Banks and other financial institutions are regularly subpoenaed by state and federal governments to produce account-holder records as part of grand jury proceedings or other investigations. The cost of having counsel review and produce responsive, relevant and non-privileged documents mounts quickly. While federal statutory law requires a prosecutor in a federal case to pay a bank for the cost of compliance with a subpoena records request, state laws don’t always follow suit.
For this reason, Preston State Bank is asking the United States Supreme Court to consider whether the bank should be compensated for producing account-holder records as part of grand jury subpoenas in state criminal proceedings. Preston seeks to be compensated for the nearly $100,000 in fees it incurred to respond to the Collin County District Attorney’s Office in a criminal grand jury proceeding.
Preston wants the Supreme Court to review the Dallas Court of Appeals’ ruling against Preston last August. The Dallas appellate court found that Preston is not entitled to compensation for responding to the subpoena by characterizing the production of records as an uncompensated “public duty.” Banks must supply information and evidence in connection with a criminal investigation and bear the cost of compliance. The appellate opinion cites to Hurtado v. U.S., a 1973 Supreme Court case as precedent that the government does not have to pay for the performance of a public duty. The District Attorney’s Office sought to apply the ruling in Hurtado broadly, arguing that a duty exists for an individual or entity to bear the costs of producing evidence regardless of the form of the evidence—written or oral.
Preston, on the other hand, argues that the cost of producing documents to aid government proceedings amounts to a taking from a private citizen for public use, in violation of federal law and the United States Constitution. The Fifth Amendment of the Constitution provides that if a private citizen’s property is taken and applied to a public use, the government should pay for the taking. Preston also distinguishes Hurtado, noting that there is a fundamental difference in paying fees for a witness required to testify (which is the basis of the Hurtado ruling) and the real costs associated with tracking down and turning over tangible property to the District Attorney’s office, which in this case amounts to nearly $39,000. Preston argues that banks should not be required to fund litigation for the state.
A ruling on this case by the Supreme Court could impact litigation budgets established by banks and other financial institutions.