The Red Light Camera, Authentication and Hearsay

After she was found “guilty of violating [California] Vehicle Code 21453, subdivision (a), by failing to stop at a red light”, Carmen Goldsmith appealed. People v. Goldsmith, __ Cal. Rptr. 3d __, 2012 WL 662290 (California Court of Appeals 2012).

Goldsmith made three arguments on appeal, only two of which we’re concerned with. Both of these issues, as I’ll explain in more detail in a moment, involved challenges to the admissibility of the computer-generated evidence that was used to convict her of the charge. People v. Goldsmith, supra. The third argument went to whether the red light camera that generated the evidence was operating properly. People v. Goldsmith, supra.

The case arose when, “on March 13, 2009, “a traffic notice to appear was issued to” Goldsmith. People v. Goldsmith, supra. It alleged that she violated California Vehicle Code § 21453(a) “by failing to stop at a red light at the intersection of Centinela Avenue and Beach Avenue in the City of Inglewood.” People v. Goldsmith, supra. Instead of implicitly admitting guilt by paying a fine, Goldsmith, as noted above, took that issue to trial. People v. Goldsmith, supra.

At her trial, the trial judge “admitted evidence from a computerized automated traffic enforcement system (ATES) and convicted Goldsmith of failing to stop at a red light.” People v. Goldsmith, supra. The opinion notes that the “police department operates the ATES, but Redflex Traffic Systems (Redflex) maintains” it. People v. Goldsmith, supra.

In addition to the evidence generated by the ATES system, the prosecution also introduced the testimony of Dean Young, an investigator with the Inglewood Police Department. People v. Goldsmith, supra. Young testified, in part, that ATES is a

computer-based digital imaging system which photographs drivers who enter the intersection after the traffic signal has turned red or who fail to stop for a red light before turning right. When its sensors detect a vehicle in the intersection in the red light phase, the ATES is programmed to obtain three digital photographs and a 12–second video.

The three photographs are a pre-violation photograph showing the vehicle behind the limit line, a post-violation photograph showing the vehicle in the intersection, and a photograph of the vehicle's license plate. A data bar, which contains the date, time, location, and how long the light had been red when each photograph was taken, is printed on each photograph. The 12–second video shows the approach and progression of the vehicle through the intersection.

Once triggered, the ATES operates independently and stores information on the hard disc of a computer at the scene. Redflex technicians retrieve that computerized information through an internet connection. A police officer reviews all photographs before a citation is printed or mailed.

People v. Goldsmith, supra.

The opinion explains that the data bar

printed on the photographs of Goldsmith's violation indicated that the signal light was in the red light phase for 0.27 seconds when the pre-violation photograph was taken. The post-violation photograph taken 0.66 seconds later showed Goldsmith in the intersection while the signal light was still in the red light phase.

People v. Goldsmith, supra. The trial judge found Goldsmith guilty and “imposed a $436.00 fine”, after which she appealed her conviction. People v. Goldsmith, supra.

Her first argument on appeal was that the trial judge should have “excluded the video, photographs, and data imprinted on the photographs because there was no evidence presented to support a finding that the computer was operating properly.” People v. Goldsmith, supra. In other words, she argued that these items should not have been admitted into evidence because they had not been “authenticated” as is required by the rules of evidence in California (and, as I’ve noted in earlier posts, in other states and the federal system).

The Court of Appeals began its analysis of Goldsmith’s first argument by explaining that under California law, a writing must be authenticated

`before it may be received in evidence.’ California Evidence Code § 1401(a). A `writing’ includes photographs, videos, and printouts of digitally generated computer records. California Evidence Code § 250. . . ‘Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.’ California Evidence Code § 1401(a).

People v. Goldsmith, supra.

The court also noted that California Evidence Code § 1552(a) and § 1553 establish a

presumption that printed representations of computer information and of images stored on a video or digital medium are accurate representations of the computer information and images they purport to represent. Thus the images and information (including the date, time, and location of the violation and how long the light had been red when each photograph was taken) imprinted on the photographs are presumed to accurately represent the digital data in the computer. Goldsmith produced no evidence that would support a finding of the nonexistence of this presumed fact. Therefore the trier of fact was required to assume the existence of the presumed fact.

