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Decisions Affecting the Powers and Duties of Attorneys General
By Emily Myers, NAAG Antitrust Counsel and Powers and Duties Counsel
This is another in our series reporting on recent decisions from across the country affecting the powers and duties of state attorneys general.
Attorney General Entitled to Search Warrant
Ex parte State of Alabama [Petition for Write of Mandamus], No. 1120498 (Ala. Feb. 15, 2013).
An investigator with the Alabama Attorney General’s Office sought a search warrant for a facility where allegedly illegal gambling devices were located. The district court judge declined to issue the warrant because the county sheriff had certified the machines to be legal, so there was conflict between enforcers. The district court stated that any other decision would “put Judges of this State in the untenable position of determining which constitutional officer they choose to believe.” The attorney general appealed, and the state court of criminal appeals upheld the district judge. The attorney general appealed to the state Supreme Court.
Citing an 1899 decision, the Alabama Supreme Court first held that a writ of mandamus is appropriate in this case, because “a court considering the issuance of a warrant acts outside its discretion when it denies the warrant based on an improper or erroneous legal ground.” In this case, the erroneous legal ground included “reliance upon another public official’s opinion as to what is and what is not a crime under applicable law” because that is a decision for the judiciary. In addition, the court should not have treated as binding the opinion of the county sheriff, especially since the attorney general is “above him within the hierarchy of the executive branch of government.” The state Supreme Court also noted that there was no dispute as to how the machines operated, but rather a legal question as to “what the criminal statute does and does not prohibit.” This is a legal question, to be decided by a judge.
The Alabama Supreme Court quoted the U.S. Supreme Court decision in Ex parte United States, 287 U.S. 241 (1932), “The refusal of the trial court to issue a warrant of arrest under such circumstances is, in reality and effect, a refusal to permit the case to come to a hearing upon either questions of law or of fact, and falls little short of a refusal to permit the enforcement of the law.” The court concluded, “The Alabama Constitution and the Alabama Legislature decide the criminal law applicable in each of the 67 counties in this State. A circuit judge is not free to frustrate the enforcement of the criminal law by refusing to issue warrants necessary or appropriate to its enforcement in his or her circuit.”
Administrative Subpoena Enforceable Out of State
State ex rel. Suthers v. Tulips Investments, 2012 COA 206; 2012 Colo. App. Lexis 1914 (Nov. 21, 2012).
The Colorado attorney general and the state administrator of the Uniform Consumer Credit Code (UCCC) issued administrative subpoenas (similar to civil investigative demands) in connection with an investigation into whether a Delaware corporation, Tulips Investments, had violated the UCCC and the Colorado Consumer Protection Act (CCPA). Tulips failed to respond, and the attorney general began contempt proceedings against Tulips. Tulips moved to dismiss the contempt proceedings, arguing that the court did not have subject matter jurisdiction to enforce an investigative subpoena served out-of-state on an out-of-state entity. The district court agreed, citing a Colorado Supreme Court decision holding that Colorado courts have no authority to enforce civil subpoenas against out-of-state nonparties. The attorney general and administrator appealed.
The Colorado court of appeals noted that the state Supreme Court’s decision indicated that where the legislature has authorized the state to issue, and Colorado courts to enforce, investigative subpoenas served out-of-state on out-of-state entities, such subpoenas may be enforced. The court of appeals interpreted the statutory language and concluded that the UCCC contemplates that out-of-state entities to which administrative subpoenas are issued must produce the required records. The court rejected defendants’ argument that the language applied only to the out-of-state records of in-state entities, on the grounds that there is no such limitation in the statute, and that such an interpretation would create “an absurd result wherein an out-of-state entity with sufficient contacts but no principal office in Colorado” would be beyond the reach of the [Administrator’s] investigative powers while within the reach of Colorado courts for purposes of the substantive action for which it is under investigation.” [citation omitted]
Attorney General Has Standing to Challenge Pension Benefits
People ex rel. Madigan v. Burge, 2012 Ill. App. LEXIS 973; 2012 IL App (1st) 112842 (Nov. 30, 2012)
A retired police officer was convicted of obstruction of justice and perjury in connection with a federal investigation of the torture and abuse of arrestees when he was employed by the Chicago police department. The officer, who retired in 1997 and was sentenced in 2011, received pension benefits. The Pension Board held a hearing to determine if §5/5-227 of the Pension Code applied. That section states, “none of the benefits provided for in this Article shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his service as a policeman.” The officer argued that the conviction was related to his giving false testimony in connection with a civil suit many years after he retired, so §5/5-227 should not apply. The Pension Board vote was 4-4, so the Board concluded that the officer could continue to receive his benefits.
