March 26, 2008 In Re UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF CALIFORNIA 325 West "F" Street, San Diego, California 92101-6991 Donald James Jacobson Donna Marie Jacobson BANKRUPTCY NO. 08-00277-T-13 Debtor. ORDER IT IS ORDERED THAT the relief sought as set forth on the continuation pages attached and numbered through with exhibits, if any, for a total of pages, is granted. Motion/Application Docket Entry No.. DATED: March 25, 2008 Judge, United States Bankruptcy Court
CSD 3000A (Page 2) This Court's Order to Show Cause Re: Contempt or Other Sanctions ("OSC") duly came on for hearing on March 20, 2008. First Future Credit Union ("First Future") was represented by William A. Smelko. KeyPoint Credit Union ("KeyPoint" and together with First Future, the "Credit Unions") was represented by David E. McAllister of Pite Duncan, LLP. The Debtors were represented by Michael G. Doan of Doan, Levinson & Liljergren, LLP. This Court, having considered the arguments made at the hearing, the declarations and documents filed in response to the OSC, the law relevant to the OSC and the facts underlying the allegations of contempt, and good cause therefore appearing, hereby makes the following Findings of Fact and Conclusions of Law and, as a result thereof, enters this Order finding First Future and KeyPoint in contempt and assessing appropriate sanctions in connection therewith as set forth below: A. CONTEMPT: 1. Order and Rule Violated: a. On December 1, 2003, the United States Bankruptcy Court for the Southern District of California ("Court") entered Bankruptcy General Order 168, In re Privacy Policy Regarding Public Access to Electronic Case Files and Amendment of Local Bankruptcy Rule 1007 2 ("General Order 168") which requires that parties filing documents with the Court refrain from including in the public record certain personally identifying information including, but not limited to, social security numbers and birth dates of debtors who are natural persons (collectively, "Personal Information"). b. Federal Rule of Bankruptcy Procedure 9037 ("Rule 9037") became effective on December 1, 2007 and provides, in pertinent part, that documents filed in all bankruptcy courts may include only the last four digits of a social security number and only the year of a birth date. 2. Facts: a. On January 16, 2008, Donald James Jacobson and Donna Marie Jacobson (the "Debtors") filed a chapter 13 bankruptcy proceeding and initiated case no. 08 00277 LT13. b. On February 4, 2008, KeyPoint filed a proof of claim (number 5 on the Claims Register, and hereinafter "Claim 5") in the Debtors' chapter 13 case thereby seeking to recover a claim against the Debtors. By virtue of this filing, Claim 5 was included in the
CSD 3000A (Page 3) publicly available electronic claims register maintained by this Court. Claim 5 had attached to it a copy of a loan application that at page one included the unredacted and entire social security number and birth date of Debtor Donald Jacobson. c. On January 29, 2008, First Future filed a proof of claim (number 2 on the Claims Register, hereinafter "Claim 2") in the Debtors' chapter 13 case thereby seeking to recover a claim against the Debtors. By virtue of this filing, Claim 2 was included in the publicly available electronic claims register maintained by this Court. Claim 2 contained an attachment that at page four included the unredacted and entire birth dates and social security numbers for the Debtors. d. On January 29, 2008, First Future filed a second proof of claim (number 3 on the Claims Register, hereinafter, "Claim 3") in the Debtors' chapter 13 case thereby seeking to recover a claim against Debtors. By virtue of this filing, Claim 3 was included in the publicly available electronic claims register maintained by this Court. Claim 3 contained an attachment that at page six included the unredacted and entire social security numbers and birth dates for the Debtors. e. There is no evidence that either First Future or KeyPoint made an appropriate diligent effort to avoid the disclosures of Debtors' Personal Information. f. There is also no evidence that either KeyPoint or First Future acted with any specific intent to disclose Debtors' Personal Information. 3. These Facts Constitute Contempt. The Court finds, based on the above referenced evidence, that as a result of the filing of Claims 2 and 3 by First Future, and Claim 5 by KeyPoint, First Future and KeyPoint are each in contempt of General Order 168 and Rule 9037. a. This Court has the power to sanction parties for violations of statute, rule, and order, pursuant to its inherent authority and pursuant to 11 U.S.C. 105. Dyer v. Lindblade, 322 F.3d 1178, 1190 1191, & 1196 (9 th Cir. 2003). b. Consistent with this authority, this Court has the power to sanction parties for violations of General Order 168 and Rule 9037. c. General Order 168 and Rule 9037 are specific and definite Orders which provide that personally identifying information such as social security numbers and birth dates must not be placed in their entirety in publicly filed documents. General Order 168 specifically