People v. Goldsmith, supra. For the last proposition – that the trial judge was required to assume the existence of the presumed fact – the court cited California Evidence Code § 604, which states, in part, that the effect of a presumption

affecting the burden of producing evidence is to require the trier of fact to assume the existence of the presumed fact unless and until evidence is introduced which would support a finding of its nonexistence, in which case the trier of fact shall determine the existence or nonexistence of the presumed fact from the evidence and without regard to the presumption.

People v. Goldsmith, supra.

The Court of Appeals also pointed out, though, that presumptions operate only to

establish that a printed representation accurately reflects data in the computer. . . . With regard to the accuracy and reliability of that digital data in the computer itself (as distinct from printed representations of that digital data), the California Supreme Court has determined that the admission of computer records does not require foundational testimony showing their accuracy and reliability.

The issue in People v. Martinez (2000) 22 Cal.4th 106 was whether a computerized record of criminal history information was admissible under the official records exception to the hearsay rule . . . , specifically whether the sources of information and method and time of preparation of such a computer record were such as to indicate its trustworthiness. . . . The California Supreme Court stated that `our courts have refused to require, as a prerequisite to admission of computer records, testimony on the “acceptability, accuracy, maintenance, and reliability of . . . computer hardware and software.”’. . . Moreover, where errors and mistakes occur, they could be developed on cross-examination and should not affect the admissibility of the computer record itself.

People v. Goldsmith, supra.

The Martinez court relied on an earlier decision of the California Court of Appeals: People v. Lugashi, 205 Cal. App.3d 632, 252 Cal. Rptr. 434 (2005). As the Goldsmith opinion notes, the Lugashi court rejected a test proposed by a defendant that would have required the proponent – here, the prosecution – of computer evidence to introduce

testimony on the reliability and acceptability of hardware, software, and internal maintenance and accuracy checks as a prerequisite to admission of that computer data. Lugashi stated that other California courts . . . had previously rejected similar claims, as had a majority of other state courts and some federal courts. . . .

Lugashi stated that the defendant's proposed test incorrectly presumed computer data to be unreliable and would require its proponent to disprove the possibility of error in order to meet the minimal showing required for admission of the evidence. . . .

Lugashi particularly found this proposed presumption to be inapplicable where the records consisted of retrieval of computer-generated data rather than data stemming from manually input, human-generated data. . . . .

Following Martinez and Lugashi, we do not presume computer data to be unreliable, and do not require the proponent of such evidence to disprove the possibility of error to meet the minimal showing required for admission. . . . Neither is the proponent of the computer records evidence required to produce testimony on the acceptability, accuracy, maintenance, and reliability of the computer hardware and software, especially where, as here, the computer data consists of retrieval of automatic inputs rather than computations based on data entered into the computer by human beings.

People v. Goldsmith, supra.

Goldsmith also claimed the “photographs, video, and data imprinted on them were hearsay” and should not have been admitted because the prosecution did not show that they fell within one of the exceptions to the default rule barring hearsay. People v. Goldsmith, supra. As I’ve explained in earlier posts, every U.S. state and the federal system has a rule of evidence that bars the introduction of hearsay unless it falls within one of a number of carefully crafted exceptions to the default rule barring its use.

As I’ve also noted, and as Wikipedia explains, hearsay is presumptively excluded because it is second-hand evidence, i.e., the declarant, the source of the evidence, does not testify at trial. Instead, someone else – a second party – testifies as to what the evidence is. That means the person as to whom the evidence is being introduced cannot effectively challenge its reliability by cross-examining the original source of the evidence.

The Court of Appeals found the photos and video were not hearsay. It noted that California Evidence Code § 1200(a) defines hearsay as “evidence of a statement that was made other than by a witness while testifying at the hearing and that is offered to prove the truth of the matter stated.” People v. Goldsmith, supra. Section 225 of the California Evidence Code defines a statement as “(a) oral or written verbal expression or (b) nonverbal conduct of a person intended by him as a substitute for oral or written verbal expression.” People v. Goldsmith, supra.

The Court of Appeals explained that a statement “is made by a `person,’” which includes human beings, corporations and other artificial legal entities, “but not . . . a computer.” People v. Goldsmith, supra. “The Evidence Code does not contemplate that a machine can make a statement, and a printout of results of a computer's internal operations is not a `statement’ constituting hearsay evidence." People v. Goldsmith, supra. The court noted that (i) the hearsay rules are intended to ensure witnesses who make “statements” can be cross-examined, and (ii) it “is not possible . . . to cross-examine computer-generated photographs or videos.” People v. Goldsmith, supra. The court therefore held that the hearsay rule did not bar the admission of the photos and video. People v. Goldsmith, supra.

