The Gramm-Leach-Bliley Act:
Scope, Impact and Avenues for Relief in the Context of Civil Discovery
By: Wells Marble & Hurst, PLLC
www.wellsmar.com
The Federal Financial Modernization Act, commonly known as the Gramm-Leach-Bliley Act ("GLBA") was passed by Congress and signed by President Clinton in November, 1999. Pursuant to the GLBA, a financial institution must provide its customers with a notice of its privacy policies and practices. It prohibits a financial institution from disclosing nonpublic personal information about a consumer to non-affiliated third parties unless the institution satisfies various notice and opt-out requirements and the consumer has not elected to opt out of the disclosure. Under the GLBA, a financial institution is considered to be any organization engaging in financial activities or activities which are “financial in nature,” including insurance companies.
The GLBA and a myriad of additional federal regulations define what a financial institution can and cannot disclose to outside parties. Essentially, any data, other than blind aggregate data, that contains personally identifiable financial information is protected from disclosure under the GLBA. For example, information a consumer provides on a loan application, account balance information, payment history, overdraft history, the fact that an individual has been or is a client of the financial institution, and information from a consumer report are all potentially protected from disclosure under the Act.
The first courts to address the sweeping implications of the GLBA were federal district courts in Louisiana. First, in Union Planters Bank, N.A. v. Gavel, a district judge enjoined an insurance employee from producing consumer records in a state court action. The court found that answering the disputed discovery request would violate the GLBA, result in the invasion of privacy of Union Planters’ customers, would expose Union Planters to regulatory sanctions, and would cause Union Planters to suffer an injury to its business reputation when its customers learned of the divulgence of their private information. Thereafter, another Louisiana district court distinguished between Gavel and the case before it, holding that “blind” and/or aggregate financial data and documentation does not constitute “nonpublic information,” and thus, does not implicate the provisions of the GLBA.
On the heels of these decisions, the Mississippi Supreme Court handed down the now withdrawn opinion in Equitable v. Irving, in which the Court found no exception within the statutory framework of the GLBA which could operate to the advantage of a private plaintiff seeking discovery of personally identifiable financial data in the course of civil discovery. Equitable v. Irving, 2003 WL 22098021 ¶ 12 (Miss. September 11, 2003) withdrawn by Order of the Supreme Court of Mississippi, No. 2002-IA-00513-SCT (Feb. 05, 2004). Since Irving, several federal district courts and one state supreme court have handed down opinions reaching opposite results. Thus, the legal waters in which stand the privacy rights afforded to consumers under the GLBA can be described as tumultuous at best. In fact, Gavel itself has since been over ruled on procedural grounds related to the maintenance of federal declaratory judgment actions – an attractive avenue for collateral relief from overly broad discovery orders within the context of the GLBA.
In considering whether a collateral attack on a state court judgement in federal court can be maintained, state law must be analyzed in light of the Rooker-Feldman doctrine. In order to seek declaratory relief, the discovery order at issue must first be a final judgment, and thus appealable, under state law. The Fifth Circuit has mandated that defendants seeking to nullify the enforcement of a state court discovery order commanding production of information protected by the GLBA, which has become final and appealable, must seek relief through that state’s appellate procedure (presumably to the State Supreme Court and, if necessary, the United States Supreme Court by applying for a writ of certiorari). However, the application of Rooker-Feldman to state court discovery orders is limited by substantive and procedural law in many states, including Mississippi. Hence, declaratory judgement may be a viable avenue for relief under proper circumstances.
The GLBA is quickly emerging as a new battle ground in litigation involving financial institutions and, specifically, insurance companies. As the Act and its provisions have become more prolific, parties have become more proactive in their attempts to use the Act to their advantage. For example, courts are now being asked to consider whether private plaintiffs may seek damages from financial institutions for violations of the GLBA, and whether dismissal is proper under Fed. R. Civ. P. 12(b) where a financial institution has failed to comply with certain provisions of the Act.
Overall, there is a dearth of opinion evaluating the GLBA’s impact on civil discovery in the context of civil litigation related to consumer finance transactions and the sale of insurance. This places heightened responsibility on defense counsel to carefully navigate the intricacies of the GLBA in a litigious environment where the stakes are glaringly apparent – given the option to settle or risk being forced to turn over information that would likely result in a windfall of new clients to opposing counsel, financial institutions and insurance companies can quickly find themselves in a quagmire. However, the GLBA not only presents a veritable potpourri of legal challenges to the disclosure of client/borrower lists and like information, under proper circumstances, it also affords a basis upon which to object to the production of any value-added data that is derived from such information. Ultimately, information protected under the GLBA, which has become ubiquitous in litigation related to consumer finance transactions and the sale of insurance, remains a prime target for disclosure within the context of civil litigation, and should be safeguarded by a competent litigation strategy which takes full advantage of the defenses afforded by the Act.
Wells Marble & Hurst, PLLC
P. O. Box 131
Jackson, MS 39205-0131
(601) 605-6900