CSD 3000A (Page 4) places the burden for ensuring that personally identifying information is not so filed on the parties filing documents. d. Proofs of Claim 2, 3 and 5 each violate General Order 168 and Rule 9037 as they contain Personal Information and were publicly filed. e. While the Court notes that both Credit Unions allege that the disclosure was "inadvertent," this inadvertence does not rise to the level necessary to avoid a finding of contempt. In particular, the Credit Unions intended to file their respective proofs of claim (Claims 2, 3, and 5) in order to seek to enforce claims against Debtors and intended to attach the exhibits containing Personal Information to the proofs of claim. Each Credit Union's alleged "actual ignorance" of Personal Information disclosure was the result of a failure to adequately review the attachments. There is no argument advanced by First Future and KeyPoint that this review occurred. The Credit Union's had an affirmative obligation to refrain from putting Personal Information in the public record. The Court determines that this must include an affirmative obligation to review attachments. f. A finding of contempt does not require that either First Future or KeyPoint specifically intended to place Personal Information, as opposed to documents containing Personal Information, in the public record. It is sufficient that they intended to file Claims 2, 3 and 5 as these documents contained Personal Information. B. SANCTIONS. 1. Standard. In connection with the Court's finding of civil contempt this Court may issue sanctions. However this Court's power is limited in that these sanctions must either compensate for harm cause by the contempt or be designed to coerce future compliance. In the case of coercive sanctions, the Court, generally, must design coercive sanctions so that parties subject to such sanctions can avoid payment entirely through future compliance or corrective measures. 2. Compensatory Sanctions: Facts. The evidence indicates that Debtors were harmed by the acts of contempt as follows: a. Their attorney reviewed the proofs of claim and upon finding the problematic information filed documents with the Court seeking an Order removing the proofs of claim from the public record. Similarly, the Debtors' counsel was required to file a brief in
CSD 3000A (Page 5) connection with the OSC and to attend the hearing in connection therewith. The evidence indicates that total fees were $2,250.00 of which $450.00 was allocable solely to KeyPoint, $450.00 of which was allocable solely to First Future, and $1,350.00 of which related to the joint brief and hearing attendance. b. Further, the Debtors reasonably are concerned that the disclosure, however brief, may have compromised the security of their Personal Information. As a result, they reasonably need to obtain a credit report to see if any adverse action has occurred, and they reasonably require some asset protection for a one year period. c. The Debtors have requested additional credit reports and additional asset protection beyond this period. Given the brief time the information was in the public record, however, the Court does not find this to be appropriate. 3. Amount of Compensatory Sanctions. Based on the foregoing, the Court assesses compensatory sanctions as follows: a. KeyPoint shall pay compensatory sanctions to the Debtors in the amount of $500.00 within thirty (30) days of the date of this Order. This amount equals fees caused solely by KeyPoint's contempt and an allocated portion of the fees caused by the contempt of both KeyPoint and First Future. b. First Future shall pay compensatory sanctions to the Debtors within thirty (30) days of the date of this Order in the amount of $1,889.95 consisting of: (i) $1,750.00. This amount equals fees caused solely by First Future's contempt and an allocated portion of the fees caused by the contempt of both KeyPoint and First Future; and (ii) $29.95 to allow the Debtors to obtain a credit report and $110.00 to allow the Debtors to obtain credit protection for a one year period. 4. Coercive Sanctions: Facts. a. Coercive sanctions are not appropriate in relation to KeyPoint. KeyPoint's evidence in response to the OSC clearly indicates that it has identified the problem and taken pro active steps to ensure that it does not reoccur. b. Coercive sanctions are appropriate in relation to First Future. First Future's response to the OSC failed to even discuss the disclosure of the social security
CSD 3000A (Page 6) numbers and birth dates. It appears that First Future either continues to employ improper procedures in reviewing Proofs of Claim, since it did not identify this as a problem, or, alternatively, has such poor document control that it was unclear within its own organization as to what it filed in the public record. In either case, the procedures already undertaken by First Future which dealt with disclosure of account information, an area not the focus of this Court's concern, are irrelevant. 5. Coercive Sanctions: Amount. In addition to compensatory sanctions, the Court also assesses coercive sanctions against First Future in light of the evidence that it has not taken appropriate remedial steps to date. In particular, within 30 days of the date of this Order, First Future must provide additional training to its employees and issue additional guidelines designed to ensure that proofs of claim including Personal Information are not filed in the public record in the future. After providing this training and issuing such guidelines, First Future must file an additional declaration advising the Court that First Future has taken these remedial steps. In the event that First Future timely takes these steps and files the required declaration, no additional coercive sanction will be appropriate. However, if First Future fails to take these steps and fails to file its declaration, then beginning on the 31st day after entry of this Order, First Future will be assessed a coercive sanction of $100.00 a day until such time as remedial steps are taken. In addition, the Court at that time will set this matter for an additional hearing to determine whether additional coercive or compensatory sanctions are appropriate.