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Uniteed States v. Sethi

United States District Court, D. Colorado

April 2, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
ROHIT SETHI, CHARLES ELROY VANCURA, also known as Chuck Vancura, and JAMES BRYAN VANCURA, Defendants. BANK OF AMERICA, JERSEY HEMEONC LLC, RUBICS WORLDWIDE LLC, and TOYOTA MOTOR NORTH AMERICA, INC., Garnishees.

          ORDER

          KRISTEN L. MIX UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on the Customer's Motion to Quash Subpoena of Financial Information [#148], [1] filed by Tracy S. VanCura (“Ms. VanCura”) (“Ms. VanCura's Motion”), and on the Customer's Motion to Quash Subpoena of Financial Information [#149], filed by Defendant James Bryan VanCura (“Defendant J. VanCura”) (“Defendant J. VanCura's Motion”) (collectively, the “Motions”). The United States filed a combined Response [#151], opposing the Motions; Ms. VanCura and Defendant J. VanCura did not file Replies. The Court has reviewed the Motions [#148, #149], the Response [#151], the case record, and the applicable law. Accordingly, the Court is fully advised in the premises. For the reasons set forth below, the Motions [#148, #149] are DENIED.

         I. Background

         On February 28, 2008, the United States sued Defendant J. VanCura and two others not at issue in the present Motions, alleging, in part, that Defendant J. VanCura failed to honor an Unconditional Guarantee of a note securing a defaulted Small Business Administration Loan. Compl. [#1] ¶¶ 102-110. As part of a Stipulated Settlement Agreement, Defendant J. VanCura executed a Consent Judgment obligating Defendant J. VanCura to pay the United States $1, 310, 000, with post-judgment interest. Stipulated Settlement Agreement [#67] ¶ 13; Consent Judgment [#77] at 1. After Defendant J. VanCura breached the Settlement Agreement, the Court entered the Consent Judgment. Am. Motion for Order Entering Consent Judgments [#72] at 5; Order [#75] at 3-4. Although the United States sent Defendant J. VanCura a payment plan, Defendant J. VanCura failed to make a payment. Response [#151] at 2 ¶ 7; Pl.'s Ex. 3 [#151-3]. Through the Treasury Offset Program, the United States applies 15% of Defendant J. VanCura's wages to Defendant J. VanCura's debt. Response [#151] at 2 ¶ 7 n.1. Approximately $1, 000, 000 of Defendant J. VanCura's debt remains unpaid. Id. at 3 ¶ 9; Pl.'s Ex. 6 [#151-6]. Defendant J. VanCura has not complied with the United States' discovery requests, nor has Defendant J. VanCura provided the United States with updated financial information since August 2012, despite the United States' request. Response [#151] at 2 ¶ 7, 3 ¶ 8; Pl.'s Ex. 5 [#151-5].

         In November 2018, Provident Funding Associates, LLP (“Provident”) informed the United States of Defendant J. VanCura's attempts to refinance the mortgage on Defendant J. VanCura's property at 7311 Sylamore Way, Falcon, Colorado 80831 (the “Falcon Property”). Response [#151] at 3 ¶ 10. As part of a potential refinancing, Provident asked the United States to subordinate its lien on the Falcon Property to Provident's loan. Id. The United States agreed, subject to several conditions. Id. Thereafter, Provident provided the United States with a copy of the Loan Estimate, reflecting Provident's compliance with the United States' conditions. Id. at 3 ¶ 11; see also Pl.'s Ex. 7 [#151-7]. Alongside Defendant J. VanCura, the Loan Estimate identifies Ms. VanCura as an applicant.[2] Pl.'s Ex. 7 [#151-7] at 7.

         Comparing the Loan Estimate with Defendant J. VanCura's most recent Financial Statement of Debtor (“Financial Statement”), the United States noticed that Defendant J. VanCura provided different addresses. Response [#151] at 3 ¶ 11; Pl.'s Ex. 2 [#151-2]. While the Loan Estimate provides the Falcon Property's address, the Financial Statement instead provides 11815 Murphy Road, Elbert, Colorado 80106 (the “Elbert Property”). Pl.'s Ex. 2 [#151-2] at 1. The Court notes the Motions also provide the Elbert Property's address. Defendant J. VanCura's Motion [#149] at 2; Ms. VanCura's Motion [#148] at 2. Corresponding with Provident, the United States inquired whether Defendant J. VanCura actually resides at the Falcon Property and whether Defendant J. VanCura disclosed any other assets during the course of Defendant J. VanCura's attempts to refinance the Falcon Property's mortgage. Pl.'s Ex. 8 [#152-8] at 2. The United States received a reply stating only that Provident could not proceed with refinancing the Falcon Property's mortgage. Response [#151] at 4 ¶ 12; Pl.'s Ex. 8 [#151-8] at 1.

