Sequeira v. United States Department of Homeland Security

Background

Nelson Sequeira, Ismael Cordero, Maria Hernandez, and Jose Antonio Manjarrez brought claims individually and on behalf of proposed classes. They alleged violations of the Right to Financial Privacy Act and California’s Unfair Competition Law based on the collection and sharing of financial and personal records through the Transaction Record Analysis Center. The alleged records involved money transfers greater than $500 sent to or from the Southwest border region.

The complaint named two groups of defendants: federal government defendants, including the Department of Homeland Security and Immigration and Customs Enforcement, and money-transfer defendants, including Western Union Financial Services, Inc.; Continental Exchange Solutions, Inc., doing business as Ria Financial Services and AFEX Money Express; Viamericas Corporation; and DolEx Dollar Express, Inc. The money-transfer defendants moved to dismiss the second amended complaint under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7).

Rule 12(b)(7) and Required Parties

Rule 12(b)(7) permits dismissal for failure to join a party under Rule 19. Rule 19 requires a court to determine whether an absent person is a required party, whether that person can feasibly be joined, and, if joinder is not feasible, whether the case should proceed without that person in equity and good conscience.

The money-transfer defendants argued that the State of Arizona and the Arizona Attorney General were required parties. The court rejected their argument under Rule 19(a)(1)(A), which concerns whether complete relief can be provided without the absent party, because it was not clear that complete relief could not be provided in Arizona’s absence. The court nevertheless found the argument persuasive under Rule 19(a)(1)(B).

The Arizona Attorney General stated that the State of Arizona and the Attorney General, in the Attorney General’s official capacity, were highly invested in the outcome. The court found that Arizona had claimed a legally protected interest in defending the validity and enforcement of its subpoenas. The court reasoned that the plaintiffs’ theory depended on the subpoenas violating federal and California law, and that a ruling for the plaintiffs could impair Arizona’s ability to issue and enforce subpoenas and obtain records.

The court also found that proceeding without Arizona could create inconsistent obligations for the money-transfer defendants. A damages award based on a finding that the companies’ compliance with Arizona subpoenas violated federal or California law could force the companies either to refuse future subpoenas or to continue conduct that a court had found unlawful. The court further concluded that proposed injunctive relief requiring disclosures to customers could impair Arizona’s interest in enforcing its subpoenas, including its interest in regulating disclosures about its investigations.

Feasibility of Joinder

The plaintiffs did not dispute that Arizona could not feasibly be joined because of sovereign immunity under the Eleventh Amendment. The court therefore concluded that Arizona could not be joined in the action.

Dismissal in Equity and Good Conscience

Because Arizona was a required party, could not feasibly be joined, and the case could not proceed fairly without Arizona, the court held that dismissal was required under Rule 12(b)(7). The court concluded that the defect could not be cured by amendment and dismissed the action with prejudice. The court also denied the plaintiffs’ request for an opportunity to amend to state claims against Arizona or other absent parties.

Other Motion and Disposition

Because the court granted the money-transfer defendants’ Rule 12(b)(7) motion to dismiss with prejudice, it did not reach their Rule 12(b)(6) arguments concerning whether the complaint adequately stated a claim. The court granted the money-transfer defendants’ motion to dismiss, ordered dismissal with prejudice, directed entry of judgment in favor of the defendants and against the plaintiffs, terminated all other pending motions as moot, and directed the Clerk to close the file.