Carnes et al v. Consumer Financial Protection Bureau

Filing 8

MEMORANDUM AND ORDER denying 1 MOTION for Order Pursuant to Customer Challenge Provision of Right to Financial Privacy Act of 1978. Signed by District Judge Daniel D. Crabtree on 5/6/2022. (kas)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
MELISSA C. CARNES REVOCABLE TRUST
DATED FEBRUARY 10, 2010; AND MELISSA
CARNES, INDIVIDUALLY AND AS
TRSUTEE OF THE MELISSA C. CARNES
TRUST,

Case No. 22-mc-00203-DDC-TJJ

Movants,
v.
CONSUMER FINANCIAL PROTECTION
BUREAU,
Respondent.
MEMORANDUM AND ORDER
Movants Melissa C. Carnes Revocable Trust, Dated February 10, 2010, and Melissa
Carnes, individually and as Trustee of the Melissa C. Carnes Trust, initiated this miscellaneous
action and filed a “Motion for Order Pursuant to Customer Challenge Provision of Right to
Financial Privacy Act of 1978” (Doc. 1). Under 12 U.S.C. § 3410, movants ask the court to
enter an Order preventing the government from accessing certain financial records. They explain
that the Consumer Financial Protection Bureau (CFPB) has served subpoenas on five financial
institutions seeking records for accounts in the name of the “Melissa C. Carnes Revocable Trust”
(MCC Trust), a trust established for the benefit of Melissa Carnes. Movants assert that the Right
to Financial Privacy Act (RFPA) applies to MCC Trust’s financial records and asks the court to
enter an Order precluding the government from accessing these records. For reasons explained
below, the court denies the motion.

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I.

Factual and Procedural Background

The following summarizes the factual and procedural background for the movants’
pending Motion for Order.
Judgment in Related Case Against James Carnes and Integrity Advance
In a separate but related case, the CFPB filed a Petition under the Consumer Financial
Protection Act seeking a judicial order enforcing a Final Order issued by the CFPB against
Integrity Advance, LLC and James R. Carnes for violating various federal consumer financial
laws. Petition to Enforce the Bureau’s January 11, 2021 Final Order, CFPB v. Integrity
Advance, LLC, No. 21-206 (D. Kan. May 19, 2021), ECF No. 1. The CFPB’s Final Order
required James Carnes and his company, Integrity Advance, jointly and severally, to pay
restitution of $38,453,341.62, and required James Carnes to pay a civil penalty of $5,000,000.
Ex. C to Decl. of Stephen C. Jacques, CFPB v. Integrity Advance, LLC, No. 21-206 (D. Kan.
May 19, 2021), ECF No. 2-1 at 67–69.
When James Carnes and Integrity Advance failed to comply with the Order, the CFPB
filed its Petition to enforce the Order, which United States District Judge John W. Lungstrum
granted on July 30, 2021. Memorandum and Order, CFPB v. Integrity Advance, LLC, No. 21206 (D. Kan. July 30, 2021), ECF No. 21 at 2, 4. The court entered a Judgment (1) requiring Mr.
Carnes and Integrity Advance to comply with the CFPB’s Final Order of January 11, 2021, and
(2) entering a judgment for the CFPB and (a) against James Carnes and Integrity Advance for
restitution in the amount of $38,453,341.62, (b) against Integrity Advance in the amount of
$7,500,000 for a civil penalty, and (c) against James Carnes in the amount of $5,000,000 for a
civil penalty. Judgment, CFPB v. Integrity Advance, LLC, No. 21-206 (D. Kan. July 30, 2021),

