## Facts

- Valley Bank of Nevada loaned $250,000 to borrowers to finance a planned purchase of King’s Castle Casino; the transaction failed and the borrowers defaulted.
- The Bank sued to recover the unpaid balance on the promissory note.
- The borrowers asserted defenses including misrepresentation, alleging the Bank induced the loan by misrepresenting the availability of additional financing and by acting to protect investments of other Bank customers, including the Teamsters Union.
- In discovery, the borrowers sought deposition testimony and production of records concerning loan transactions between the Bank and certain named nonparty persons and entities, and records of banking relationships involving the Teamsters Union and casinos allegedly connected to it.
- The Bank objected that the requested materials involved confidential transactions of nonparty customers and sought a protective order under California discovery statutes.
- The trial court denied a full protective order and ordered disclosure with some limitations, finding the materials relevant and not privileged.
- The Bank sought extraordinary relief in the California Supreme Court to compel the trial court to restrict discovery of nonparty customer financial information.

## Issues

1. Whether California law recognizes a bank-customer privilege that bars discovery of confidential bank records.
2. Under what conditions, if any, civil discovery may compel a bank to produce confidential financial information of nonparty customers.
3. What procedures and safeguards are required to protect nonparty customers’ privacy interests when such records are sought.

## Decision

- The court held that California does not recognize a statutory or common-law bank-customer privilege, and courts may not create new privileges beyond those in the Evidence Code.
- The court held that nonparty bank records may be discoverable when relevant, but the constitutional right of privacy in financial affairs requires safeguards before disclosure.
- The court required that, before producing confidential information about a nonparty customer, a bank must take reasonable steps to locate and notify the customer and provide a reasonable opportunity to object and seek a protective order.
- The court granted mandate relief, directing the trial court to vacate its discovery order and conduct further proceedings applying a balancing approach and the required notice procedure.

## Legal Principles

- Evidence Code privileges are exclusive; absent legislative authorization, there is no bank-customer privilege that automatically shields customer financial records from discovery.
- Bank customers have a protectable privacy interest in their financial affairs under the California Constitution, even though that interest is not absolute.
- Trial courts must balance the requesting party’s need for relevant discovery against nonparty customers’ privacy interests and craft protective conditions where appropriate.
- When a discovery request seeks confidential nonparty bank records, reasonable customer notice and an opportunity to object are required before disclosure.

## Conclusion

The California Supreme Court held that bank records are not privileged merely because they are confidential, but discovery of nonparty customer financial information must be preceded by reasonable customer notice and a meaningful opportunity to object, with the trial court balancing relevance and need against constitutional financial privacy and issuing tailored protective measures.


Valley Bank of Nev. v. Superior Court, 15 Cal. 3d 652 (Cal. 1975)