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State v. McAllister

June 20, 2005

STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
MARLENE MCALLISTER, DEFENDANT-RESPONDENT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 366 N.J. Super. 251 (2004).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

This appeal presents the question of whether account holders have a reasonable expectation of privacy in their bank records and, if so, the extent of the protection that the Court should afford that interest.

Harding Township residents George and Renee Uslar were elderly and in poor health. In 1996, the Uslars hired Marlene McAllister to help them run errands, go grocery shopping, and pick up their mail. The couple became suspicious that she was stealing money from their bank accounts and notified the police. Following an investigation, the police arrested McAllister. An inventory search of McAllister's purse revealed a check register that recorded deposits of the couple's money into her accounts. The prosecutor then executed grand jury subpoenas duces tecum on McAllister's banks requesting her account records. The banks complied and the records confirmed the deposits.

The grand jury indicted McAllister for theft and forgery. At trial, the State introduced McAllister's check register and the bank records into evidence. The jury convicted McAllister on both counts. McAllister was sentenced to 180 days in prison with three years probation for forgery, a concurrent 90-day prison term with two years probation for theft, and was ordered to pay more than $35,000 in restitution.

McAllister appealed her conviction, contending that the State's acquisition of her bank records without a search warrant violated her State constitutional rights. The Appellate Division agreed, holding that the longstanding practice of obtaining bank records with a grand jury subpoena duces tecum without notice to the account holder is contrary to state constitutional norms, but affirmed McAllister's conviction because the error was harmless.

This Court granted the State's petition for certification.

HELD: Under the New Jersey Constitution, citizens have a reasonable expectation of privacy in bank records.

However, existing grand jury subpoena procedures sufficiently protect that expectation. Neither a probable cause standard for grand jury subpoenas nor notice to account holders is a constitutional requirement. Although notice to account holders is not constitutionally required, additional protections may be desirable. The Criminal Practice Committee is directed to make a recommendation on whether the Court should consider additional safeguards for account holders.

1. In the seminal United States Supreme Court opinion concerning an individual's interest in financial records held by a bank, United States v. Miller, the Supreme Court rejected the argument that the records should be suppressed, finding that there was no intrusion into any area in which respondent had a protected Fourth Amendment interest. The Court extended the reach of the Miller doctrine in United States v. Payner, holding that the defendant did not have standing to challenge the admission of the records because he had no protectable Fourth Amendment interest in copies of checks and deposit slips retained by his bank. As Miller and Payner make clear, the Federal Constitution does not recognize an expectation of privacy in bank records and does not give citizens recourse to challenge the federal government's acquisition of their bank records from their banks, even if that acquisition involves egregious misconduct. The prosecution's procurement of McAllister's bank records did not violate the United States Constitution. (pp. 10-13)

2. In contrast to the development of federal law, our state jurisprudence has placed limits on the government's power to obtain bank records. As early as 1929, in Brex v. Smith, a New Jersey court recognized that account holders expect their banks to keep their records confidential, even in the face of a government official's formal request. The State concedes that Brex remains the law and does not suggest that police officers should be able to obtain bank records on demand. (pp. 13-16)

3. When the United States Constitution affords our citizens less protection than does the New Jersey Constitution, we have not merely the authority to give full effect to the State protection, we have the duty to do so. Account holders repose trust and confidence in their banks, a relationship that is eroded by unwarranted government interference. This recognition reflects the long tradition in New Jersey of limiting government access to bank records. Further, the advent of modern technology, coupled with the ubiquity of commercial banking, underscores both the ability of prying government eyes to obtain bank records and the need to protect ordinary citizens' financial privacy in ways that promote fairness. The New Jersey Constitution recognizes an account holder's interest in the privacy of his or her bank records. (pp. 17-22)

4. The issuance of a grand jury subpoena duces tecum based on a relevancy standard satisfies the constitutional prohibition against improper government intrusion. (p. 27)

5. Although we conclude that notice is not constitutionally mandated, we believe that further study is warranted to assess whether a notice requirement reflects good policy. Therefore, we refer this matter to the Criminal Practice Committee. We exercise our supervisory authority over grand juries to refer this issue to the Criminal Practice Committee for further study of the benefits and burdens of enhanced protections for bank records. (pp. 29-37)

Judgment of the Appellate Division is AFFIRMED in part, REVERSED in part, and defendant's conviction is AFFIRMED.