Finally, the Court of Appeals also held that the computer printed data on photographs

depicting Goldsmith's violation which gave the date, time, and location of the photographs, and how long the light was red at the time the . . . image was taken. This information was generated by a machine, not a person. The printed data on the photographs was not subject to cross-examination. It was therefore not a statement constituting hearsay.

People v. Goldsmith, supra. Since it was not hearsay, the court found that the trial judge did not err in admitting this evidence, either. People v. Goldsmith, supra. So, the Court of Appeals affirmed Goldsmith’s conviction. People v. Goldsmith, supra.

The Laptop, Miranda and Poisonous Fruit

The Michigan Court of Appeals recently issued an opinion in People v. Davis, 2012 WL 639330 (2012) that addresses some interesting Miranda and 4^th Amendment issues.

John Wayne Davis, Jr. was charged with “larceny in a building” in violation of Michigan Compiled Laws § 750.360 and with “receiving and concealing stolen property valued between $1,000 and $20,000” in violation of Michigan Compiled Laws § 750.535(3)(a). People v. Davis, supra. The Court of Appeals’ opinion doesn’t explain what Davis allegedly did that led to his being charged with these crimes because its sole concern was the legal issues noted above.

After being charged, Davis filed a motion to suppress in which he claimed he “had been subjected to custodial interrogation without having been given warnings required by Miranda v. Arizona, 384 U.S. 436 (1966).” People v. Davis, supra. He succeeded, perhaps beyond his expectations:

The trial court agreed and suppressed not only an unwarned statement [Davis] made in his home before his arrest, but also physical evidence seized at the home. The trial court also suppressed a statement [Davis] gave at the station house after waiving his Miranda rights and dismissed the case.

People v. Davis, supra.

The prosecution then appealed “the trial court’s order granting [Davis’] motion to suppress evidence and dismiss all charges.” People v. Davis, supra. As far as I can tell, under Michigan procedure the prosecution can seek leave to appeal a non-final order like this and can proceed if leave is granted. Michigan Court Rule 7.103(A)(1).

The Court of Appeals began its analysis of the trial court’s rulings by noting the applicable standards of review:

We review de novo a trial court's ultimate decision on a motion to suppress evidence. People v. Chowdhury, 285 Mich. App 509, 775 N.W.2d 845 (2009). The trial court's factual findings, however, are reviewed for clear error. Id. Here, whether [Davis] was interrogated while `in custody,’ so entitled to Miranda warnings, presents a mixed question of law and fact. People v. Coomer, 245 Mich. App 206, 627 N.W. 2d 612 (2001). A trial court's factual finding `is clearly erroneous if, after reviewing the entire record, an appellate court is left with a definite and firm conviction that a mistake has been made.’ Id.

The first issue the court reviewed was whether Davis was subjected to custodial interrogation “without first having been advised of his Miranda rights.” People v. Davis, supra. As Wikipedia explains, and as you may already know, people are only entitled to the Miranda warnings when they’re in “custody”, which means they were under arrest or their freedom of movement was restrained “such that a reasonable person would not feel free to end the interrogation and leave.” People v. Davis, supra.

To determine custody, courts make an objective determination based on the “totality of the circumstances” involved. People v. Davis, supra. The Davis court noted that the following factors “may be relevant” in determining whether someone was in custody:

1) the number of police officers present, 2) whether the officers were in uniform or had their weapons drawn, 3) what the officers told the individual, i.e., whether he was not under arrest or free to leave, 4) where the questioning occurred, 5) when the questioning occurred, 6) whether the individual was restrained or directed where the questioning would occur, 7) who else was present during the questioning, and 8) the duration of the questioning. . . . Generally, a person is not in custody . . . when questioned in their own home.

People v. Davis, supra.

After applying these factors to what happened to Davis, the court found he was in custody for the purposes of Miranda:

Eighteen-year old [Davis] was questioned by three uniformed police officers standing in his bedroom at 3 a.m. The officers never told [him] he was not under arrest or free to leave. Although the questioning occurred in the home where [he] lives with his grandmother, it did not occur in a common area of the home or a room of [his] choosing.