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ECF No. 22 at 2, 4. The CFPB asserts, to date, neither James Carnes nor Integrity Advance has
made any payment to satisfy any aspect of the Judgment.
The MCC Trust
The CFPB asserts that it has reason to believe that James Carnes “may have taken steps
to conceal and transfer assets from January 2013 to the present, including by using his wife’s
trust, MCC Trust . . . as a vehicle for shielding the proceeds from his unlawful activity.” Doc. 62 at 6 (Cohen Decl. ¶ 17). The CFPB contends that James Carnes possessed substantial personal
wealth during and after he operated Integrity Advance. But, the CFPB doesn’t know where his
assets are located now. The CFPB asserts that, as of October 21, 2021, assets held in Mr.
Carnes’s name have dwindled substantially.
In January 2013, the CFPB served a civil investigative demand on Integrity Advance,
including interrogatories and a request to produce documents. Decl. of Alusheyi Wheeler ¶ 5,
CFPB v. Integrity Advance, LLC, No. 21-206 (D. Kan. Dec. 8, 2021), ECF No. 33-3 at 2. The
CFPB asserts that the civil investigative demand would have placed Mr. Carnes (who was
Integrity Advance’s CEO) on notice of the CFPB’s investigation.
In the related case, Magistrate Judge James P. O’Hara issued an Order granting the
CFPB’s Motion to Compel James Carnes to produce responses to the CFPB’s post-judgment
interrogatories and document requests. Order, CFPB v. Integrity Advance, LLC, No. 21-206 (D.
Kan. Feb. 1, 2022), ECF No. 39. Among other things, Judge O’Hara’s Order addressed the
CFPB’s factual assertions about the relevance of the MCC Trust to Mr. Carnes’s assets. Id. at 8–
9. Judge O’Hara explained that the MCC Trust appears to have sold three parcels of real
property and, in return, received about $8.7 million. Id. at 8. Judge O’Hara noted that the MCC
Trust currently holds at least two other properties. Id. Judge O’Hara described how the MCC

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Trust entered at least one sales transaction that listed the grantor as “James Carnes, individually
and as trustee of the MCC Trust[.]” Id. at 9 (internal quotation marks omitted). Also, Judge
O’Hara discussed that the MCC Trust purchased a Montana condominium that it may have
procured using funds from James Carnes’s income and that James Carnes made payments on
behalf of the MCC Trust using funds he deposited into a joint account. Id. Based on the CFPB’s
factual assertions about the MCC Trust, Judge O’Hara found that “information concerning the
MCC Trust [is] relevant to [James] Carnes’ financial condition, including whether he concealed
or transferred assets that could otherwise be used to satisfy the court’s judgment.” Id.
Also, the CFPB asserts additional facts about the MCC Trust’s relationship to James
Carnes’s financial condition with its filings in this case. The CFPB contends that the MCC Trust
had a money market account with a balance of about $11.2 million as of December 31, 2013
(separate from the $8.7 million in real estate transactions) and that this account made several
transfers to LLCs and a trust controlled by James Carnes in 2014. Doc. 6-3 at 2–3 (Bowra Decl.
¶¶ 5–6). Also, the CFPB asserts, the MCC Trust made a loan in December 2020 to a third party
LLC controlled by Peter Benz, who later made a loan to James Carnes two days after Judge
Lungstrum entered the July 2021 Judgment in the related case. Id. at 3 (Bowra Decl. ¶ 7); see
also Ex. C. to Decl. of Bradley H. Cohen, CFPB v. Integrity Advance, LLC, No. 21-206 (D. Kan.
Dec. 8, 2021), ECF No. 33-2 at 39–40, 44 (Carnes’s Answers to Interrogatories 10 and 18).
Post-Judgment Discovery in the Related Case
To help collect the Judgment entered by Judge Lungstrum in the related case, the CFPB
started propounded discovery in August 2021. Doc. 6-2 at 6 (Cohen Decl. ¶ 17). Specifically,
the CFPB sought financial records and information for James Carnes, as well as his wife
(Melissa Carnes), his dependents, and trust and corporate entities, including the MCC Trust,

