Emily Myers, NAAG Antitrust and Powers and Duties Chief Counsel
New York and Massachusetts
Attorney General Subpoena Authority
Several recent decisions, from a federal district court in New York and from the Massachusetts Supreme Judicial Court, discussed the breadth of attorney general investigatory powers. In each case, the court dismissed Exxon Mobil’s attempt to stop state officials from using compulsory process in investigations.
The attorneys general of Massachusetts and New York sought documents from Exxon Mobil (Exxon) about Exxon’s “historical knowledge of climate change and its communications with interest groups and shareholders regarding” climate change. The subpoena from the New York attorney general and the civil investigative demand (CID) from the Massachusetts attorney general were issued in connection with investigations into deceptive and fraudulent acts in violation of state law. The types of documents sought included research and internal communications concerning climate change, marketing, advertising and public relations materials about climate change, communications with other energy companies and affiliated interest groups, and public statements its officers have made about climate change.
Exxon filed a federal suit in Texas against the Massachusetts attorney general several months after receiving the CID, later adding the New York attorney general. The complaint alleged that the CID and subpoena were part of a conspiracy “to silence and intimidate one side of the public policy debate on how to address climate change.” Exxon cited a press conference held by the attorneys general in New York at which both indicated that they were investigating potential fraud by Exxon in “a troubling disconnect between what Exxon knew, what industry folks knew, and what the company and industry chose to share with investors and with the American public.” Exxon argued that the AGs’ “overtly political tone,” and comments on public “confusion” relative to climate change showed that their intent is to chill dissenting speech and that they are retaliating against Exxon for its speech about climate change. Among other causes of action, Exxon alleged violations of its free speech rights under the First Amendment, its right to be free of unreasonable searches under the Fourth Amendment, and its due process rights under the Fourteenth Amendment. Exxon sought a declaratory judgment that the attorney general investigations violated its constitutional rights and an injunction halting or limiting the investigation. The federal suit was transferred to New York. The attorneys general moved to dismiss on the grounds, among others, of personal jurisdiction, res judicata, and failure to state a claim.
Exxon also filed suit in Massachusetts Superior Court to set aside the CID and disqualify the Massachusetts attorney general from the investigation. The state court complaint relied on the same factual allegations as the federal suit and claimed that the Massachusetts subpoena violated the state constitution’s protections for free speech and was arbitrary and capricious, and further alleged that Exxon was not subject to personal jurisdiction in Massachusetts. The Massachusetts attorney general cross-moved to compel Exxon to comply with the subpoena. The Massachusetts superior court denied Exxon’s petition and granted the attorney general’s motion to compel. The court found that Exxon was subject to personal jurisdiction by virtue of its control over its franchisees operating in the state. The court also found that the attorney general had provided sufficient grounds upon which to issue the CID. With respect to the attorney general’s remarks at the press conference, the court said, “These remarks do not evidence any actionable bias on the part of the Attorney General: instead it seems logical that the Attorney General inform her constituents about the basis for her investigations.” The court also declined to disqualify the attorney general.
In the federal case, the district court first discussed whether it had personal jurisdiction over the Massachusetts attorney general. The basis for the claim was the attorney general’s attendance at the news conference in New York that formed the basis for Exxon’s claims of bias. The court stated that whether a single meeting could form the basis for jurisdiction depends on “the significance of the meeting to the claim and the relationship between the meeting and the wrongful act.” Exxon alleged that the attorneys general formalized a “conspiracy” against Exxon at the news conference and that the event served as a “kickoff” for the actions taken against Exxon. The court found that these allegations were sufficient to satisfy the minimum contacts requirement and also indicate that jurisdiction over the Massachusetts attorney general is reasonable. Although the court stated that it was “mindful of the affront to state sovereignty posed by haling a state official into federal court . . . in another state,” courts have recognized that an out-of-state law enforcement officer’s “established relationship with forum state officials” can be sufficient to establish personal jurisdiction, and that relationship was established here.