Instead, the officers followed [Davis’] grandmother, who permitted their entry, back to [his] bedroom, without invitation, and questioned [him] while standing between him and the door. The 3 a.m. questioning occurred immediately after [Davis’] grandmother woke him, and the officers questioned [him] while he sat on his bed wearing only his boxer shorts. [Davis said] he was groggy and unable to see clearly. The only other person present was [his] grandmother, who testified she was not in the room for at least part of the questioning.

Although [Davis] was in his own home, the time of day, [his] age, condition, the number of officers, their position and their failure to tell [him] he was not in custody and free to leave, support the conclusion that a reasonable person in [his] position would have felt they were unable to end the interrogation or leave.

People v. Davis, supra.

Since the court found he was in custody and was interrogated without being given the Miranda warnings and the opportunity to invoke his right to counsel and right to silence, it held that the trial court properly suppressed the statements Davis made at home. People v. Davis, supra. The Court of Appeals then addressed what I find a far more interesting issue: “whether the laptop [Davis] gave to police” while they were at his home had to be suppressed because of the Miranda violation. People v. Davis, supra.

As to how he came to give the police the laptop, the opinion explains that

[a]ccording to the police, [Davis] initially denied knowing anything about the laptop. Only after his grandmother said to [him], `I told you that laptop he brought you was stolen,’ did he retrieve the laptop from under his bed and hand it to Officer Keimig.

People v. Davis, supra. In a later part of the opinion, the Court of Appeals notes that after Davis was interrogated at home, he

dressed and rode with the police officers to show them where his friend, Kirk, lived. The officers then drove [Davis] to the police station, where he was provided his Miranda warnings, waived them, and made his second statement. It is unclear how much time had passed, but the location and questioning officer had changed. In addition, [Davis] was not only read his Miranda rights, he was also provided them in writing. Thereafter, [he] wrote out a full-page statement regarding the theft of the laptop.

People v. Davis, supra.

The trial court “suppressed the laptop . . . as `fruit of the poisonous tree.’” People v. Davis, supra. As Wikipedia notes, “fruit of the poisonous tree” is a principle in U.S. law which bars the state from using evidence that was obtained by violating the Constitution. The principle originated in the U.S. Supreme Court’s decision in Silverthorne Lumber Co. v. U.S., 251 U.S. 385 (1920) and was identified as the fruit of the poisonous tree doctrine in Nardone v. U.S., 308 U.S. 338 (1939). So, as the Supreme Court explained in Segura v. U.S., 468 U.S. 796 (1984), the 4^th Amendment exclusionary rule encompasses “primary evidence obtained as a direct result of an illegal search or seizure” and also extends to the indirect product of such unconstitutional conduct.

That brings us back to Davis: As noted above, the trial court judge not only suppressed the statements Davis made at his home, he also suppressed the laptop and a second statement Davis made at the police station. People v. Davis, supra.

The trial court’s suppression of the laptop was based on his conclusion that the police interrogation of Davis at his home violated Miranda, a conclusion with which the Court of Appeals agreed. The Court of Appeals did not, however, agree with the trial judge’s suppressing the laptop. People v. Davis, supra.

To understand why, consider the nature and purpose of the exclusionary rule: It’s designed to protect Constitutional rights – and only Constitutional rights – by creating a deterrent for police conduct that violates the relevant constitutional provisions, i.e., the 4^th Amendment, the 5^th Amendment and the 6^th Amendment. So, for the trial judge’s ruling suppressing the laptop to have been correct, the judge had to have based the ruling on a finding that police violated Davis’ 4^th or 5^th Amendment rights. (Since he had not yet been charged with a crime, Davis did not have a 6^th Amendment right to counsel.)

As noted above, the trial judge did not rely on a 4^th Amendment violation; there is nothing in the opinion that indicates there was any 4^th Amendment violation in this case. (I'm assuming Davis didn't make any 4th Amendment arguments before the trial court, but I don't have access to the motion to suppress so I can't be sure about that.) Instead, the trial judge “suppressed the laptop and second statement [Davis] made after being advised of and waiving his Miranda rights as `fruit of the poisonous tree.’” People v. Davis, supra. That means there must have been a "poisonous tree."