JUSTICE WALLACE, has filed an opinion CONCURRING in the result, in which JUSTICES LaVECCHIA and RIVERA-SOTO join. In deciding this case, it is not necessary to make a constitutional pronouncement that we have a protected reasonable expectation of privacy in bank records. Inasmuch as we all agree that the relevancy standard for the grand jury subpoena for defendant's bank records was met here, we should defer addressing the constitutional issue.

CHIEF JUSTICE PORITZ and JUSTICES LONG and ALBIN join in JUSTICE ZAZZALI's opinion. JUSTICE WALLACE filed a separate opinion, concurring in the result, in which JUSTICES LaVECCHIA and RIVERA-SOTO join.

The opinion of the court was delivered by: Justice Zazzali

Argued January 4, 2004

In this appeal, we consider whether account holders have a reasonable expectation of privacy in their bank records, and, if so, the extent of the protection that we should afford that interest.

In 1996, an elderly couple employed defendant as a caretaker. The couple became suspicious that she was stealing money from their bank accounts. They notified the police, and, following an investigation, the police arrested defendant. An inventory search of defendant's purse revealed a check register that recorded deposits of the couple's money into defendant's accounts. The prosecutor then executed grand jury subpoenas duces tecum on defendant's banks requesting her account records. The banks complied, and the records confirmed the deposits.

The Appellate Division held that the long-standing practice of obtaining bank records with a grand jury subpoena duces tecum without notice to the account holder is contrary to state constitutional norms. The panel concluded that this Court's evolving interpretation of the right to privacy renders bank records the property of the account holder, not the bank. Under the panel's holding, a prosecutor has two options: either demonstrate probable cause before acquiring an account holder's records from a bank, or provide notice to the account holder and an opportunity to object.

We hold that, under the New Jersey Constitution, citizens have a reasonable expectation of privacy in bank records. However, we conclude that existing grand jury subpoena procedures sufficiently protect that expectation of privacy. Accordingly, we reject both the application of a probable cause standard to grand jury subpoenas and the imposition of a notice requirement. Nonetheless, although notice to account holders is not constitutionally required, additional protections may be desirable as a matter of policy. Therefore, in the exercise of our supervisory authority, we will request that the Criminal Practice Committee study our grand jury procedures and recommend whether the Court should consider additional safeguards for account holders.

I.

In the mid-1990s, Harding Township residents George and Renee Uslar were elderly and in poor health. In 1996, the Uslars hired defendant Marlene McAllister to help them run errands, go grocery shopping, and pick up their mail.

The Uslars were financially secure, with significant holdings in two separate Merrill Lynch cash management accounts and a joint account at Chase National Bank. Early each year, Mr. Uslar received a statement from Merrill Lynch that listed all checks paid from his account in the prior year, which he carefully reviewed for income-tax purposes. By late 1997, Mr. Uslar suspected that defendant was tampering with his mail.

In February 1998, an employee of a small New Jersey printing company received an order to create a "fake original" Merrill Lynch annual statement. Creating a fake original requires the use of overlays and a process known as "bleeding" the document, which allows the printer to delete certain items from the original while leaving other features untouched in the newly printed copy. The employee later identified defendant in court as the person who submitted the order.

In early 1998, Mr. Uslar did not receive his annual statement on time and requested that Merrill Lynch send him another copy. Expecting the replacement copy, he went to the post office to retrieve his mail on a Saturday morning. However, the window clerk informed him that defendant had already picked up the mail. That revelation troubled Mr. Uslar because defendant did not work on Saturdays.