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beginning from January 1, 2014 to the present. Id. at 6–7 n.2 (Cohen Decl. 17–18). After James
Carnes failed to comply with the post-judgment discovery requests, the CFPB filed a Motion to
Compel, which—as already noted—Judge O’Hara granted. Order, CFPB v. Integrity Advance,
LLC, No. 21-206 (D. Kan. Feb. 1, 2022), ECF No. 39. Judge O’Hara specifically ordered James
Carnes to respond to the CFPB’s discovery seeking information and documents for the
entire time period requested, including information about the MCC Trust. Id. at 6, 9, 15.
After the CFPB received Mr. Carnes’s discovery responses, the CFPB served five
subpoenas on five financial institutions under the Federal Debt Collection Procedures Act, 28
U.S.C. § 3015, and Rules 45 and 69 of the Federal Rules of Civil Procedure. Doc. 6-2 at 1–3, 6–
7, 8–172 (Cohen Decl. ¶¶ 3–10, 16–18 & Exs. A–E). Each subpoena commands the financial
institution to produce: (1) signature cards and other records reflecting the nature of accounts, (2)
periodic statements issued since 2013, and (3) checks and similar records of account transactions
for the MCC Trust, James Carnes, and twelve other entities, since 2013. Id. at 2–3, 8–172
(Cohen Decl. ¶¶ 4–10 & Exs. A–E). The CFPB included with the subpoenas for each financial
institution a RFPA certification, explaining that the RFPA does not apply to records for accounts
of those who are not “customers” under the RFPA (which, the CFPB asserts, applies to the MCC
Trust and the other 12 entities) or James Carnes (because he is a named party in the underlying
civil action). Id. at 2–3, 8–173 (Cohen Decl. ¶¶ 4–10 & Exs. A–E). Each subpoena required the
financial institutions to comply with the subpoenas by April 20, 2022. Id. at 8–173 (Cohen Decl.
Exs. A–E). The same day that the CFPB served these five subpoenas, the agency also mailed
Melissa Carnes a copy of the subpoenas, with a letter describing the nature of the law
enforcement inquiry with the notice language set forth in 12 U.S.C. § 3407. Id. at 3–4, 173–78
(Cohen Decl. ¶ 11 & Ex. F).

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On April 13, 2022, movants here filed, as a separate miscellaneous RFPA action, the
pending Motion for Order attaching a sworn statement by Melissa Carnes. Doc. 1. On Friday,
April 15, 2022, the MCC Trust emailed a file stamped copy of the Motion for Order and the
supporting exhibits to CFPB counsel who had served the subpoenas. Doc. 6-2 at 4–5 (Cohen
Decl. ¶ 12). The next business day, Monday, April 18, 2022, the CFPB emailed counsel for each
recipient of the five subpoenas notifying them of the pending Motion for Order, as well as the
motions to quash filed separately by James Carnes and Melissa Carnes and the MCC Trust in the
related case. Id. at 5 (Cohen Decl. ¶ 13). Each email directed the subpoena recipient as follows:
“[P]lease do not produce any documents in response to the [CFPB’s] March 30, 2022
subpoena until you receive further instructions from [CFPB] counsel.” Id. (emphasis in
original). On Tuesday, April 19, 2022, CFPB counsel learned that one of the five subpoena
recipients—Country Club Bank—uploaded ZIP files of responsive documents to the CFPB’s
Extranet on April 14, 2022. Id. (Cohen Decl. ¶ 14). The CFPB attests that it never has unzipped,
opened, otherwise processed, or transferred the putatively responsive documents to a place on
the CFPB’s network that would have made them accessible to any employee in the CFPB’s
Office of Enforcement, nor has it extracted the data in the ZIP files so that CFPB could review
these data. Id. The CFPB asserts that it has acted to keep the documents sequestered while the
Motion for Order under the RFPA and the motions to quash filed in the related case are pending.
Id. Other than Country Club Bank, no other subpoena recipient has produced responsive
documents. Id. (Cohen Decl. ¶ 15).
II.

Legal Standard

The Right to Financial Privacy Act permits individuals to “contest government access to
certain records held by banks and other financial institutions . . . by requiring the government

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authority issuing a subpoena for bank records to notify the bank customer of the subpoena served
on the financial institution, as well as the nature of the law enforcement inquiry to which the
subpoena relates.” Lynch v. U.S. Dep’t of Hous. & Urb. Dev., No. 09-mc-229-JWL, 2009 WL
4827049, at *2 (D. Kan. Dec. 11, 2009) (citation and internal quotation marks omitted). “The
RFPA contains three separate bases for quashing such a subpoena: (1) the agency’s inquiry is
not a legitimate law enforcement inquiry, (2) the records sought are not relevant to the agency’s
inquiry, or (3) the agency has not substantially complied with the” RFPA. Id.; see also 12
U.S.C. § 3410(a)(2) (requiring that a movant under the RFPA state, in part, the “reasons for
believing that the financial records sought are not relevant to the legitimate law enforcement
inquiry asserted by the Government authority in its notice”).
“To oppose disclosure of financial records to a government entity such as [the CFPB], the
[opposing] individual must attach to [the] motion an affidavit (1) stating that the individual is a
customer of a financial institution from which financial records are being sought and (2) setting
forth [the] reasons ‘for believing that the financial records sought are not relevant to the
legitimate law enforcement inquiry,’ as such inquiry is explained by the government in its
mandatory notice, or that ‘there has not been substantial compliance’ with the” RFPA’s
requirements. Lynch, 2009 WL 4827049, at *2 (quoting 12 U.S.C. § 3410(a)). “If the Court
concludes that the individual has complied with these requirements, the Court ‘shall order the
Government authority to file a sworn response.’” Id. (quoting 12 U.S.C. § 3410(b)).
In contrast, the court must deny the RFPA challenge if it finds “‘a demonstrable reason to
believe that the law enforcement inquiry is legitimate and a reasonable belief that the records
sought are relevant to that inquiry.’” Id. at *3 (quoting 12 U.S.C. § 3410(c)). So, “in its
response, the agency need not establish that the records sought are in fact relevant, but rather