Since neither the 4th nor the 6th Amendments were implicated here, in order to be valid, the suppression would have to have been based on a finding that the application of the exclusionary rule was warranted because police violated Davis’ 5^th Amendment right not to be compelled to incriminate himself. But as the Court of Appeals explained, police do not “compel” someone under the 5^th Amendment when they merely interrogate someone without giving them their Miranda rights. People v. Davis, supra.

“Compulsion” requires coercion, e.g., the use of violence or other sanctions, which was not involved here. (This is why Justice White, for example, wrote a dissent in the Miranda case in which he argued, with some credibility, that the majority of the Court was using the Miranda formula to basically import the 5th Amendment privilege into a context in which it had never before applied, i.e., police interrogation.)

The trial judge, though, relied not on the 5^th Amendment, but on Miranda, assuming the failure to give Davis his Miranda warnings during the interrogation at his home triggered the exclusionary rule. Miranda's constitutional status, i.e., its relationship with the 5th Amendment, has been and remains at least somewhat uncertain, but it is and has always been clear that the Miranda rules provide far more protection than the 5th Amendment does. So the two are, at a minimum, clearly not co-extensive.

The Court of Appeals referred to this fact, noting that in U.S. v. Patane, 542 U.S. 630 (2004), the Supreme Court held that “[b]ecause the failure to administer Miranda rights is not in itself a violation of the 5h Amendment, the exclusionary rule that fruits of a constitutional violation must be suppressed does not apply.” People v. Davis, supra. The Patane Court also held that if police fail to give a suspect his/her Miranda rights, the failure does not require the suppression of the “physical fruits” (e.g., a laptop) of the suspect’s unwarned statements. U.S. v. Patane, supra. So there was no constitutional violation, no poisonous tree and no “fruit.”

The Court of Appeals held, therefore, that “the laptop should not have been suppressed.” People v. Davis, supra. It also held that the statement Davis gave later at the police station should not have been suppressed because of the facts noted above, i.e., he dressed and was driven to the police station where he was given his Miranda rights and waived them. People v. Davis, supra.

It therefore affirmed the suppression of Davis’ original statement, reversed the suppression of the laptop and his second statement and remanded the case for “proceedings consistent with this opinion.” People v. Davis, supra.

Imposture, Security and the Funds Transfer Agreement

Like some of my posts, this one examines an opinion issued in a civil lawsuit rather than one issued in a criminal case. The civil suit, though, involves what I think are interesting issues involving computer security.

We’ll start with the facts. This, according to the opinion, is how the case arose:

In September of 2002, [Roger] Chavez opened a bank account at [Mercantil Commercebank's, N.A.] (`Mercantil’). His account was subject to a Funds Transfer Agreement (`FTA’) that implemented one of three security procedures. . . . [He] chose the first option contained within Annex 1 of the FTA, which requires the Bank only to verify the signature of written payment orders when delivered in person. Mercantil states that it also utilized additional security procedures for processing payment orders by following steps set forth in the Customer Services Manual (`CSM’), including a requirement to verify account and balance information, the existence of an FTA, and identification.

On February 4, 2008, Chavez, a resident of Venezuela, flew to Miami to visit the Bank's Doral branch because he had not been receiving his monthly bank statements and because he wanted to make a large cash deposit into the account. On February 5, 2008, Chavez returned to make another small cash deposit. On February 6, 2008, [he] returned his rental car to the rental car facility at the Miami airport at 6:40 AM, and then departed on a flight to Caracas, Venezuela.

On February 7, 2008, the Bank wire transferred $329,500 from Chavez's account to the account of a beneficiary in the Dominican Republic. This transfer was made pursuant to a payment order (`subject payment order’) dated February 6, 2008, that bore Chavez's signature and was delivered in person by a man purporting to be Chavez. No video footage inside or outside of the bank was available because the security cameras were either broken or their recordings were taped over.

The subject payment order was processed by Mercantil's employee Rossana Gutierrez, who was a `greeter’ that occasionally assumed the responsibilities of a Customer Service Representative (`CSR’). In processing the order, Gutierrez confirmed all the information on the subject payment order; the identity of the customer by requesting an identification document, e.g. a passport or Cedula; the sufficiency of funds by checking the account balance; the existence of an FTA; and the authenticity of the signature. Gutierrez then obtained written approval from two officers, Talia Pina and Lolita Peroza, that, in accordance with their habit and practice, took extra steps to verify the authenticity of the Payment Order and ensure that Gutierrez had completed her duties. Following this approval, Mercantil completed the order and transferred funds to a beneficiary in the Dominican Republic.

