Opinion
CIVIL ACTION 02-1224, SECTION "T"(4)
May 9, 2002
Before the Court is a Preliminary Injunction, filed on behalf of Union Planters Bank, N.A. and a Motion to Dismiss or Stay filed on behalf of the Intervenors, Tariq Maurice Salih, Individually and as Administrator of the Succession of Canty. The Court entertained oral argument on May 7, 2002, before taking these motions under submission for further consideration. The Court, having considered the arguments of counsel, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
Union Planters Bank, N.A. ("Union Planters") seeks to prevent the release of private consumer financial information without the consent of the relevant consumers in accordance with the Gramm-Leach-Bliley Act ("GLBA"), 15 U.S.C. § 6801 et seq. In the state court proceeding,Salih v. Union Planters Bank, 2001-118, Civil District Court for the Parish of Orleans, State of Louisiana, a subpoena was issued to John A. Gavel, Jr. for the production of certain information relating to customers of Union Planters.
Specifically, the subpoena originally requested (1) "any and all records" wherein Union Planters requested the placement or purchase of flood insurance and the amounts of any such insurance policies; (2) the names, addresses, and telephone numbers of any party currently or formerly indebted to Union Planters by virtue of a residential mortgage/deed of trust loan, the current balance of said loan, the original loan amount, the loan balance on the effective date of any flood insurance policy where flood insurance was provided by Union Planters; and, (3) any records showing the mortgage balance and the original amount of the loan where flood insurance was placed by Union Planters.
John A. Gavel, Jr. and his employer, WNC Insurance Services, Inc. ("WNC"), filed a Motion to Quash/Motion for Protective Order with regard to the subpoena in the state court to the extent it sought information barred from disclosure by Louisiana privacy laws and the GLBA. The motion was denied; however, the state court limited the subpoena as follows:
All records regarding forced placement of insurance in the State of Louisiana from Union Planters Bank, by and through John A. Gavel, Jr., a Louisiana broker, as requested by WNC from January 1, 1991, through December 31, 2001.
WNC and Gavel then applied for writs with the Fourth Circuit Court of Appeals, State of Louisiana. Writs were denied as it related to Gavel, however, granted with respect to WNC, as it was found that WNC as a non-party, non-resident corporation could not be subpoenaed to produce documents at a deposition in Louisiana. As such, Gavel was prepared to produce the information sought in the subpoena, as modified by the state court, at his deposition on April 24, 2002.
Union Planters filed this action seeking a temporary restraining order seeking to enjoin Gavel from disclosing the information requested by theSalih plaintiff's subpoena, as modified, as it violated the GLBA. This Court entered the temporary restraining order until it could rule on the injunction. Subsequently, the intervenors went back to state court to seek a clarification of the state court's ruling.
II. ARGUMENTS OF THE RESPECTIVE PARTIES:
A. Arguments of Union Planters in Support of a Preliminary Injunction:
Union Planters contends that it is likely to succeed on the merits of its claim. The GLBA clearly prohibits the disclosure of non-public information to third parties unless the consumer is given the opportunity, before the time that the information is disclosed, to direct that the information not be disclosed to said third party. See, 15 U.S.C. § 6802(b)(1). Unless Gavel is enjoined from producing the information requested, non-public personal information covered by the GLBA will be disclosed to third parties without any individual customer's advance knowledge or consent, in clear violation of the statute.
Secondly, it is submitted that Union Planters faces irreparable injury. The disclosure of this information by Gavel would result in an invasion of privacy of Union Planters' customers. Union Planters will surely suffer injury to its business reputation when its customers learn that their private financial information was divulged to third parties without their consent.
Next, Union Planters argues that the balance of interests favors issuance of an injunction. Union Planters can be issued regulatory sanctions in the event that disclosure of nonpublic personal information is made known in violation of the GLBA. Moreover, Union Planters will face the wrath of at least some of its customers. While an injunction would protect Union Planters and the rights of its customers, it would not impinge upon Mr. Gavel or, to the extent relevant, the Salih plaintiff's attorneys. Gavel has no particular interest in disclosing the information sought in the subpoena, which he possesses solely in his capacity as agent for Union Planters. As for the plaintiff's attorneys, there is no reason this information would be required other than for client development.