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must merely demonstrate ‘a reasonable belief that the records sought are relevant.’” Id. (quoting
Matter of SEC Priv. Investigation/Application of John Doe re Certain Subpoenas, No. M8-85,
1990 WL 119321, at *2 (S.D.N.Y. Aug. 10, 1990)). “‘A mere belief is not enough, but a
reasonable belief is.’” Id. (quoting Matter of SEC Priv. Investigation, 1990 WL 119321, at *2).
“The government bears the burden of proving the relevance of the records to the inquiry
it is conducting.” Whitburn v. U.S. Dep’t of Treasury, No. 93-MC-139-PFK, 1993 WL 544285,
at *1 (D. Kan. Dec. 9, 1993). The standard for relevance is “‘quite broad.’” Lynch, 2009 WL
4827049, at *3 (quoting Whitburn, 1993 WL 544285, at *2). The law enforcement agency need
only have a “‘good reason to investigate.’” Id. (quoting Matter of SEC Priv. Investigation, 1990
WL 119321, at *2).
III.

Analysis

Here, movants have filed a Motion for Order under the RFPA complying with 12 U.S.C.
§ 3410’s statutory requirements to include an affidavit (1) asserting that the MCC Trust is a
“customer” of the financial institution from which the CFPB seeks financial records, and (2)
providing the reasons that the financial records sought are not relevant to a legitimate law
enforcement inquiry as stated by the CFPB’s notice, or that the CFPB has not complied
substantially with the RFPA’s requirements. See Doc. 1-3 at 2 (asserting that (1) the MCC Trust
“is a customer” of the five financial institutions on whom the CFPB served the subpoenas, and
(2) the financial records sought by the CFPB “are not relevant to the legitimate law enforcement
inquiry stated in the Customer Notice that was sent to [Melissa Carnes]” or “should not be
disclosed because there has not been substantial compliance with the” RFPA).
Once a court determines that an RFPA applicant has satisfied the requirements of §
3410(a), it must order the government to file a response to the motion. 12 U.S.C. § 3410(b).

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Here, the court hasn’t yet ordered the CFPB to respond to the pending Motion for Order, but the
CFPB nonetheless submitted an Opposition to the Motion (Doc. 6) on April 29, 2022. The
statute requires the court to complete all proceedings and decide the RFPA motion “within seven
calendar days of the filing of the Government’s response.” 12 U.S.C. § 3410(b). With this May
6, 2022, Order, the court timely decides the RFPA motion. In reaching its decision, the court
also has considered movants’ Reply, filed on May 5, 2022 (Doc. 7).
The CFPB argues the court should deny movants’ Motion for Order under the RFPA for
two reasons. First, the CFPB asserts that neither Melissa Carnes nor the MCC Trust is a
“customer” under the RFPA, and thus movants have no right to invoke the RFPA’s procedures.
Second, the CFPB contends that movants haven’t come forward with any reason to quash the
subpoenas because the financial records that the subpoenas seek are relevant to a legitimate law
enforcement inquiry (i.e., collecting the Judgment against James Carnes and Integrity Advance),
and, when issuing the subpoenas, the CFPB complied substantially with the RFPA’s
requirements. The court addresses each argument, below.
A. Does the RFPA Apply to Movants?
The CFPB argues that neither movant is a “customer” who can invoke the protections of
the RFPA. The RFPA permits only a “customer” to “file a motion to quash” a subpoena issued
by a government agency to a financial institution “from which financial records pertaining to [the
customer] have been sought[.]” 12 U.S.C. § 3410(a). And, the RFPA requires the court to “deny
the motion” to quash if “the court finds that the [movant] is not the customer to whom the
financial records sought by the Government authority pertain[.]” Id. § 3410(c).
The RFRA defines “customer” as a “person or authorized representative of that person
who utilized or is utilizing any service of a financial institution . . . in relation to an account

