Sequeira v. United States Department of Homeland Security

Background

Nelson Sequeira, Orsay Alegria, and Ismael Cordero sued the U.S. Department of Homeland Security, U.S. Immigration and Customs Enforcement, and money-transfer companies 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 plaintiffs sued individually and on behalf of a proposed class.

The plaintiffs alleged that the money-transfer defendants shared private financial and personal records with law-enforcement agencies, including the federal government defendants, and that the government defendants collected and obtained those records. They alleged that the records were collected and shared through the Transaction Record Analysis Center, a collaboration among law-enforcement agencies. They asserted claims under the federal Right to Financial Privacy Act and California’s Unfair Competition Law, based on alleged violations of the California Financial Information Privacy Act.

Right to Financial Privacy Act claim

The court held that the RFPA’s term “consumer finance institution” means a company for which providing financing and cash loans to consumers is a core function and purpose of its business. Because the amended complaint did not allege that Continental or Viamericas provided loans, the plaintiffs did not adequately allege that those companies were covered financial institutions under the RFPA.

The court found that the complaint did allege that Western Union provided lending services and that DolEx provided personal lending and advertised personal loans. The court treated the defendants’ challenges to those allegations as factual disputes that could not be resolved on a motion to dismiss.

The court also held that a person qualifies as an RFPA “customer” only when the financial institution maintains an account in that person’s name. The complaint did not allege that the plaintiffs used the money-transfer defendants’ services in relation to accounts maintained in their names. The court therefore concluded that the plaintiffs failed to plead a legally cognizable RFPA claim for this separate reason as well.

The court granted the defendants’ motion to dismiss as to the RFPA claim. In the conclusion, it stated that Continental, Viamericas, DolEx, and the federal government defendants’ motions to dismiss were granted with leave to amend. It also granted Western Union’s motion to dismiss with leave to amend as to the RFPA claim.

California Unfair Competition Law claim

The court held that Sequeira and Cordero adequately alleged economic injury for purposes of standing under California’s Unfair Competition Law because they alleged that, had they known of Western Union’s alleged violations, they would not have paid Western Union to process their transactions and would have looked for other ways to send their money.

Alegria, who was the only plaintiff alleged to have used Continental, Viamericas, or DolEx’s services, alleged distress and a privacy violation but did not allege a loss of money or property. The court therefore dismissed the plaintiffs’ UCL claim against Continental, Viamericas, and DolEx for lack of standing.

The court rejected Western Union’s argument that the California Financial Information Privacy Act barred a UCL claim because that statute did not provide a private right of action. It also held that the statute’s language making certain civil penalties exclusively recoverable in an action brought by the California government did not expressly make those penalties the exclusive means of obtaining any relief for violations. The court denied Western Union’s motion to dismiss the UCL claim on that basis.

The court also denied Western Union’s request to dismiss the UCL claim based on alleged statutory violations and immunity under the Annunzio–Wylie Anti–Money Laundering Act. The court treated those arguments as affirmative defenses and found that the factual record was not adequate to resolve them on a motion to dismiss.

Leave to amend and judicial notice

Because the court could not conclude that amendment would be futile, it granted the plaintiffs leave to amend. Any amended complaint had to be filed within 28 days of the order.

The court granted the defendants’ requests for judicial notice of subpoenas, court orders, and other publicly available documents related to the production of financial records. The court took notice of the documents’ existence but did not accept their underlying factual contents as true.

Disposition

Judge Haywood S. Gilliam, Jr. granted the dismissal motions in part and denied them in part. Continental, Viamericas, DolEx, and the federal government defendants’ motions were granted with leave to amend. Western Union’s motion was granted with leave to amend as to the RFPA claim and denied as to the UCL claim. The defendants’ requests for judicial notice were granted.