Chavez v. Mercantil Commercebank, N.A., 2011 WL 5285713 (U.S. District Court for the Southern District of Florida 2011). (According to Chavez’s complaint, Mercantil “is a national banking association doing business in Miami-Dade County, Florida.” Amended Complaint, Chavez v. Mercantil Commercebank, N.A., 2010 WL 4896668.

While he was in Venezuela “[o]n or about April 14, 2008,” Chavez “checked his account online and claims this is when he first learned that his balance was considerably lower than expected.” Chavez v. Mercantil Commercebank, N.A., supra. He contacted the bank, was told that $329,500 had been wire transferred from his account and, when his “demand that the funds be returned by the bank failed,” filed “this suit in order to retrieve the funds.” Chavez v. Mercantil Commercebank, N.A., supra.

Mercantil responded by filing a motion for summary judgment which, as Wikipedia notes, “is a judgment entered by a court for one party and against another summarily, i.e., without a” trial on the merits. As Wikipedia also explains, in the U.S. a judge can issue summary judgment for the moving party if he/she finds that “there are no disputed issues of `material’ requiring a trial to resolve” and “in applying the law to the undisputed facts, one party is clearly entitled to judgment.”

The legal issues involved in the motion for summary judgment concerned the security procedures implemented by the FTA. The first arose under Florida Statutes § 670.201, which “requires that a `security procedure’ be established by agreement of the customer and the bank.” Chavez argued that “Mercantil's security procedures do not fit within § 670.201’s definition of `security procedure’” and Mercantil of course argued the opposite. Chavez v. Mercantil Commercebank, N.A., supra. The judge agreed with Mercantil:

[§ 670.201] was satisfied when the parties, in their FTA, unambiguously assented to implement the security procedures in Annex 1 of the FTA, requiring all written payment orders to be signed and delivered by an authorized representative `in person or by mail, or by facsimile transmission.’ If the payment order was delivered by mail or fax, Mercantil would be required to complete a follow-up phone call for the purpose of verifying the authorized representative's identity.

In addition to these agreed-upon procedures, clause (iii) of the FTA permitted the bank to, `at its option,’ use other security procedures in addition to those selected by the client that would permit it to verify any payment order or related instruction. . . . [T]his means that, although Annex 1 of the FTA between Mercantil and Chavez did not explicitly state that a procedure for I.D. verification would be implemented, the use of this procedure was agreed upon according to clause (iii) of the FTA.

Chavez v. Mercantil Commercebank, N.A., supra.

The judge therefore found that “the security procedures at issue . . . were established by agreement between the customer and the bank for the purpose of verifying a payment order pursuant to § 670.201.” Chavez v. Mercantil Commercebank, N.A., supra. And he noted that Chavez’s claim that Mercantil’s security procedures did not fit within

§ 670.201’s definition of `security procedure’ fails. The Advisory Committee Notes of the statute explain that the requirement of `algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar devices’ is clearly only contemplated in instances where the fund transfer is not requested in person. Indeed, we have not identified, nor has [Chavez] cited, a single case where algorithms or encryptions were ever required by a customer that stood directly in front of the bank's employee and could simply provide identification.

Chavez v. Mercantil Commercebank, N.A., supra.

This meant the judge then had to decide if there was any factual dispute as to a second issue: “whether these security procedures are commercially reasonable for verifying payment orders delivered in person.” Chavez v. Mercantil Commercebank, N.A., supra. Florida Statutes § 670.202(3) states that the

commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank; the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank; alternative security procedures offered to the customer; and security procedures in general use by customers and receiving banks similarly situated.

As the opinion notes, the statute also

sets out the following factors to be analyzed when determining whether a security procedure is commercially reasonable:

the wishes of the customer expressed to the bank; the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank; alternative security procedures offered to the customer; and security procedures in general use by customers and receiving banks similarly situated.

Chavez v. Mercantil Commercebank, N.A., supra.

