 431 (App. Div. 2009) (internal quotation marks omitted). The tort of malicious abuse of process lies not for commencing an improper action, but for misusing or misapplying process after it is issued." Ibid. "[T]hat process is not abused unless after its issuance the defendant reveals an ulterior purpose he had in securing it by committing further acts whereby he demonstrably uses the process as a means to coerce or oppress the plaintiff." Ibid. (internal quotation marks omitted).
Plaintiffs do not supply even a single case in which abuse of process did not involve affirmative conduct on the part of an actor in causing process to be issued, followed by the commission of a further act demonstrating an illegitimate ulterior purpose.
The facts in this case simply do not support such a claim. Plaintiffs initiated process by virtue of their issuance of the July 2009 subpoena. Despite the improper response, the record does not establish an ulterior purpose.
The bank responded to the 2009 subpoena by providing only post-2006 subpoenas and explaining that they had given their "final response" and the "matter will be closed." Such a response is not a further act that demonstrates an ulterior purpose. Instead, the July 2009 response was an attempt both to comply as best it could with the July 2009 subpoena and still follow the instructions of the Attorney General's office. Plaintiffs have provided no evidence that the bank issued a false response in order to hinder plaintiffs' investigation into the public release of records.
XV.
Finally, as to the bank defendants, plaintiffs allege in count nine that the court improperly dismissed its prima facie tort claim because defendant acted in an unjustified manner. We consider this point to be so lacking in merit as to not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
XVI.
Insofar as plaintiffs' claims against Burke, unquestionably, as the trial judge found, qualified immunity applied. That doctrine shields government officials "from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S. Ct. 2727, 2738, 73 L. Ed. 2d 396, 410 (1982). The issue is whether the officer's conduct violated a constitutional or statutory right. See Gormley v. Wood-El, ___ N.J. ___, ___ (2014) (slip op. at 55-57). "Whether an official is covered by qualified immunity is a matter of law to be decided by a court, preferably on a properly supported motion for summary judgment or dismissal." Id. at 56 (internal quotation marks omitted). The doctrine balances the need to hold public officials accountable for exercising their power improperly and the need to protect them from liability when they perform their duties reasonably. See ibid. Such determinations are to be made as early as possible in the litigation. Wildoner v. Borough of Ramsey, 162 N.J. 375, 387 (2000).
In McAllister, as we have said, the New Jersey Supreme Court came to the conclusion that although a citizen had a reasonable expectation of privacy in bank records, that did not require notice where bank records are subpoenaed as part of a grand jury investigation. Id. at 39. Knowledge of the ongoing investigation, as a result of knowledge of a subpoena in the case of an insurance fraud investigation, like in the grand jury investigation in McAllister, could well have made successful investigation impossible. The possibility that a successful investigation could have been impeded remains even if ultimately plaintiffs were exonerated from any involvement in wrongdoing.
Therefore, Burke's instruction to Wachovia complied with the requirements of N.J.S.A. 17:33A-11, which states that the documents being investigated under the IFPA cannot be released except under enumerated circumstances not relevant here. Because Burke's directive to Wachovia complied with the law and was not violative of any right of plaintiffs, she is entitled to qualified immunity.
XVII.
Certainly, the bank had other alternatives to the route it chose. Given the number of subpoenas no doubt issued by government agencies that demand confidentiality, however, it is not surprising that they chose to do nothing but stonewall. Absent any showing, not made on this record, that the bank withheld the subpoenas for some reason other than to comply with the instructions of the OIFP and a deputy attorney general, all of plaintiffs' claims lack merit. Having viewed plaintiffs' allegations in the most favorable light, we conclude that they have no basis in law. We acknowledge that what occurred here was unacceptable and one is troubled by the apparent source of the leak — but nothing in the record suggests that these defendants had a hand in the wrong inflicted on plaintiffs.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION