A number of recent decisions have addressed the enforcement of civil investigative demands (CIDs) and subpoenas issued by attorneys general.
Massachusetts: A Massachusetts decision addressed the question of personal jurisdiction over the recipient of a CID issued by the Massachusetts attorney general. The state contracted with IDDC for protective gear during the COVID-19 pandemic. IDDC used a subcontractor, USiDG, who spent the state’s money, but provided almost none of the contracted-for material. The Massachusetts attorney general issued a CID to USiDG, seeking information and a video deposition. USiDG responded by letter, declining to provide the documents or the deposition, but did not file a motion seeking to set aside or modify the CID as permitted under Massachusetts law. The attorney general filed an action to enforce the CID. USiDG argued that the attorney general lacked authority to bring this action and the court lacked personal jurisdiction over USiDG. The court concluded that USiDG waived its personal jurisdiction defense by failing to file a motion for a protective order in response to the CID. The court cited prior Massachusetts caselaw, which held that “Merely informing the Attorney General of its refusal to comply does not suffice to shift the burden to the Attorney General to take the next legal step.” With respect to the question of whether the court has subject matter jurisdiction, the court granted the attorney general’s motion for jurisdictional discovery about the facts surrounding the contract with USiDG and its connections with Massachusetts. Attorney General v. USiDG, 2023 Mass. Super. LEXIS 34 (Mass. Super. Suffolk Cty. Apr. 20, 2023).
Michigan: A Michigan court of appeals held that the Michigan attorney general could not issue investigative subpoenas to a drug manufacturer because its conduct was regulated by the Food and Drug Administration. The attorney general filed a petition for civil investigative subpoenas under Michigan’s Consumer Protection Act (MCPA). The MCPA makes unlawful “unfair, unconscionable or deceptive methods, acts or practices in the conduct of trade or commerce.” The attorney general sought to investigate defendant Eli Lilly’s practices in pricing analog insulin and sought a declaratory judgment that the MCPA applied to the conduct at issue. Two Michigan supreme court opinions have interpreted MCL sec. 445.904(1)(a), which exempts from the MCPA, “[a) transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” The Michigan supreme court held that if a general category of conduct is specifically authorized by law, this exemption applies, even if the specific conduct could otherwise be improper.
In this case, the trial court held that because Eli Lilly was authorized by law to manufacture and sell insulin, this MCPA exception applied. The attorney general appealed. The court of appeals affirmed, on the same grounds, and refused the attorney general’s suggestion that the appellate court decline to apply the past supreme court cases. The court held that the Michigan supreme court is responsible for overturning its own precedent, and it has not explicitly directed the appellate court to address this issue here. Attorney General v. Eli Lilly & Co., 2023 Mich. App. LEXIS 4445 (Mich. Ct. App. June 22, 2023). The attorney general has appealed the decision to the Michigan supreme court and the court has agreed to hear the case.
New Jersey: A New Jersey appellate court addressed the application of Fifth Amendment protections when the New Jersey attorney general issued a subpoena to a New Jersey business. Slumped Kitchen is a grocery retail and delivery business that “gifts” cannabis to its customers in connection with the sale of snacks, such as brownies and cookies. The price for the snacks depended upon whether the customer selected a fourteen-gram or twenty-eight-gram gift of cannabis with their purchased treats. The New Jersey attorney general’s office issued subpoenas to Slumped Kitchen seeking information about its advertising, the cost of its inputs and age verification processes for its sales, among other things. After failing to respond, Slumped Kitchen moved to quash the subpoena. Slumped Kitchen argued that before its incorporation on April 15, 2021, it was a sole proprietorship and production of documents prior to that date violated its Fifth Amendment privilege against self-incrimination. The trial court found the Fifth Amendment and New Jersey privilege against self-incrimination applied to individuals and not business entities and the requested information was corporate in nature. “[t]he production of corporate records by the employees of [plaintiff] implicates no personal right.” Slumped Kitchen appealed.
The appellate court affirmed the district court’s decision. First, the court noted that the privilege against self-incrimination applies only to natural individuals, and the New Jersey supreme court has specifically held that “”[t]he business records of a sole proprietor[ship] do not lie within that special zone of privacy that forms the core of the documents protected by . . . the New Jersey privilege against self-incrimination.” In the same case, the New Jersey supreme court stated, “[T]o distinguish between the business records of a sole proprietorship and other business entities not only would be inequitable but might in fact offer the knowledgeable white-collar criminal a means to avoid criminal prosecution.” In fact, because plaintiff is not a natural person, it lacked standing to assert a Fifth Amendment privilege claim at all.