The judge began the process of analyzing this issue by noting that “the commercial reasonableness of security procedures used for in person wire transfers is largely one of first impression”, which meant he could not relay on case law for guidance. Chavez v. Mercantil Commercebank, N.A., supra. He therefore bean his opinion by pointing out that comment made by the drafters of the Uniform Commercial Code, which influenced the Florida Statutes, makes it clear that the primary purpose of the security procedures

is to `authenticate’ payment orders, i.e. to verify that the identity of the anonymous person on the other side of an electronic transmission is in fact the person who is authorized to make transfers to and from the account. Fla. Stat. § 670.201 Cmt. 1 (2011). A secondary purpose is to protect against erroneous or mistaken transfers, e.g. transfers that overdraft an account or multiple transmissions of the same payment order. For purposes of deciding [this case], this court should look only at the security procedures that go to establishing the authenticity of a payment order because this order was not a mistake; rather it was fraudulently filed by either Chavez or some other party purporting to be Chavez.

Chavez v. Mercantil Commercebank, N.A., supra.

The judge explained that he was not required to consider the procedures verifying

(i) that the payment order had all the necessary information, (iv) that the customer had an FTA on file, or (v) that the account balance was sufficient to cover the payment order. These `security procedures’ are essentially safeguards against mistaken or erroneous transfers and not measures that authenticate payment orders by verifying a customer's identity. Similarly, [this Court does not need to] consider the (vi) security procedure that requires two officers to verify that procedures (i-v) were taken by the customer service representative because, if the steps taken by the customer service representative were not commercially reasonable in the first place, the officers would simply be `rubber-stamping’ unsatisfactory procedures. Indeed, the officers sitting behind closed doors had no way of verifying the identity of the person purporting to be Chavez that day by simply reviewing the paperwork completed and submitted by their customer service representative.

The security procedures implemented by Mercantil that are meant to protect against the type of fraudulent transfers that Fla. Stat. § 670.202 is designed to prevent include (ii) an identification (`I.D.’) check and (iii) a signature comparison. Therefore, these are the two security procedures this Court must find to be commercially reasonable. Both protect against fraudulent transfers as opposed to mistaken or erroneous transfers. It is clear that signature comparison is an approved security procedure under § 670.202 because the statute states `[c]omparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.’ (emphasis added). If signature comparison was not an approved procedure, the statute would have plainly said so and would not have bothered to make this distinction.

Chavez v. Mercantil Commercebank, N.A., supra.

He found that “the final and most difficult question” was “ whether a request for a form of identification” to verify a customer’s identity “is a commercially reasonable security procedure that, when combined with a signature comparison, satisfies the requirements of § 670.202(2).” Chavez v. Mercantil Commercebank, N.A., supra. “Logically, it would seem there can be no better safeguard against the fraudulent submission of payment orders than by requiring the customer to present an I.D. that has the customer's picture on it and a name that matches both the name entered on the payment order and the name on the customer's account.” Chavez v. Mercantil Commercebank, N.A., supra.

He noted, though, that in “today’s technological world,” the creation of false identification

might be too easy. For example, . . . an impersonator could have copied [Chavez’s] identification while superimposing or replacing a picture of the impersonator over the [his] picture. . . . If a recording or copy of [his] I.D. was kept in the bank's computer system, the customer sales representative would easily be able to detect this type of fraud because the picture that was superimposed onto the legitimate . . . identification could be checked against the picture on file instead, for example, of having the customer service representative ensure that the names match up in all three places.

But because the statute does not require banks to keep a copy of a customer's I.D. on file, and because verifying a customer's identity by checking the customer's I.D. is commercially reasonable, outside of the single example discussed above, a reasonable juror could not find that a signature comparison combined with a request for a form of I.D. is not a commercially reasonable way of protecting the customer from fraudulent transfers, when the customer submits the payment order in person. This finding is further supported by the unrebutted opinion of Ms. McGuire, Mercantil's expert, who states that Mercantil's security procedures are the prevailing standards in banking. . . .’ See § 670.202(3) (commercial reasonableness is to be determined by considering, inter alia, the `security procedures in general use by customers and receiving banks similarly situated’).

Chavez v. Mercantil Commercebank, N.A., supra.

Finally, the judge pointed out that the bank offered “two alternative security procedures,” which would have “offered a higher level of security” but he rejected them. Chavez v. Mercantil Commercebank, N.A., supra. He therefore ended his opinion by holding that because there was

no genuine issue of fact or law that Mercantil's security procedures were within § 670.201's definition of `security procedure,’ commercially reasonable, and complied with in `good faith’. . . . the Court has no choice but to grant Mercantil's Motion for Summary Judgment in full.

Chavez v. Mercantil Commercebank, N.A., supra.