The Massachusetts attorney general also argued that the Massachusetts superior court decision to enforce the subpoena is preclusive of the claims in this case. The court found that there was no issue preclusion because the standard applied by Massachusetts courts in cases seeking to set aside subpoenas is a good cause standard, a “significantly heavier burden of persuasion” than the preponderance of the evidence standard applied in the Second Circuit.
The court did find, however, that Exxon’s claims against Massachusetts were barred by res judicata, which bars re-litigation of claims that could have been raised in a previous proceeding, whether or not those claims were actually litigated. The court held that the claims in Exxon’s federal case “could have and should have been raised” in the Massachusetts case, so the claims are precluded. Claims are the same for res judicata purposes if they are “transactionally related” to the claims in the earlier proceeding. In this case, the facts alleged by Exxon are the same for each proceeding, even though some different causes of action are included. Thus, the court granted the Massachusetts attorney general’s motion to dismiss on claim preclusion grounds.
Turning to the argument that Exxon failed to state a claim, the court found that the heart of Exxon’s case is that “each of the constitutional torts it has asserted requires a plausible inference that the AGs acted not based on a good faith belief that Exxon may have violated state laws, but to retaliate against Exxon for, or to deter Exxon from, speech that is protected by the First Amendment.” Exxon’s claims are based on the press conference, at which Exxon argued that the attorneys general “evinced their intent to discriminate against other viewpoints regarding climate change.” The court held:
The fact that Schneiderman believes climate change is real—so does Exxon apparently—and advocates for particular policy responses does not mean the NYAG does not also have reason to believe that Exxon may have committed fraud. The latter depends on the separate question of what the NYAG believes Exxon knew, when it knew it, and whether what it knew differs from what it has publicly said.
Similarly, the court stated, “Healey’s statement suggests that she believes Exxon may have made false statements to its investors and the public and may have committed fraud.”
Exxon also argued that a common-interest agreement among the attorneys general was evidence of “concealment of their political agenda.” The court noted that the preamble to the agreement states that the AGs share an interest in “ensuring the dissemination of accurate information about climate change,” and characterized this as “an admirable goal of a public official with which few would quarrel” rather than evidence that the attorneys general were willing “to violate First Amendment rights to carry out [their] agenda.” The court also noted, “‘Accurate information’ is the lifeblood of our democracy—not a goal that suggests skullduggery.”
Finally, the court determined that concerns expressed by other state attorneys general and by a congressional committee about Massachusetts and New York’s investigation were not germane.
Indeed, if the fact that elected Republicans criticize investigations conducted by elected Democrats (and vice versa) were to be evidence that the criticized investigations are improperly motivated political hit jobs, law enforcement at the state level will be drawn to a screeching halt by what amounts to a heckler’s veto.
The court granted the motions to dismiss, with prejudice. Exxon Mobil Corp. v. Schneiderman, No. 1:17-02301 (S.D.N.Y. Mar. 29, 2018).
Massachusetts Supreme Court
Exxon appealed the Massachusetts trial court’s decision (discussed above) and the Massachusetts Supreme Judicial Court transferred the case on its own motion from the appellate court. A few days after the federal court ruling discussed above, the state Supreme Court concluded that there was personal jurisdiction over Exxon with respect to the attorney general’s investigation and affirmed that lower court’s order denying Exxon’s request to set aside the civil investigative demand and disqualify the attorney general.
The court agreed with the trial court that the court’s jurisdiction over Exxon satisfied both the Massachusetts long-arm statute and the due process requirements of the Fourteenth Amendment. Although Exxon’s general activities in Massachusetts were not sufficient to create general jurisdiction, the court determined that the attorney general is authorized to investigate any conduct she believes may violate Chapter 93A of the Massachusetts General Law (G.L. 93A), which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices in the conduct of any trade or commerce.” G.L. 93A is a statute of “broad impact” and the court held that what constitutes a prohibited practice requires a case-by-case analysis. The attorney general alleged that Exxon knew about “the impact of fossil fuels on both the Earth’s climate and the value of the company” but failed to disclose to customers and investors. The CID sought information about what Exxon knew about these matters. The court found that both the Massachusetts long-arm statute and due process were satisfied because Exxon’s agreement with its franchisees in the state included Exxon control over its franchisees’ advertising and that advertising was a focus of the CID.
Turning to Exxon’s substantive challenge to the CID as overbroad and burdensome, the court stated that the attorney general’s authority to investigate under G.L. 93A is broad, but there are some limits: the party challenging the CID has the burden of showing that the information requested is not described with reasonable particularity, is not relevant, or is an excessive amount. The state Supreme Court found that the CID appropriately described the requested material. The court disagreed with Exxon that historic documents from as far back as 1976 were irrelevant, holding, “A document created more than four years ago is, of course, still probative of Exxon’s present knowledge on the issue of climate change, and whether Exxon disclosed that knowledge to the public.” The court also found that the CID did not request excessive amounts of material, especially since “Exxon has already complied with a request for similar documents from New York’s attorney general.” The court also addressed Exxon’s claims that the attorney general’s issuance of the CID was pretextual and thus was arbitrary and capricious. The court held that “The Attorney General’s belief that Exxon’s conduct may violate G.L. 93A is all that is required under G. L. c. 93A, § 6 (1).”
The court next reviewed Exxon’s request for disqualification of the entire office of the attorney general, based on her remarks at a press conference (described above). Exxon alleged that the attorney general’s remarks violated Massachusetts rules of professional conduct prohibiting a lawyer from making prejudicial statements to the public regarding an ongoing investigation. The state Supreme Court upheld the lower court’s refusal to disqualify the attorney general, stating “The Attorney General is authorized to investigate what she believes to be violations of c. 93A. . . . As an elected official, it is reasonable that she routinely informs her constituents of the nature of her investigations.”
Finally, the Supreme Court affirmed the trial court’s denial of a stay of this litigation until the federal court litigation was completed. The court stated, “In denying Exxon’s request, the judge reasoned that the Superior Court is better equipped than a Federal court in Texas to decide a matter pertaining to Massachusetts’s primary consumer protection law. [citation omitted] Exxon argues that this constitutes an abuse of discretion, and contends, somewhat remarkably, that there “is good reason to question the premise” that Massachusetts courts are more capable than out-of-State courts to oversee cases arising under c. 93A.” The Supreme Court noted that the legislature had designated Massachusetts Superior Court as the forum for challenging a CID, and stated, “It should go without saying that Massachusetts courts, which routinely hear c. 93A claims, are better equipped than other courts in other jurisdictions to oversee such cases.” Exxon Mobil Corporation v. Attorney General, No. SJC-12376 (Mass. Apr. 13, 2018).
Attorney General Is Part of Executive, Not Judicial Branch
The Mississippi Supreme Court, addressing an unusual challenge to an arrest and indictment, analyzed whether the attorney general is an officer of the judicial or executive branch of state government. Smith was arrested and indicted for capital murder, among other crimes. He filed a civil action against the Mississippi attorney general for a writ of quo warranto, declaratory judgment, and a writ of prohibition, based on the legal theory that the attorney general was a judicial officer, precluded from carrying out any law enforcement or prosecutorial duties. The trial court held that the attorney general is within the executive branch of government, and Smith appealed.
The Supreme Court noted that the offices of the attorney general and the state’s district attorneys are created in Article 6 of the Mississippi Constitution, entitled “Judiciary.” The court, relying on established case law, explained that the constitution’s article titles are “a mere facility of convenience,” which carry no more weight than the section numbers. Although the court acknowledged that it had never before addressed the question in a case where a litigant has challenged the attorney general’s ability to discharge his prosecutorial duties, the court held, “the Office of Attorney General, under our Constitution, is a component of the executive branch. That the office is located within the article entitled ‘Judiciary’ is of no consequence.” Smith v. Hood, 2018 Miss. Lexis 83 (Miss. Mar. 1, 2018).
Attorney General’s Charities Regulation Not a Violation of First Amendment Rights
Non-profit organizations organized under both Internal Revenue Code sections 501(c)(3) and 501(c)(4) are required to submit a Form 990, including a list of the organization’s donors, addresses, and amounts of their donations. The Internal Revenue Service (IRS) must keep this information confidential. New York’s non-profit regulations, promulgated by the attorney general, require non-profits soliciting donations in New York to submit Form 990 to the state. Those filings are only reviewed by the attorney general’s charities section.
The plaintiffs are two non-profit organizations, a 501(c)(3) and a 501(c)(4), who espouse specific political views. They have submitted the Form 990 each year since 2005, but have never included the list of donors. The attorney general accepted their submissions until 2013, when the attorney general’s office began serving deficiency notices on the organizations. Although the attorney general has not done so, he is authorized to levy fines of $100 per day for the deficiencies and to revoke their solicitation privileges in New York.
The plaintiffs filed suit in federal court in 2014 challenging the attorney general’s regulations. They argued that the regulations were an unconstitutional prior restraint because they were required to disclose their donors before asking for money. They also argued that, by collecting lists of names of donors with specific political preferences that could be released to the public, the attorney general had “the unconstitutional power to intimidate donors from paying for the communication of their views.” Plaintiffs also argued that the attorney general was preempted from duplicating the federal government’s disclosure requirements. The trial court granted the attorney general’s motion to dismiss on all grounds, and the plaintiffs appealed.
Turning first to plaintiffs’ First Amendment claims, the court determined that the appropriate level of analysis was “exacting scrutiny,” under which there must be a “substantial relation” between the disclosure requirement and a “sufficiently important governmental interest” where the strength of that interest is “commensurate with the seriousness of the burden on First Amendment rights.” In this case, the court agreed with the attorney general as to the “importance of the government’s interests in ensuring organizations that receive special tax treatment do not abuse that privilege and of its interest in preventing those organizations from using donations for purposes other than those they represent to their donors and the public.” In this case, “we see no reason to believe that this risk of speech chilling is more than that which comes with any disclosure regulation,” and the same information has already been provided to the IRS.
With regard to the plaintiffs’ claims that the regulations are unconstitutional as applied to them, the court acknowledged that someone might hesitate to advance a cause if they knew a state officer will see their action. “But totalitarian tendencies do not lurk behind every instance of a state’s collection of information about those within its jurisdiction.” Because the disclosure is limited by statute to the attorney general’s charities division, the court refused to find that the mere possibility that the donor information would be revealed by the attorney general was insufficient to outweigh the attorney general’s need for the information. The court stated that the only harm alleged by plaintiffs is “a bare assertion that the attorney general has a vendetta against” the plaintiffs and rejected the plaintiffs “as applied” claims.
The court also rejected plaintiffs’ claim that the regulations constituted a prior restraint. The court noted that the argument appears to be that the attorney general has the discretion to withdraw permission to solicit in New York if they do not comply with the filing requirements. The court described this as a facially content-neutral law which only constitutes a prior restraint when it “(1) disallow[s] that expression unless it has previous permission from a government official and (2) vest[s] that official with enough discretion that it could be abused.” In this case, the court noted that the withdrawal of permission to solicit is a remedial, rather than ex ante measure, and “we cannot view the Attorney General’s discretion to determine which groups receive deficiency notices or face penalties for failing to file Schedule B as anything but a necessary manifestation of the need to prioritize certain enforcement efforts over others.” Citizens United v. Schneiderman, No. 16-3310 (2d Cir. Feb. 15, 2018).
Attorney General’s Common Law Powers
The operators of a charter school were sued for alleged self-dealing, breach of fiduciary duty, and other misuse of both federal and state public funds. The state department of education and the attorney general filed an intervening complaint. The defendants challenged the attorney general’s authority to press the state’s claims.
The court held that the attorney general may bring these claims. Ohio statutes authorize the attorney general to bring these types of claims when the state auditor requests the action. In addition, that attorney general has common law standing to pursue the claims because he is seeking to recover public property. The statute authorizing this type of claim does not restrict the attorney general’s common law standing, because any such restriction must be explicitly stated by the legislature. In this case, there is no language limiting the attorney general’s standing, and “statutory reinforcements of specific areas of the Attorney General’s common law standing are not limitations on his general standing.” Sun Bldg. Ltd. Partnership v. Value Learning & Teaching Acad., 2018 Ohio Misc. Lexis 2 (Hamilton Cty. Ct. Comm. Pleas, March 26, 2018).
