Articles

Eric Johnson

SUBPOENA COMPLIANCE UPDATE

How should a financial institution respond to a civil subpoena for customer records?

A subpoena is a document issued in the name of a court or government agency that commands the recipient to produce documents, permit inspection, copying, testing, or sampling, or appear at a trial, hearing, or deposition.  A sample subpoena is attached hereto.

A financial institution may receive a subpoena for the records of a depositor, borrower, or other customer in connection with a civil lawsuit, criminal prosecution, or criminal or regulatory investigation with which the financial institution is not otherwise involved.

Knowing how to respond to the subpoena will help the financial institution minimize the risk of possible civil and criminal penalties, while also fulfilling its obligations to its customer.

This update briefly covers subpoenas in civil lawsuits to which the financial institution is not a party.  But, certain concepts discussed may also apply to criminal or regulatory subpoenas.

Subpoena Basics

  • An attorney can issue a subpoena. The subpoena need not come directly from the court.
  • The party issuing the subpoena must provide two notices to all other parties in the lawsuit: (1) notice of the subpoena before the subpoena is issued; and (2) notice that the financial institution is required to produce documents as provided in the subpoena at least 7 days before the date by which the institution must produce the documents.
  • A financial institution has 14 days to make a written objection to the subpoena. Objections may include that the subpoena is overly broad, would require unnecessary expense, or requests confidential information.  Because a financial institution cannot represent itself in court proceedings, objections should be made through the institution’s legal counsel.
  • If objection is made, the institution need not comply with the subpoena absent a court order.
  • A financial institution is entitled to reimbursement of its reasonable costs incurred to gather, duplicate, and produce documents responsive to a subpoena. The subpoenaing party must make arrangements to pay such costs before the institution is required to produce documents.

Confidentiality of Customer Records

State and federal laws can affect the extent to which a financial institution may disclose a customer’s financial records.

  • The federal Gramm-Leach-Bliley Act obligates financial institutions to keep customers’ “nonpublic personal information” confidential, but permits release of such information to comply with “a properly authorized” civil subpoena or other “judicial process.”
  • The federal Right to Financial Privacy Act prohibits providing customers’ financial records to any federal government agency except in limited circumstances, such as when the records are the subject of a grand jury subpoena or of an ordinary subpoena and the customer has received a copy of the subpoena and notice of the right to challenge it.
  • The Minnesota Supreme Court has twice noted a financial institution’s legal duty not to disclose the financial information of its customers, but it has never addressed whether an exception exists for responding to a subpoena. Courts in other states and federal districts have held that an institution does not breach its duty of confidentiality by producing customer financial records in response to a valid judicially authorized subpoena.
  • Thus, before producing customer records in response to a subpoena, financial institutions should consult legal counsel to ensure that the requirements for a valid subpoena have been satisfied. The financial institution may also object through legal counsel to the subpoena based on the duty of confidentiality and request that the subpoenaing party obtain a court order requiring compliance with the subpoena.

Develop a System for Handling Service and Response to Subpoenas

  • Financial institutions should (1) designate one or more individuals at each office or branch to whom subpoenas should be immediately directed when received; and (2) adopt a procedure to record the date and time of receipt and ensure that subpoenas are directed to appropriate institution officers and/or legal counsel for review.
  • Unless legal counsel determines that objection is warranted or compliance is not required, an institution should: (1) identify and gather all documents in its possession, custody, or control that are responsive to the subpoena; (2) preserve potentially responsive documents (e.g., by halting routine recordkeeping practices that may eliminate potentially responsive documents); (3) make and maintain a record of the process; (4) arrange for reimbursement of its expenses of compliance; and (5) produce all documents in its possession, custody, or control that are responsive to the subpoena by the required time.
  • Even after developing a subpoena response system, institutions should periodically “audit” the system to ensure that appropriate steps are being taken.

Download a Sample Subpoena Letter »

Fryberger Lender Support Team Contact

Please contact Eric Johnson at ejohnson@fryberger.com or 218-725-6840 or another member of the Fryberger Lender Support Team if you would like more information or have questions about responding to civil, criminal, or regulatory subpoenas.