Several weeks later, Mr. Uslar finally received a copy of his Merrill Lynch statement. The statement documented a $30,000 check drawn on his account that he had not written or authorized. The check was endorsed by "McAllister" and marked with an account number. Mr. Uslar promptly called the police. Further investigation revealed that three of Mr. Uslar's monthly statements from 1997 had pages missing. He later testified that he never separated his bank statements and that defendant had been picking up the mail during that summer. In addition to the $30,000 check, Mr. Uslar discovered a series of five checks that he neither issued nor authorized totaling over $5,000 and made payable to several banks and to "McAllister."

Harding Township police subsequently arrested defendant. At the police station, officers examined her purse and catalogued its contents as part of a routine inventory search. Among the items found was a checkbook for defendant's account at Chase Manhattan Bank. The checkbook bore the same account number that appeared on three of the checks drawn on Mr. Uslar's account. Deposits recorded in defendant's check register and several deposit slips found in the purse corresponded in date and amount with the series of unauthorized checks.

The prosecutor then executed a grand jury subpoena duces tecum on the New York City branch of Chase Manhattan Bank where defendant maintained an account. The subpoena ordered the bank to appear before the grand jury to produce several documents detailing defendant's financial records: a copy of defendant's signature card; her checking account statements; information identifying any other accounts in defendant's name; and copies of deposit items the grand jury might request after review of the other documents. The grand jury issued another subpoena duces tecum to United National Bank requesting information related to defendant's car loan. Both banks complied with the subpoenas and provided the records. Neither the banks nor the prosecutor notified defendant that her bank records were the subject of a grand jury investigation.

The grand jury indicted defendant for third-degree theft, N.J.S.A. 2C:20-3; fourth-degree forgery, N.J.S.A. 2C:21-1a(2); and four counts of third-degree fraudulent use of a credit card, N.J.S.A. 2C:21-6h. Before trial, the State moved to dismiss the four counts of credit card fraud and an allegation of the theft count. The trial court granted the State's motion, and defendant was tried on the forgery count and the remaining theft allegation.

Defendant filed a pretrial motion to suppress the bank records. She claimed that, rather than use a grand jury subpoena, the State was obligated to obtain a search warrant predicated on probable cause to lawfully acquire her bank records. Concluding that New Jersey law did not resolve the issue, the trial court turned instead to United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed. 2d 71 (1976). Relying on the Supreme Court's conclusion in Miller that individuals have no legitimate expectation of privacy in their bank records, the trial court denied defendant's motion and admitted the records into evidence.

At trial, the State introduced both defendant's checkbook register obtained during the inventory search and the records provided by the banks. The jury subsequently convicted defendant of both the forgery and theft counts. The court sentenced defendant to 180 days imprisonment with three years probation on the forgery count and a concurrent 90-day prison term with two years probation on the theft count. The court also ordered defendant to pay more than $35,000 in restitution.

Defendant appealed her conviction, contending that the State's acquisition of her bank records without a search warrant violated her rights under article I, paragraph 7 of the New Jersey Constitution. State v. McAllister, 366 N.J. Super. 251 (App. Div. 2004). The Appellate Division agreed with part of her argument:

[B]ecause persons have a legitimate expectation of privacy in the record of their banking transactions, the State must either obtain a search warrant based upon probable cause before acquiring bank records or provide notice and a reasonable opportunity to object to the issuance of a grand jury subpoena duces tecum for such records. [Id. at 254 (italics omitted).]

The panel, however, affirmed defendant's conviction because the State's failure to follow either alternative was harmless error. Ibid. The court reached that conclusion because defendant's own checkbook register, validly acquired during an inventory search, included her Chase account number, which matched the number of the account where Mr. Uslar's checks were deposited. Id. at 268. Thus, the panel considered the bank records ...


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