654 B.R. 425
Bankr. E.D. Tex.2023Background
- Debtor Matthew Kerns, manager of Glade Creek Livestock LLC, obtained loans secured by ~206 cattle and farm equipment; First State Bank filed UCC financing statements.
- By 2019 much collateral was missing; the Bank repossessed remaining items after workout efforts failed.
- Kerns filed Chapter 7 on Nov. 11, 2019 and received a discharge on Feb. 21, 2020.
- After the bankruptcy filing the Bank reported Kerns to Special Ranger Jimmy Dickson (Texas & Southwestern Cattle Raisers Association); Dickson investigated, referred the matter to the county district attorney, and later arrested Kerns on a Texas ‘‘hindering a secured creditor’’ charge.
- Kerns sued the Bank for violating the automatic stay (11 U.S.C. § 362) and the discharge injunction (11 U.S.C. § 524). The Bank moved for summary judgment, asserting immunity under the Annunzio‑Wylie Act safe harbor, 31 U.S.C. § 5318(g)(3).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 31 U.S.C. § 5318(g)(3) shields the Bank for reporting suspected criminal conduct | § 5318(g)(3) does not apply; reporting violated §§ 362/524 | The safe harbor immunizes voluntary disclosures of possible violations from liability | Court: Yes. Bank entitled to summary judgment under § 5318(g)(3) |
| Whether safe harbor requires filing a Suspicious Activity Report (SAR) | Immunity limited to formal SAR filings | Safe harbor covers all voluntary reports to authorities, not only SARs | Court: No SAR prerequisite; safe harbor broader than SAR requirement |
| Whether safe harbor covers only federal crimes/money‑laundering/BSA violations | Immunity applies only to federal law / BSA‑related reports | Statutory text "any possible violation of law" includes state offenses | Court: Not limited to federal crimes; state law reports qualify |
| Whether report had to be to a federal government agency and whether a Special Ranger qualifies | Report to TSCRA special ranger is not a report to a government agency or authority | Special Rangers are licensed peace officers and are law enforcement authorities | Court: Special Ranger is law enforcement; report falls within § 5318(g)(3) safe harbor |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standard)
- Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir. 1999) (construing Annunzio‑Wylie safe harbor broadly; no good‑faith prerequisite)
- Lopez v. First Union Nat'l Bank, 129 F.3d 1186 (11th Cir. 1997) (contrasting view that safe harbor requires good faith)
- Nevin v. Citibank, N.A., 107 F. Supp. 2d 333 (S.D.N.Y. 2000) (safe harbor covers reports to local law enforcement)
- Stoutt v. Banco Popular de P.R., 158 F. Supp. 2d 167 (D.P.R. 2001) (describing Annunzio‑Wylie purpose to encourage reporting of suspicious transactions)
- BedRoc Ltd. v. United States, 541 U.S. 176 (U.S. 2004) (statutory interpretation begins with plain meaning)