The Illinois attorney general filed a complaint alleging that the Pension Board’s decision violated §5/5-227 and seeking an injunction against further pension benefits and an order requiring him to repay amounts paid since the felony conviction. The Pension Board argued that the court lacked subject matter jurisdiction because the Board’s decision was reviewable only under the Administrative Review Law, and the attorney general had not filed an action under that law. The lower court dismissed the case, and the attorney general appealed.
The Illinois Supreme Court held that although the Pension Code gave the Board the power to “authorize, increase, reduce or suspend” any pension, provided the beneficiary was given due process, another section provides that “a civil action may be brought by the Attorney General or by a participant, beneficiary or fiduciary” in order to enjoin any act or practice that violates the Code. The Supreme Court held there was “no explicit language in the statute expressing a legislative intent to divest circuit courts of the subject matter jurisdiction to hear civil actions brought by the Attorney General . . .” The court held that the Pension Board erred in concluding that a tie vote was sufficient to continue the pension benefits to the officer. Their decision was voidable and within the jurisdiction of the lower court.
The state Supreme Court also addressed the issue of the attorney general’s standing to bring this claim. The court reaffirmed that the Illinois attorney general has common law powers as well as those expressed in statutes. The court concluded that the attorney general’s legislatively prescribed duties included,
the duty to represent the people of the state in any litigation in which the people of the state are interested; and to investigate alleged violations of the statutes which the Attorney General has a duty to enforce. . . Here, the Attorney General, as the representative of all the taxpayers of the state, has the standing under her statutory powers to sue to recover funds disbursed in violation of section 5-227 of the Pension Code.
State Agency Claims Must Be Brought by Attorney General, Not Outside Counsel
State v. Gulfport Energy Corp., 2012 La. App. LEXIS 1384 (Nov. 7, 2012).
The Louisiana Department of Wildlife and Fisheries (DWF) hired outside counsel to file suit against an energy company, alleging the company had disturbed oyster beds with dredging operations and, pursuant to permits issued by the state, owed approximately $3 million in damages. The trial court agreed with the energy company that DWF lacked the capacity to file a tort suit to recover for damages, and that the Department of Justice, through the attorney general, was the proper party to sue on behalf of the state. DWF appealed.
The appellate court found that DWF did not have authority to sue on behalf of the state. Although DWF did have the authority to calculate damage to the environment, the court cited La. Rev. Stat. §49:257(A):
Notwithstanding any other law to the contrary and in addition to any other powers, duties, or authority granted to the attorney general and the Department of Justice by the constitution and laws of the state, the attorney general shall represent the state and all departments and agencies of state government in all litigation arising out of or involving tort or contract.
The court held that although the attorney general did not have to appear as a party in the case, the attorney general did have to appear on behalf of DWF in this matter. The court stated that DWF’s arguments center on “whether DWF can recover monies for damages to oyster beds, and we have no reason to find that they cannot. Like the trial court, though, we find that DWF cannot sue on behalf of the state without being represented by the Attorney General.”
Dual Roles of AAGs in Administrative Hearings Are Not Due Process Violations.
Mallinckrodt US, LLC v. Maine Dept. of Environmental Protection, 2012 Me. Super. LEXIS 146 (Me. Super. Nov. 1, 2012).
In connection with a decision of the Maine Board of Environmental Protection about cleanup of a hazardous waste site, the defendant alleged that the Board erred in not allowing evidence of “the allegedly conflicting roles of the assistant attorney generals who both prosecuted the case and have advised the Board in the past.” The court stated,
The Court is convinced that because of the unique nature of the Attorney General’s office in pursuing the public interest, see Superintendent of Ins. v. Attorney General, 557 A .2d 1197, 1202 (Me. 1989), assistant attorney generals do not violate ethical rules or violate constitutional due process requirements by serving as prosecutor and advisor to the same agency in two separate proceedings.