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maintained in the person’s name[.]” Id. § 3401(5). And, the RFPA defines “person” as “an
individual or a partnership of five or fewer individuals[.]” Id. § 3401(4). The CRFB argues
neither the MCC Trust nor Melissa Carnes qualifies as a “customer” under the RFPA’s
definition.
The CFPB asserts the MCC Trust—as a revocable trust—is not “an individual or
partnership[,]” and thus, it’s not a “person” entitled to invoke the RFRA’s protections. Id. §
3401(4), (5). Also, the CFPB cites several cases holding the “RFPA does not apply to . . .
trusts.” Lee v. McClellan, No. 3:97CV355-P, 1997 WL 882907, at *4 (W.D.N.C. Nov. 18,
1997); see also Chao v. Cmty. Tr. Co., 474 F.3d 75, 82–83 (3d Cir. 2007) (declining to “carve
out a ‘trust exception’ to RFPA’s definition of ‘person’ solely on the principles of the common
law of trusts” and refusing to “reshape clear statutory language” defining “customer” to apply the
RFPA to a trust); Crypto Traders Mgmt., LLC v. SEC, No. 1:20-mc-00336-BLW, 2021 WL
665892, at *2 (D. Idaho Feb. 11, 2021) (“A trust is neither an individual nor a partnership and
therefore cannot qualify as a ‘customer’ under the RFPA.”). And, the CFPB argues that Melissa
Carnes is not a “customer” because she isn’t a “person or authorized representative of that person
who utilized or is utilizing any service of a financial institution . . . in relation to an account
maintained in the person’s name[.]” 12 U.S.C. § 3401(5) (emphasis added). Here, the accounts
at issue are maintained in the name of the MCC Trust—not Melissa Carnes’s name. So, the
CFPB argues, she isn’t a “customer” under the RFRA.
Movants respond that the court should reject the CFPB’s arguments that the RFPA
doesn’t apply to the MCC Trust and Melissa Carnes based on the Notice that it sent to Melissa
Carnes on March 30, 2022, informing her about the five subpoenas issued to the five financial
institutions and advising her about her right to challenge the subpoenas. Movants argue that the

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CFPB previously treated them as “customers” under the RFPA, and they urge the court to
prohibit the CFPB from changing its position. But, this argument ignores the Certificate of
Compliance that the CFPB included with the subpoenas. They explicitly asserted that the
subpoenas were seeking records for accounts of those who are not “customers” under the RFPA
(which, the CFPB asserts, applies to the MCC Trust and the other 12 entities) or James Carnes
(because he is a named party in the underlying civil action). See, e.g., Doc. 6-2 at 152 (Cohen
Decl. Ex. E).
Also, movants argue that the cases declining to apply the RFRA to trusts didn’t involve a
revocable trust, like the MCC Trust at issue here. Movants assert that Kansas treats revocable
trusts as individuals in the debtor/creditor context. Doc. 7 at 4–5 (citing Redmond v. Kester, 159
P.3d 1004 (Kan. 2007)). Kester held that “a trust beneficiary holds an equitable interest in the
property held by the trust.” Id. at 1009. But Kester didn’t involve the RFRA, and the court is
puzzled why movants believe this Kansas case requires the court to treat a trust as a “customer”
under the RFRA.1 Also, movants argue that Melissa Carnes is a “customer” under the RFRA
because the MCC Trust accounts at issue use her social security number. To support this
argument, movants cite a case where an Indiana federal court considered whether providing a
social security number for an account made a person a “customer” but, ultimately, held that no
evidence existed that the financial institution “maintained an account in” the RFPA plaintiff’s
name, and thus, the court dismissed the RFPA plaintiff’s claims for lack of standing. Lynn v.

Movants also cite a Colorado federal case where the court addressed the merits of a RFPA
challenge brought by a family trust seeking to quash a subpoena that the government issued to an
investment firm. See United States v. Thomas, 165 F. Supp. 3d 992 (D. Colo. 2015). But, it doesn’t
appear that any party in that case challenged whether the trust was a “customer” as defined under the
RFPA, and the Colorado decision never addressed this specific issue.