         Attempting to clarify Defendant J. VanCura's financial condition and asset holdings, the United States issued a Subpoena, directing Provident to produce “[a]ll records related to the refinancing of the mortgage for property located at 7311 Sylamore Way, Falcon, CO 80831, on or about November 2018.” Response [#151] at 4 ¶ 13; Pl.'s Ex. 9 [#151-9] at 1, 4. Since the Loan Estimate identifies Ms. VanCura as an applicant and Provident may, therefore, incidentally disclose Ms. VanCura's financial information in responding to the Subpoena, the United States sent Ms. VanCura a copy of the Subpoena and the required Right to Financial Privacy Act (“RFPA”) notice (“RFPA Notice”). Response [#151] at 4 ¶ 13; Pl.'s Ex. 7 [#151-7] at 7; Pl.'s Ex. 9 [#151-9] at 1-5, 9-13; 12 U.S.C. § 3407.

         In December 2018, Ms. VanCura and Defendant J. VanCura filed the Motions, moving to quash the Subpoena under the RFPA's “customer challenges” provisions, 12 U.S.C. § 3410, and citing “the financial institution [sic] rejection of my application of mortgage rate adjustment” and “[t]he request for rate adjustment was denied, ” respectively. Ms. VanCura's Motion [#148] at 2; Defendant J. VanCura's Motion [#149] at 2. The United States filed a combined Response [#151], opposing the Motions; Ms. VanCura and Defendant J. VanCura did not file Replies.

         II. Analysis

         The Federal Debt Collection Practices Act (“FDCPA”), codified at 28 U.S.C. §§ 3001-3308 (2018), provides-to the extent not inconsistent with another Federal law-the “exclusive civil procedures for the United States . . . to recover a judgment on a debt.” 28 U.S.C. § 3001(a)-(a)(1). According to the FDCPA, the Court may enforce a judgment against “[a]ll property in which the judgment debtor has a substantial nonexempt interest, ” id. § 3203(a), defining “property” to include “any present or future interest, whether legal or equitable, in real, personal (including choses in action), or mixed property, tangible or intangible, vested or contingent, wherever located and however held.” Id. § 3002(12).

         To aid in execution against the judgment debtor, the “United States may have discovery regarding the financial condition of the debtor in the manner in which discovery is authorized by the Federal Rules of Civil Procedure in an action on a claim for a debt.” Id. § 3015(a). Federal Rule of Civil Procedure 69(a), in turn, permits “discovery from any person-including the judgment debtor-as provided in these [R]ules.” Although the RFPA, codified at 12 U.S.C. §§ 3401-3423 (2018), establishes specific procedures the United States must follow to obtain information from a financial institution about a customer's financial records, the RFPA also reinforces the FDCPA's discovery provisions, expressly exempting from RFPA protections financial records “sought by a Government authority under the Federal Rules of Civil . . . Procedure or comparable rules of other courts in connection with litigation to which the Government authority and the customer are parties.”[3] 12 U.S.C. § 3413(e).

         As relevant here, the RFPA permits the United States to obtain from a financial institution a non-party customer's financial records, pursuant to a subpoena, if “such subpoena is authorized by law and there is reason to believe that the records sought are relevant to a legitimate law enforcement inquiry.”[4] Id. § 3407(1); see, e.g., Fed. Trade Comm'n v. Kutzner, No. SA CV 16-00999 BRO (AFMx), 2016 WL 9282403 (C.D. Cal. Nov. 16, 2016); Neuhaus v. SEC, No. MISC 07-0025 FCD GGH, 2007 WL 1322340, at *2 (E.D. Cal. May 4, 2007) (“RFPA is the exclusive means by which ‘government authority' can acquire financial records of a non-party ‘customer' (individual) via a judicial subpoena from a ‘financial institution' . . .. [O]rdinary discovery rules apply to parties in an action.”).

         To obtain from a financial institution a non-party customer's financial records, the United States must provide the customer with a copy of the subpoena, a “notice . . . stat[ing] with reasonable specificity the nature of the law enforcement inquiry, ” and opportunity to object. 12 U.S.C. § 3407(2)-(3). To object to the United States' subpoena, a customer must comply with several procedural provisions such as, within “ten days . . . from the date of service or fourteen days from the date of mailing of the notice, ” filing “a sworn statement and motion to quash in an appropriate court.” Id. § 3407(3). The “sworn statement” must state “that the applicant is a customer of the financial institution from which financial records pertaining to him have been sought” and “the applicant's reasons for believing that the financial records sought are not relevant to the legitimate law enforcement inquiry stated by the Government authority in its notice, or that there has not been substantial compliance with the provisions of [the RFPA].” Id. § 3410(a)(1)-(2). The statutory template for the RFPA Notice also invites the customer to provide “any other legal basis for objecting to the release of the records.” Id. § 3407(2).

         If the Court finds that “the applicant is the customer to whom the records sought by the Government authority pertain, and that there is not a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the records sought are relevant to that inquiry, or that there has not been substantial compliance with the provisions of this chapter, it shall order the process quashed.” Id. § 3410(c); see, e.g., Penalosa v. Dep't of Defense, No. 15-mc-00049-RM, 2015 WL 1598088, at *3 (D. Colo. Apr. 8, 2015) (denying motion to quash after finding ‚Äúthere is a demonstrable ...


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