New York Attorney General Does Not Have Standing to Intervene in Class Action
In re American International Group Securities Litigation>, 2013 U.S. Dist. LEXIS 3479 (S.D.N.Y. Jan. 7, 2013).
In 2004, a class action was filed in federal court in New York against American International Group (AIG) and its officers, alleging violations of the Securities and Exchange Act of 1934. Shortly thereafter, the court appointed individual and institutional class representatives. The defendants settled with the class over the following years. The remaining five defendants (the Starr defendants) reached an agreement with the class which was presented to the court for approval. Before the fairness hearing was held, the New York attorney general filed an objection to the proposed settlement, on the grounds that the settlement does not take into account an alleged fraudulent transaction that is the basis of a suit that the attorney general was prosecuting in state court. The court determined that the attorney general did not have standing to object to the settlement and denied the attorney general’s request to intervene.
The court first addressed the attorney general’s argument that the Class Action Fairness Act (CAFA), which provides for notice to state attorneys general of class action settlements, gave the attorney general standing to participate in the case. The court rejected this argument, noting that the case was filed before CAFA was enacted. The court held that even if CAFA did apply in this case, the proper role for the attorney general under CAFA is as amicus curiae. With respect to non-CAFA standing, the court stated, “It is not infrequent that parallel suits are litigated, and not unthinkable that there might be overlap between class members in a federal suit and state residents who provide the basis for pursuing state claims. There is no recognition of standing simply to delay or stall federal litigation in which one has no direct interest.” The court therefore considered the attorney general’s objections as amicus curiae submissions, and rejected those objections on the grounds that it would unduly delay resolution of a case which had already continued for eight years, and that prospective class members were given an opportunity to opt out and preserve their rights under the attorney general’s suit. The attorney general has filed an appeal of the court’s decision.
Attorney General Overreached in Settlement of Will Contest
Attorney General v. Dallas, No. 27227 (S.C. Feb. 27, 2013).
In August 2000, the singer James Brown wrote a will devising all of his personal effects to his six children and leaving the remainder of his estate to an irrevocable trust (the Irrevocable Trust). The Irrevocable Trust was created under a separate agreement to provide financial assistance for the education of his grandchildren (in the amount of $2 million) and for the education of poor and financially needy children who seek to continue their education in South Carolina and Georgia. The bulk of Brown’s estate was to be used for the support of the Irrevocable Trust. The will also specified his six children and their legitimate issue as the sole beneficiaries and disavowed any other potential beneficiaries. In the trust agreement, he specified that the trust estate would not be available to any past or future spouse, and that any beneficiary who challenged the will or trust would forfeit his interest thereunder. Brown subsequently married Tomi Rae Hynie, who executed a prenuptial agreement waiving all rights to Brown’s property.
When Brown died, five of his adult children and Tomi Rae Hynie brought actions to challenge the will and the trust. The court appointed new personal representatives of Brown’s estate (after allegations of misappropriation by one of the personal representatives appointed in Brown’s will.) The South Carolina attorney general intervened on the grounds that the claims involved a charitable trust. Through negotiations directed by the attorney general all parties except the court-appointed personal representatives, reached an agreement which was approved by the court. Under this agreement, all challenges were dismissed, the personal representatives of the estate were removed, Tomi Rae Hynie was recognized as the surviving spouse and a new “settlement entity” was created to hold and manage all assets. The trustees of this entity were to be selected solely by the attorney general. A new charitable trust was established (the New Trust), of which the attorney general would select the trustee. An advisory board was created for the New Trust, the number of which was to be determined by the attorney general, with members selected by Tomi Rae and Brown’s children. Approximately half of Brown’s estate was to go to the New Trust, approximately one quarter was to go to Tomi Rae, and each of Brown’s adult children received approximately 4.8 percent.
The personal representatives who had been removed appealed the court’s approval of the agreement. They argued first that the agreement was not eligible for court consideration under South Carolina statutes because the trust did not agree to it and the attorney general had no authority to speak for the trust. The court held that the agreement was eligible for court consideration because the attorney general was appropriately included as the proper person to protect the interests of the public at large, and it was the lower court, rather than the attorney general, who approved the compromise agreement.