Protection of Attorney General CID Materials from FOIA Disclosure
Two hospitals in Huntington, West Virginia, agreed to merge. The West Virginia Attorney General’s Office and the Federal Trade Commission (FTC) both investigated the merger for potential anticompetitive effects. In the course of the investigation, the FTC transferred some of the documents it received to the attorney general. The West Virginia Antitrust Act provides, “The attorney general shall not make public the name or identity of a person whose acts or conduct he investigates pursuant to this section or the facts disclosed in the investigation, but this subsection does not apply to disclosures in actions or enforcement proceedings pursuant to this article.” The attorney general and the parties also executed a confidentiality agreement under which the documents received by the attorney general would not be disclosed and would be used only for law enforcement purposes. The attorney general eventually filed an Assurance of Voluntary Compliance, through which the merger of the hospitals was approved.
The transaction was opposed by Steel of West Virginia (Steel) which made a Freedom of Information Act (FOIA) request to the attorney general’s office for all public records and correspondence relating to the merger. The attorney general declined to provide a number of documents because they were subject to the “investigatory exemption” of the West Virginia Antitrust Act. Steel filed a complaint to enjoin the attorney general from withholding the documents on the grounds that there was no basis for withholding them and that the attorney general must produce an index of the documents justifying their withholding. The attorney general produced the index which was reviewed by the court, and the attorney general also sent to the FTC the portion of the index describing the documents it had received from the FTC. The FTC wrote a letter to the court, stating that the documents it provided to the attorney general had been provided upon the attorney general’s certification that the material would remain confidential and be used only for law enforcement purposes.
The court ordered the attorney general to unseal the entire index, as a sanction for having disclosed a portion to the FTC, and ordered production of 89 documents. This order was appealed to the state Supreme Court. The Supreme Court held that the statutory exemption in the West Virginia Antitrust Act is incorporated into the West Virginia Freedom of Information Act, and reversed the order directing production of the 89 documents, stating, “A denial of the full import of the Attorney General’s statutory exemption would place investigations of illegal conduct under the Antitrust Act at a disadvantage and would be contrary to the public’s interest in the enforcement of the law.”
The Supreme Court also reversed the court’s order unsealing the index of documents prepared by the attorney general. The Supreme Court found that the release of the portion of the index to the FTC was permitted because the state Antitrust Act states that the attorney general “may cooperate with officials of the federal government and the several states in the enforcement of this article.”
Finally, the court addressed the attorney general’s argument that the lower court incorrectly concluded that the West Virginia Health Care Authority Act exempts the transaction from the state antitrust laws. That statute went into effect in March 2016, after the transaction at issue here had been approved by the attorney general. The statute is intended to provide state action immunity for consolidations of health care providers if those consolidations are approved by the West Virginia Health Care Authority. The court held that this statute was prospective, rather than retrospective, in effect, and that the attorney general’s “duties of confidentiality in securing information regarding the merger predate the 2016 statutes.” Morrisey v. Steel of West Virginia, No. 16-1104 (W. Va. Jan. 31, 2018).
Relationship between Attorney General and Local Prosecutor
Three cases, in Michigan, New York, and Virginia, addressed the relationship between attorneys general and local prosecutors with respect to post-conviction criminal matters.
In Michigan, three juveniles were convicted of first-degree murder and other offenses 25 years ago and were sentenced to life in prison without parole. The judge presiding over their trials and sentencing is now a Michigan county prosecutor in the same county. After the Supreme Court decided, in Miller v. Alabama,1 that life without parole for juvenile offenders violates the Eighth Amendment, the Michigan legislature established a procedure for resentencing juveniles to whom the decision applied. Under that procedure, if the prosecutor failed to seek resentencing, the affected defendant would be sentenced to a term of years. In this case, the prosecutor’s office sought resentencing of the defendants to life without parole.