1

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United States, No. 1:13-cv-00570-WTL-MJD, 2013 WL 6989358, at *1 (S.D. Ind. Nov. 14,
2013).2
The court is not particularly persuaded by movant’s arguments that they qualify as
“customers” under the RFPA such that they have standing to assert their RFPA challenges to the
five subpoenas at issue. But, in the end, the court need not decide this issue. That’s so, because,
even if the court assumes that the RFPA applies to movants, their RFPA challenge fails on the
merits. The court explains why in the next subsection.
B. Even if the RFPA Applies, Movants Aren’t Entitled To Relief Under the
RFPA Because the Subpoenas are Relevant to a Legitimate Law
Enforcement Inquiry.
Next, the CFPB asserts, even if the RFPA applies to movants as “customers,” they cannot
secure relief under the Act because the challenged subpoenas are relevant to a legitimate law
enforcement inquiry.3 Two of the CFPB’s arguments sustain this conclusion.
First, the CFPB asserts that the subpoenas are for a legitimate law enforcement inquiry—
i.e., collecting a judgment against James Carnes. Movants don’t dispute “that investigating a
judgment debtor’s assets is a legitimate law enforcement inquiry.” Doc. 7 at 7. Indeed, the
RFPA defines “law enforcement inquiry” as “a lawful investigation or official proceeding
inquiring into a violation of, or failure to comply with, any criminal or civil statute or any
regulation, rule, or order issued pursuant thereto.” 12 U.S.C. § 3401(8). The post-judgment

The Indiana court also dismissed the RFPA challenge brought by another plaintiff—the Abigail
Paige Lynn Trust—because the RFPA’s definition of “person” “unambiguously excludes other legal
structures, such as corporations or trusts” so, the court concluded, the Abigail Paige Lynn Trust lacked
standing to assert the challenge. Lynn, 2013 WL 6989358, at *1.

2

3

The CFPB also has shown that it substantially compiled with the RFPA when issuing the
subpoenas. Doc. 6 at 17–19. Movants’ Reply doesn’t challenge the substantial compliance requirement
of 12 U.S.C. § 3410(a).

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discovery designed to aid in collection of the Judgment against James Carnes and Integrity
Advance qualifies as a “law enforcement inquiry” under this definition.
Second, the CFPB argues that the five subpoenas seek documents and information
relevant to that legitimate law enforcement inquiry. As already discussed, Judge O’Hara found,
based on the CFPB’s factual assertions about the MCC Trust, that “information concerning the
MCC Trust [is] relevant to [James] Carnes’ financial condition, including whether he concealed
or transferred assets that could otherwise be used to satisfy the court’s judgment.” Order, CFPB
v. Integrity Advance, LLC, No. 21-206 (D. Kan. Feb. 1, 2022), ECF No. 39 at 9. And with this
motion, the CFPB has submitted Declarations showing that (1) the MCC Trust transferred funds
to judgment debtor James Carnes or that James Carnes made payments on behalf of the MCC
Trust, (2) the MCC Trust transferred assets to LLCs and a trust controlled by Carnes in 2014, (3)
and the MCC Trust account held significant assets (about $11.2 million) in December 2013.
These factual assertions about the financial activity of the MCC Trust demonstrate a
“‘reasonable belief’” that the CFPB’s subpoenas seeking financial documents and information
about the MCC Trust’s financial accounts are relevant to a legitimate law enforcement inquiry.
Lynch, 2009 WL 4827049, at *3 (quoting Matter of SEC Priv. Investigation, 1990 WL 119321,
at *2). And, even though neither the MCC Trust nor Melissa Carnes is the target of that
legitimate law enforcement inquiry, that “does not defeat the subpoenas” because a “legitimate
law enforcement inquiry into a” judgment debtor’s “financial condition . . . may extend to the
accounts of third parties such as spouses.” United States v. Allen, No. CR-11-00989-02-PHXDJH, 2020 WL 1034395, at *4 (D. Ariz. Jan. 31, 2020) (citation omitted).
Movants assert that the court must apply a “more exacting scrutiny” to the disputed
subpoenas, citing In re McVane, 44 F.3d 1127, 1138 (2d Cir. 1995). Movants argue that this