The personal representatives next argued that under South Carolina law, a compromise agreement may be approved only if it settles a good-faith controversy and if the compromise is “just and reasonable.” They argued that there was no good-faith controversy and that the compromise was not just and reasonable. The court concluded that there was not a good faith controversy between the parties, in light of the testator’s specific language in the will and the relative suddenness of his death (arguing against undue influence by any party). The court also held that the compromise should not have been approved because it was not just and reasonable. Generally, a compromise is favored in order to avoid a will contest, but the agreement must “defer to the testator’s intent unless departing from his intent is reasonably necessary to protect the beneficiaries’ interests.” That was not the case here. The court criticized the attorney general’s involvement, stating
The settlement provisions allowing the AG to select the trustee, and his continued influence over the trust overreaches his statutory authority, as there is no provision allowing an AG to become involved in the day-to-day operations of a trust. Moreover, the AG’s primary job is the enforcement of charitable trusts, and in this case, the compromise dismantles the existing charitable trusts, to great ill effect on Brown’s estate plan, rather than enforces it.
The court reversed the lower court’s approval of the agreement and ordered appointment of new fiduciaries to oversee the estate.
CAFA Removal Not Appropriate, AAG Not Subject to §1983 Claims
Myinfoguard v. Sorrell, >No. 2:12-cv-00102 (D.Vt. Nov. 9, 2012).
Companies located in Florida and New York (the Sellers) filed suit in federal court challenging the constitutionality of section 2466 of Vermont’s Consumer Protection Act, which requires that companies wishing to charge consumer on their local telephone bills notify them of the charges by first class mail. The statute is designed to prevent addition of unwanted services to customers’ bills (a practice known as cramming.) Two days later, the attorney general filed suit against the companies for violations of the state consumer protection laws, including section 2466. The sellers sought to remove the state action to federal court and added a claim that the lead attorney for the state (AAG Burg) had violated their rights in violation of 42 U.S.C. §1983. The attorney general sought dismissal of the 1983 claims and remand of the case to state court.
The Sellers alleged that AAG Burg had violated §1983 by drafting the original version of §2466, enforcing that provision even after its constitutionality was in question after a Second Circuit decision and “improperly using his powers to investigate violations of the provision and to pursue civil cases against the Sellers. . .” AAG Burg argued that his actions were protected by absolute immunity, which applies to government officials performing functions “analogous to those of a prosecutor.” The court held, “Issuing civil investigative subpoenas, threatening enforcement actions, engaging in settlement discussions, and filing a state court action are all related to the Attorney General’s preparation for litigation” and are thus covered by absolute immunity, especially because he was clearly acting within the scope of the attorney general’s authority. The statute had not been invalidated by a prior court judgment, and “The AAG does not retroactively lose authority to enforce the notification requirement simply because the Sellers have raised potentially valid constitutional objections.” AAG Burg’s acts in drafting the legislative provisions were protected by absolute legislative immunity, which protects non-legislators who perform “legislative functions.” All claims against AAG Burg were dismissed.
The court next addressed the removal of the state case to federal court, which the Sellers argued was appropriate under either the class action or mass action provision of the Class Action Fairness Act (CAFA). The court adopted the “whole complaint” analysis used by the Fourth, Seventh and Ninth Circuits to determine whether a state is the real party in interest in a parens patriae action on behalf of its citizens. The state sought an injunction, civil penalties and restitution for consumers. The court concluded that the state is the real party in interest because the civil penalties and injunction are only available to the state. The Sellers argued that the civil penalty and injunction claims are irrelevant because they voluntarily ceased cramming before the litigation and the recent amendment of §2466 prohibits most third-party charges to Vermont customers. The Sellers also argued that the state’s consumer protection statutes only allow the state to seek injunctive relief for prospective violations of the statutes, and the state may not seek penalties except for violation of an existing injunction. The court rejected these arguments, stating “In the woods of statutory interpretation, this Court may occasionally be convinced to take a road less traveled, but by advancing a rather tortured construction of the CPA, the Sellers
are essentially asking the Court to bushwhack.” The court found that the state was the real party in interest, that CAFA was inapplicable, and that the case should be remanded to state court.
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