Finally, Union Planters asserts that the injunctive relief will not undermine or disserve the public interest. A federal statute designed to protect the privacy interests of American consumers could only serve to promote the public interest in this case. There is no countervailing public interest in allowing Gavel to violate the statute.
B. Arguments of the Intervenors in Support of a Dismissal or Stay of the Action:
Intervenors contend that the matter before the Court was "res judicata" pursuant to the ruling of the Fourth Circuit Court of Appeals, or in the alternative, that this Court should abstain. It is submitted that after considering the "Colorado River" doctrine of abstention factors, as set forth in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), namely, that (1) this forum would be inconvenient, as it has already been twice removed and remanded; (2) abstention in this case would avoid piecemeal litigation; and, (3) the state court proceeding was the first filed action. Additionally, it is submitted that after this matter has been removed and remanded twice, Union Planters now attempts to gain federal jurisdiction by suing its own insurance agent.
III. LAW AND ANALYSIS:
A. Law on Res Judicata:
Under federal law, res judicata bars a subsequent action when a prior judgment has been rendered in an action where: (1) the parties are the same in both suits, (2) the prior judgment was rendered by a court of competent jurisdiction, (3) there has been a final judgment on the merits, and (4) the same cause of action is involved in both cases. See,Nilsen v. City of Moss Point, Miss., 701 F.2d 556 (5th Cir. 1983);Agrilectric Power Partners v. General Elec. Co., 20 F.3d 663 (5th Cir. 1994). The principal test for comparing causes of action is whether the primary right and duty or wrong are the same in each action. Nilsen, supra. Furthermore, in determining whether the same cause of action is involved, the critical issue is not what relief is requested or the theory asserted, but rather whether plaintiff bases two actions on the same nucleus of operative facts. Res judicata bars all claims that were or could have been advanced in support of a cause of action on occasion of its former adjudication, not merely those that were adjudicated.Travelers Insurance Co. v. St. Jude Hospital of Kenner, 37 F.3d 193 (5th Cir. 1994), rehearing denied 41 F.3d 666 (5th Cir. 1994), cert. denied 514 U.S. 1065, 115 S.Ct. 1696, 131 L.Ed.2d 559 (1995). A final judgment is res judicata even if it is still appealable. Amcast Industrial Corp. v. Detrex Corp. 45 F.3d 155 (7th Cir. 1995).
B. Law on Abstention Doctrine:
A federal court may decline to exercise jurisdiction if there is a pending action in state court involving the same parties and there are exceptional circumstances involving wise judicial administration and conservation of judicial resources. Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). However, the United States Supreme Court stated that abstention is "an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it" and that federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given to them." Colorado River, 424 U.S. at 813, 817, 96 S.Ct. at 1244, 1246; Falcon Operators v. P.M.P. Wireline Services, Inc., 1997 WL 313417 (E.D.La. 6/9/97). A party requesting a district court to abstain must demonstrate "exceptional circumstances and the clearest of justifications" to justify the surrender of a federal court's jurisdiction. Colorado River, 424 U.S. at 824, 96 S.Ct. at 1250.
The United States Supreme Court articulated the following factors a district court should consider when deciding whether or not to decline jurisdiction:
1. Whether the federal court has assumed jurisdiction over the res;
2. Inconvenience of the federal forum;
3. Desirability of avoiding piecemeal litigation;
4. The order in which jurisdiction was obtained;
5. Whether federal law provides the basis of decision; and,
6. Whether state court proceedings are inadequate to protect federal court's plaintiff's rights.Colorado River, 424 U.S. at 818, 96 S.Ct. at 1246-47; Moses H. Cone, 460 U.S. at 16, 103 S.Ct. at 937. No one factor is determinative; a carefully considered judgment taking into account both the obligation to exercise jurisdiction and the combination of factors counseling against that exercise is required. Id.
However, there must first exist truly parallel cases. The Fifth Circuit defines parallel actions as those involving the same parties and the same issues. Republicbank Dallas National Association v. McIntosh, 828 F.2d 1120 (5th Cir. 1987) per curiam; PPG Industries, Inc. v. Continental Oil Co., 478 F.2d 674, 682 (5th Cir. 1973); Hartford Acc. Indem. v. Costa Lines Cargo Serv., 903 F.2d 352 (5th Cir. 1990); Doerle's Quarterboats, Inc. v. Been Weeks, Co., 1995 WL 747470 (E.D.La.).
