Thursday, May 30, 2013

FYI: Cal App Ct Holds Federal Law Does Not Immunize Bank and Bank Employees from Malicious Prosecution for Non-Money Laundering Reports

The California Court of Appeal, Second District, recently ruled that a bank customer made a prima facie case of malicious prosecution under California law against a bank and its employees arising out of an allegedly false report to police that the customer had threatened to blow up the bank. 


In so ruling, the Court concluded that the federal Annunzio-Wylie Anti-Money Laundering Act neither preempted California's malicious prosecution law, nor provided immunity to the bank or its employees for reporting a violation of law unrelated to suspected money laundering transactions.


A copy of the opinion is available at:


Plaintiff bank customer ("Customer") went into defendant bank ("Bank") to cash two checks.  Bank refused to cash the larger of the checks for just over $7000 because Bank supposedly needed to verify the signature on the check.  An altercation erupted among Customer, the supervisor of the bank tellers ("Supervisor"), and the Bank's branch manager ("Manager").  Manager called the police, reporting that Customer had threatened to blow up Bank.   A short time later, police arrested Customer outside the Bank while he was smoking a cigarette and supposedly waiting for his check to be verified.


Customer sued Bank, Manager, and Supervisor (collectively, "Defendants") for malicious prosecution.  Defendants filed a special motion to strike under section 425.16 of the California Code of Civil Procedure.  The lower court entered judgment in favor of Defendants.  Customer appealed.


The appellate court reversed, ruling in part that Customer had established a prima facie case for malicious prosecution.


As you may recall, when filing a special motion to strike, a defendant bears the initial burden to demonstrate that a plaintiff's cause of action arises from protected activity, such as the exercise of free speech or to the right to petition a court for redress of grievances.  See Brill Media Co., LLC v. TCW Group, Inc., 132 Cal. App.4th 324, 329 (2005); Cal. Code Civ. Proc. § 425.16(a).  Next, after defendants show that the cause of action arose from protected activity, the plaintiff must demonstrate the probability of prevailing on the claim.  Equilon Enterprises v. Consumer Cause, Inc., 29 Cal 4th 53, 67 (2002); Wilson v. parker, Covert & Chidester, 28 Cal. 4th 811, 821 (2002). 


In addition, the federal Annunzio-Wylie Anti-Money Laundering Act (the "Act") grants immunity to banks for making disclosures to the government of suspicious activity and certain financial information potentially related to money laundering activity.  See 31 U.S.C. § 5318(g).  Specifically, the so-called safe harbors in the Act provide an affirmative defense to claims against a financial institution "for disclosing an individual's financial records or account-related activity."  See Lopez v. First Union Nat'l Bank, 129 F.3d 1186, 1191 (11th Cir. 1997); 31 U.S.C. § 5318(g)(3).


Pointing out that the Act contains no clear language manifesting Congressional intent to preempt California's malicious prosecution law, the Appellate Court rejected Defendants' assertion that the Act grants immunity to a bank or bank employees for reporting violations of law in matters other than money laundering.  In so doing, the Appellate Court explained that the Act's immunity provisions must be analyzed within the context of the Act itself and "no matter how broadly they apply to 'disclosures' concerning financial institutions, they cannot be read to immunize any report to law enforcement, by any bank  [or its employees or agents]."   


Next, applying California law in determining whether Customer made a prima facie showing that he was likely to prevail on his malicious prosecution claim, the Appellate Court noted that the test in a malicious prosecution case is whether the defendant was actively instrumental in causing the prosecution by knowingly making a false police report.   See Sullivan v. County of Los Angeles, 12 Cal. 3d 710, 720 (1974).  The Appellate Court also explained in part that in a malicious prosecution claim, malice may simply consist of a lack of a substantial ground for believing in the plaintiff's guilt, rather than actual hostility or ill will.  See Centers v. Dollar Markets, 99 Cal. App.2d 534, 544 (1950); Sycamore Ridge Apartments LLC v. Naumann, 157 Cal.App. 4th 1385, 1407 (2007).


Further, the Appellate Court noted that Defendants and Customer submitted evidence showing conflicting accounts of the events at the Bank and that within the context of a special motion to strike, it must accept as true all evidence favorable to the plaintiff.  The Appellate Court thus concluded that Customer's declaration that he never threatened to blow up the bank was sufficient to establish a prima facie case.  See, Inc. v. Gradient Analytics, Inc., 151 Cal. App.4th 688 (2007).    


Pointing out that under the facts before them, a police officer would not have arrested Customer for disturbing the peace, the Appellate Court concluded that Customer had met his burden in challenging Defendants' special motion to strike by establishing a prima facie case of malicious prosecution.  


The Appellate Court therefore reversed the judgment of the lower court. 




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois


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