Turning to the substance of the subpoena, the court held that the requested documents were corporate in nature and not personal because they related to plaintiff’s “business practices, including licenses, advertising methods, and age-verification policies.” The court also held that the trial court was not required to conduct an in-camera review of the documents because the corporate nature of the requested documents appeared on the face of the subpoena. Slumped Kitchen LLC v. New Jersey, 2023 N.J. Super. Unpub. LEXIS 1002 (N.J. Super. App. Div., June 22, 2023).
New York: A New York appellate court recently articulated the standard for quashing an investigatory subpoena issued by the attorney general. In an investigation of complaints about price gouging of meat products during the pandemic, the attorney general of New York served a subpoena on Tyson Foods, which it sought to quash. The trial court denied the motion to quash and the appellate division affirmed, stating that Tyson had failed to demonstrate that “the Attorney General’s subpoena calls for documents that are utterly irrelevant to any proper inquiry or that the futility of the process to uncover anything legitimate is inevitable or obvious (citations omitted).” The court held that “the documents sought bear a reasonable relation to the issue of whether respondent . . . engaged in price gouging within the meaning of General Business Law §396-r(2).” Matter of People v. Tyson Foods, Inc., 218 A.D. 3d 424 (N.Y. App. Div. July 27, 2023).
Pennsylvania: The Pennsylvania attorney general could conduct discovery about potential violations unknown to the attorney general and not included in its complaint, according to a recent decision. The Pennsylvania attorney general filed a complaint against defendants, alleging violations of the state’s unfair trade practices and consumer protection laws and the Home Improvement Consumer Protection Act. The attorney general then issued discovery requests to the defendants as well as third party subpoenas. The defendants argued that the attorney general should only be permitted to conduct discovery about the specific alleged violations which caused the Commonwealth to file the Complaint and should not be permitted to conduct discovery to identify additional alleged violations currently unknown to the attorney general. Under general discovery rules, discovery cannot be too burdensome or expensive, and it must be “reasonably calculated to lead to the discovery of admissible evidence.” There is no Pennsylvania caselaw about whether the attorney general is entitled to conduct broader discovery than other parties.
The court held that the attorney general should be permitted to conduct discovery to identify additional alleged violations of the state’s consumer protection laws which were unknown to the attorney general when it filed its complaint. The complaint alleges a pattern of behavior that the attorney general believes violated the law, and the complaint provides examples, but not an exhaustive list, of the alleged violations. Incidents of alleged violations, even if unknown to the attorney general, are relevant to the causes of action in the complaint. To reduce the burden of discovery, however, the court limited the period for discovery to five years prior to the complaint. The court specifically held, “This does not mean that Plaintiff may not prosecute incidents that allegedly occurred before that time that it knew about when it filed the Complaint or that it learns about by means other than discovery; it means that Plaintiff may only conduct discovery for that period.”
The court originally determined that the attorney general could not conduct discovery about incidents that occurred after the complaint was filed. Incidents that had not yet occurred when the complaint was filed were not relevant to the attorney general’s complaint, even if they are the same types of incidents set forth in the complaint. The court pointed out that the attorney general could file a subsequent complaint. on a motion for reconsideration, the court held that the attorney general should be permitted to conduct discovery on additional incidents that occurred within five years prior to the complaint. Thee court also held reversed its prior ruling and held that the attorney general could seek discovery about alleged unfair trade practices that occurred after the complaint was filed because that discovery is relevant to whether the offending conduct is likely to reoccur without an injunction. In addition, the statutory language allows discovery when the attorney generla has reason to believe that “any person is using or is about to use” any uunfair trade practice, indicating that the attorney general’s enforcement actions are concerned with future as well as ongoing practices. Commonwealth v. Curtis Total Service, Inc., 2023 Pa. Dist. & Cnty. Dec. LEXIS 1690 (Ct. Comm. Pleas, Lehigh Cnty., August 23, 2023), motion for reconsideration granted, Dec. 12. 2023).