See also, Nakash v. Marciano, 882 F.2d 1411 (9th Cir. 1989) (citingRepublicbank); Crawley v. Hamilton County Comm'rs, 744 F.2d 28 (6th Cir. 1984).
C. Law on Preliminary Injunction:
A preliminary injunction is an extraordinary remedy. In order to secure a preliminary injunction, the movant has the burden of proving four elements: (1) a substantial likelihood of success on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not issued; (3) that threatened injury to the movant outweighs any damage the injunction might cause to the opponent; and (4) that the injunction will not disserve the public interest. See Apple Barrel Productions, Inc. v. RD. Beard, 730 F.2d 384, 386 (5th Cir. 1984) ( citing Dallas Cowboy Cheerleaders v. Scoreboard Posters, Inc., 600 F.2d 1184, 1187 (5th Cir. 1979)). In order to obtain preliminary injunctive relief, the Plaintiff must successfully carry the burden of persuasion as to each element of the four-pronged test. See id. at 389. That is, a preliminary injunction will be denied based on a failure to prove separately each of the four elements of the four-prong test for obtaining the injunction. See e.g., Apple Barrel Productions, 730 F.2d at 389; Southern Monorail Co. v. Robbins Myers, Inc., 666 F.2d 185, 186 (5th Cir. 1982).
D. The Court's Analysis:
The Intervenors contend that this Court should dismiss the complaint of Union Planters as the matter is res judicata, or in the alternative, that this Court should abstain from deciding this matter. It is the opinion of this Court, however, that neither res judicata, nor abstention bars the injunctive relief sought by Union Planters under the circumstances presented herein. Res Judicata bars a subsequent action only when a prior judgment has been rendered in an action where the parties are the same in both suits. Nilsen, supra. In this instance, while Union Planters was a party to the state court proceeding, it was not the party to which the subpoena was directed. As such, Union Planters had no real standing to request that said subpoena be quashed. Rather, it was Gavel and WNC who sought to have the subpoena quashed. This Court notes that while Union Planters was present at the hearing in state court, and further, filed a brief with the appellate court, it is the opinion of this Court that Union Planters, at no time, had a full and fair opportunity to have its position considered as it was not a direct party-in-interest to those proceedings involving the subpoena issued to Gavel. It was not until Gavel was ordered to disclose the information requested in the subpoena that Union Planters had a justiciable issue. As such, the ruling by the state court in no way bars the present litigation on res judicata grounds.
Next, this Court must consider whether abstention is appropriate in the present case. A court may abstain only in the rarest of circumstances. See, Colorado River, supra. The most recent pronouncement from the Fifth Circuit makes clear that a federal district court may not abstain from deciding a case brought properly in federal court under federal law solely because that party is involved in a related state-court action.Bank One, N.A. v. Boyd, 2002 WL 518633 (5th Cir. Apr. 5, 2002).
Considering the factors for determining whether abstention is appropriate, this Court finds that on balance, the factors weigh in favor of exercising jurisdiction. Neither the first nor second factor are particularly relevant in the present case. There is no property, or res, for which the courts have assumed jurisdiction, nor has any party raised the issue of inconvenience of the forum, as the courts are located in the same geographic area. The avoidance of piecemeal litigation is a factor which would weigh in favor of surrendering jurisdiction to the state court, as that court controls the litigation between these parties and will decide the merits of the case. Whereas, this Court has been asked to rule on one very small element of that case, with regard to a particular discovery request which implicates a federal statute. Likewise, the fourth factor, the order in which jurisdiction was obtained, weighs in favor of surrendering jurisdiction to the earlier filed state court action. The fifth factor, however, weighs in favor of this Court exercising its jurisdiction. It is only federal law and the policy and purpose surrounding those provisions which provide the law applicable to the issue presented before this Court. Finally, the adequacy of the state proceedings weighs in favor of maintaining jurisdiction. While this Court is confident in the abilities of the state court to consider, interpret, and apply the federal law, the relief sought by Union Planters could not have been awarded by the state court, as it was not the party to which the subpoena was issued. As such, it is the opinion of this Court, that Union Planters has invoked this Court's jurisdiction pursuant to a federal statute and has a right to have this Court decide the issue before it. See, Id. (citing Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964)). There is nothing vexatious in Union Planters' resort to the federal courts and as such, abstention will not be granted.