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standard applied because the subpoenas “seek personal records of persons who are not
themselves targets of the investigation and whose connection to the investigation consists only of
their family ties to corporate participants[.]” Id. at 1138. McVane held that the FDIC has not
satisfied the “enhanced scrutiny” applied to subpoenas it had directed to spouses and family
members of corporate directors because it had “articulated no grounds for suspecting” that any of
the those particular directors had “transferred asserts to family members.” Id. at 1138–39. In
contrast, here, the CFPB has offered more than speculation about fraudulent transfers between
the MCC Trust and James Carnes. And, in similar circumstances, courts have declined to apply
the “more exacting scrutiny” standard discussed in McVane. See FDIC v. Garner, 126 F.3d
1138, 1145 (9th Cir. 1997) (holding, where the FDIC alleged that “money may have been
transferred to the subpoenaed family members’ trusts” and the subpoenas “targeted specific
individuals who are implicated by documentary evidence,” the “sweeping request problem of
McVane” didn’t exist, and “combined with the highly specific allegations of malfeasance by the
targeted Directors . . . the subpoenas satisf[ied] the ‘intermediate standard’ of scrutiny set forth
by McVane”); see also Sharma v. United States, No. 21-3173 (SDW) (LDW), 2021 WL
7878968, at *4 (D.N.J. July 20, 2021) (holding that Sharma’s facts differed from McVane
because the third-party challenging a summons had made at least three transfers from his
financial account to an Indian bank account primarily used to make gifts to his brother—the
target of the investigation—so “it cannot be said that his only connection to the investigation is
his familial relationship with the target”). For the same reasons addressed in Garner and
Sharma, the court declines to apply a more exacting standard to the subpoenas at issue here.
As discussed, the CFPB has come forward with specific factual assertions showing that
the MCC Trust’s connection to the investigation into James Carnes’s financial condition (to aid

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in collecting the Judgment) is not just Melissa Carnes’s familial ties with the target—James
Carnes. Instead, the CFPB cites transfers of funds between the MCC Trust and James Carnes, as
well as the MCC Trust’s transfer of funds to LLCs and a trust controlled by James Carnes. The
CFPB contends that these facts support a reasonable belief that the records sought by the five
subpoenas are relevant to James Carnes’s financial condition and deciding whether he concealed
or transferred assets to avoid paying the Judgment. The court agrees with the CFPB. It has
satisfied the relevance requirement here.
Also, movants argue that the court already has granted the CFPB “broad latitude” in
discovery about the MCC Trust and that James Carnes already has produced “comprehensive
information regarding his financial information and transfers.” Doc. 7 at 7. And, movants argue
that the CFPB offers nothing to support its request seeking documents and information going
back to January 1, 2013, when the post-judgment discovery in the related case merely sought
information beginning in 2014. Id. at 8. These arguments by movants ignore the standard for
relevance which is “‘quite broad.’” Lynch, 2009 WL 4827049, at *3 (quoting Whitburn, 1993
WL 544285, at *2). To satisfy the relevance inquiry, the law enforcement agency need only
have a “‘good reason to investigate.’” Id. (quoting Matter of SEC Priv. Investigation, 1990 WL
119321, at *2). The CFPB has provided the requisite good reason here. It asserts that the MCC
Trust had significant assets in a money market account in 2013 (about $11.2 million), and in the
following year, the MCC Trust made several transfers to LLCs and a trust controlled by James
Carnes. Applying the broad relevance standard, the CFPB has provided good reason for seeking
documents and information going back to January 1, 2013, based on the assets the MCC Trust
controlled during that year and before it began transferring assets to other entities controlled by
James Carnes.

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Case 2:22-mc-00203-DDC-TJJ Document 8 Filed 05/06/22 Page 16 of 16

In sum, the court finds that the CFPB’s law enforcement inquiry “is legitimate” and there
is “a reasonable belief that the records sought are relevant to the inquiry[.]” 12 U.S.C. § 3410(c).
The RFPA thus requires the court to deny movants’ Motion for Order. See id. (providing that a
court “shall deny the motion or application” if the court finds “that there is a demonstrable
reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the
records sought are relevant to that inquiry” (emphasis added)).
IV.

Conclusion

For reasons explained in this Order, the court denies movants’ “Motion for Order
Pursuant to Customer Challenge Provision of Right to Financial Privacy Act of 1978” (Doc. 1).
IT IS THEREFORE ORDERED BY THE COURT THAT movants’ “Motion for
Order Pursuant to Customer Challenge Provision of Right to Financial Privacy Act of 1978”
(Doc. 1) is denied.
IT IS SO ORDERED.
Dated this 6th day of May, 2022, at Kansas City, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge

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