The defendants filed motions to disqualify the prosecutor and her entire office, alleging that, as the judge in the prior proceedings, she had a conflict of interest that raised constitutional concerns, and that her motions requesting life without parole for them should be struck (meaning they would receive a term of years). The prosecutor requested that the attorney general appoint a special prosecutor, pursuant to Michigan law. The attorney general took over the case (as he was permitted to do under state law), and decided not to withdraw the prosecutor’s motions for mandatory life sentences. The trial court concluded that, although the prosecutor had essentially conceded that she was disqualified, the attorney general had the authority to re-evaluate the prosecutor’s motions, which need not be struck. The defendants appealed.
The court of appeals analyzed the statute under which the attorney general may appoint a special prosecutor or act as the prosecutor himself. The statute provides that “the attorney general may elect to proceed in the matter.” When the attorney general took over the cases, he did so “for purposes of going forward or continuing the existing cases . . . . The procedural history of the case up to that point in time was not wiped out by the transfer of prosecutorial power from the prosecutor to the attorney general.” The attorney general became vested with all of the powers of the prosecuting attorney and had the authority to withdraw the previously filed motions. “The attorney general decided to proceed on the same course as the prosecutor. Defendants, therefore, have received the unbiased and unconflicted review that they demand.” People v. Hayes, 2018 Mich. App. Lexis 950 (Mich. Ct. App. Mar. 27, 2018).
In New York, the State Police investigated alleged drug trafficking at the Rensselaer County Jail. The investigation led to a broader investigation of misuse of funds by officials of the correction officers’ union, the Sheriff’s Employees Association of Rensselaer County (SEARCO). The Rensselaer county district attorney recused himself from the investigation, which was taken over by the U.S. attorney for the district. After the federal authorities determined that the defendant’s actions did not constitute federal offenses, the New York Attorney General’s Office reviewed the files and told the investigator that a formal request was required for the attorney general to take over the prosecution. The request was made in 2015. The defendant was indicted on four counts and moved to dismiss the indictment on several grounds, including that the attorney general’s office lacked jurisdiction. The county court declined to dismiss the indictments, and defendant appealed.
The appellate court noted that the New York attorney general has prosecutorial power only “when specifically authorized by statute.” In this case, New York’s Executive Law states, “upon the request of the head of any department, authority, division or agency of the state,” the attorney general may prosecute illegal activity that falls within the authority of the requesting officer. In this case, the superintendent of the State Police had sent a letter asking the attorney general to review and, if appropriate, prosecute the SEARCO matter. The fact that the attorney general’s office had previously reviewed the files and informed the investigators in the case that a referral was required did not negate this request. People v. Rogers, 157 A.D.3d 1001; 69 N.Y.S.3d 384 (N.Y. App. Div. 2018).
In Virginia, a convicted murderer, Brown, petitioned for a writ of actual innocence 40 years after he was convicted of murder. The trial court ordered post-conviction DNA testing by the state Department of Forensic Science (DFS) laboratory, which was inconclusive. Brown then sought testing by another lab, and the Commonwealth’s attorney did not object to the request. Brown based his petition for a writ of actual innocence on the testing done by the private laboratory. The Virginia Attorney General’s Office moved to dismiss Brown’s petition on the grounds that 1) his petition relied on testing not performed or certified by DFS, as required by statute, and 2) even the private lab results did not provide sufficient evidence of actual innocence under Virginia law.
Among other things, Brown argued that the attorney general’s office is estopped from making the statutory argument because the Commonwealth’s attorney had not objected to the testing by the private laboratory. The court held:
It is also irrelevant that the Attorney General and the Commonwealth’s Attorney disagree on this issue. They are separate constitutional officers and are entitled to their separate opinions. . . . The Attorney General and the Commonwealth’s Attorney each have distinct, although at times complementary, responsibilities. . . The duty to represent the Commonwealth in petitions for writs of actual innocence rests exclusively with the Attorney General.
The court agreed with the attorney general and denied Brown’s petition. In re Brown, 2018 Va. Lexis 26 (Va. March 22, 2018).
- 567 U.S. 460 (2012).