Accordingly, this Court must now look to the merits of whether the preliminary injunction should be issued. It is clear to this Court that the GLBA specifically prohibits Mr. Gavel from disclosing the information sought by the subpoena issued, as modified by the state court, without the consent of the customers. 15 U.S.C. § 6802(b)(1). Mr. Gavel received the information sought by the subpoena from WNC which provides insurance services to Union Planters. Gavel, in turn, performs services for WNC with respect to Union Planters' Louisiana customers by preparing and filing surplus lines tax statements and paying the associated tax to the Louisiana Department of Insurance. As such, Mr. Gavel is included in the prohibitions of the GLBA, as said provisions apply to "financial institutions", for which Union Planters is without a doubt; but which also include any person or organization significantly engaged in an activity which is "financial in nature". The activities of Mr. Gavel in providing insurance brokerage and administrative services for loans and acting as agent or broker for purposes of insuring against loss, are "financial in nature". 12 U.S.C. § 1843(k)(3)(B) and 12 C.F.R. § 225.28(b)(1).
Moreover, the information which Gavel has been asked to produce is clearly "nonpublic personal information" which falls within the provisions of the GLBA prohibiting disclosure. Records regarding the forced placement of flood insurance for Union Planters' customers constitutes a "grouping" of non-public personally identifiable financial information which is precluded by the GLBA. See, 15 U.S.C. § 6809(4)(A)(ii), (C); 12 C.F.R. § 40.3(n). Furthermore, it is clear that the document sought by the Intervenors submitted to the Louisiana Department of Insurance, on its face, provides that the document is exempt from Louisiana's Public Records Law.
Finally, this Court finds that the "fraud" exception of the GLBA is not applicable in the current circumstances. See, 15 U.S.C. § 6802(e)(3). To apply this exception, to the circumstances presented in this case, would render the protections provided by the GLBA meaningless. This Court is in agreement with Union Planters that said exception is intended for situations in which the customer is using the privacy associated with his financial account to perpetrate a fraud. Under those circumstances, a financial institution would be free to disclose the information about that customer and said account.
Accordingly, as discussed above, this Court finds that Union Planters has succeeded on the merits of its claim. Secondly, this Court believes that irreparable injury would result if Gavel were allowed to disclose the private financial information provided to him from Union Planters with respect to its customers. Once this information has been provided, in contradiction to the dictates of the GLBA, there is no monetary relief which could compensate such a loss. Gavel would not be injured in any way should the injunction be entered, as he is merely the possessor of information with no real interest in the proceedings. Union Planters, however, could suffer grave consequences should the information sought in the subpoena be disclosed. Finally, the injunction in no way would disserve the public interest as the injunction would merely uphold and enforce a federal statute. Accordingly, the request for preliminary injunction is hereby granted.
Accordingly,
IT IS ORDERED that the Motion for Preliminary Injunction filed on behalf of the petitioner, Union Planters Bank, N.A., be and the same is hereby GRANTED. John A. Gavel, Jr. is enjoined only from disclosing documents, and/or information, as set forth in the modified subpoena, and subsequent Court clarification, which would violate the GLBA.
IT IS FURTHER ORDERED that the Motion to Dismiss or Stay filed on behalf of the Intervenors, Tariq Maurice Salih, Individually and as Administrator of the Succession of Canty, be and the same is hereby DENIED.
IT IS FURTHER ORDERED that Intervenors, Tariq Maurice Salih, Individually and as Administrator of the Succession of Canty, are hereby ENJOINED from taking any action in the state court which would render this Court's order ineffective or jeopardize the parties who were directed to comply with it.
See, D.G. Bland Lumber Co. v. National Labor Relations Board, 177 F.2d 555 (5th Cir. 1949); 28 U.S.C. § 2283.