Emily Myers, NAAG Antitrust and Powers and Duties Chief Counsel
Conflicts in Representation and Due Process Rights
In a complicated case involving the investigation of a sitting attorney general, the Arizona Supreme Court addressed due process rights in administrative proceedings where a single individual acts as both prosecutor and decision maker. The Arizona attorney general and other parties were accused of campaign finance violations by the secretary of state. Arizona law provides that the secretary of state refer such accusations to the Attorney General’s Office. In order to avoid the appearance of impropriety, the solicitor general appointed a special assistant attorney general (SAAG) to investigate the alleged violations. The SAAG investigated and issued a compliance order finding that the defendant had violated Arizona campaign finance law and ordering substantial refunds of contributions. Pursuant to the prescribed administrative process, the defendants requested a hearing before an administrative law judge (ALJ). After a hearing, the ALJ found that the SAAG had failed to prove the claims and recommended that the SAAG’s order be vacated. The SAAG then issued a final administrative decision rejecting the ALJ’s recommendation. The defendants appealed to the district court, and in the course of that appeal, learned that the SAAG had participated in the prosecution of the case before the ALJ, including preparation and strategy. The defendants claimed a violation of their due process rights, and the district court and court of appeals rejected those arguments. The Arizona Supreme Court granted review.
The Arizona Supreme Court held that due process requires a neutral decision maker, and, although there was no indication of actual bias, “once an official determines that a legal violation has occurred, that official can be expected to develop a will to win at subsequent levels of adjudication.” The court emphasized several times that the potential for bias is not “intolerable” if the functions are combined in a single agency, but if they are performed by the same person, they violate due process. The court noted, “We have here not only a single agency performing accusatory, advocacy, and adjudicatory functions, but the same individual performing all three functions.” The court held, “due process does not allow the same person to serve as an accuser, advocate, and final decisionmaker in an agency adjudication.” Again emphasizing that this decision involved the actions of a single person, the court stated, “The agency head may supervise personnel involved in such functions; but if she makes the final agency decision, she must be isolated from advocacy functions and strategic prosecutorial decisionmaking and must supervise personnel involved in those functions in an arms-length fashion.” The court remanded the case to the Attorney General’s Office for a final decision, because the current officeholder had no conflict and could render a final administrative decision. Horne v. Polk, 2017 Ariz. LEXIS 150 (Ariz. May 25, 2017).
Attorney General’s Common Law Duties
A Hawaiian case addressed the representation of the legislature by the attorney general and the attorney general’s common law powers. Plaintiffs filed a quo warranto claim against a long-time state legislator, Calvin Say, who they claimed did not live in the district that he represented. After an appeal, the court issued a writ of quo warranto against Say, requiring him to show by what authority he claimed the seat. The Hawaii House of Representatives, represented by the attorney general, moved to intervene in the action. After a number of lower court proceedings, the case was appealed to the Hawaii Supreme Court. The plaintiffs sought to disqualify the attorney general on the grounds that the attorney general had a conflict of interest. Plaintiffs argued that the attorney general’s client is the state of Hawaii, and the attorney general cannot represent the House of Representatives if that results in a position adverse to the general state interest. The Supreme Court held that the attorney general was not representing multiple clients in this case. The plaintiffs are represented by independent counsel, while the attorney general represents the House of Representatives. The court noted “The Attorney General’s common law duty to protect the public interest is subject to his or her definition of what is in the best interests of the state or public at large. . . [plaintiffs’] writ of quo warranto does not ipso facto establish their position to be in the public interest and is not binding upon the Attorney General.” Hussey v. Say, 139 Haw. 181 (Haw. 2016).
Attorney General Control of Litigation on Behalf of the State
The authority of the Illinois attorney general to control all litigation on behalf of the state was reaffirmed in a recent decision. The director of Central Management Services (CMS), an Illinois state agency, sued the attorney general after she declined to defend CMS’s position that certain health care personal assistants were not state employees for purposes of the state’s workers’ compensation law. CMS sought to enjoin the attorney general from representing CMS and to require the attorney general to appoint a special assistant attorney general to represent the agency. The trial court dismissed the complaint, holding that the “unique” powers of the Illinois attorney general include the “responsibility to decide what arguments, strategies, and litigation tactics to employ.” The trial court also held that CMS’s “disagreement with the attorney general’s strategy” was not a conflict of interest that justified removal of the attorney general. CMS appealed.
The court of appeals affirmed the district court. Noting that the Illinois attorney general has extensive common law powers, the court described two situations in which there could be disqualifying conflicts for the attorney general: where the attorney general is individually interested in or a party to the case or when the attorney general is representing opposing state agencies. Neither of those circumstances applies in this case, because CMS simply disagrees with the arguments made by the attorney general. The attorney general was defending CMS, but was refusing to make arguments that had repeatedly been rejected by the Illinois Industrial Commission (the decision-making authority). In fact, the Attorney General’s Office “has been threatened with penalties and fees” because this argument “is unreasonable in light of numerous decisions [to the contrary].” The court of appeals concluded by citing Illinois Supreme Court precedent: “[I]f the Attorney General is to have the unqualified role of chief legal officer of the State, he or she must be able to direct the legal affairs of the State and its agencies.” Hoffman v. Madigan, 2017 IL App (4th) 160392 (Ill. App. 4th Dist. June 22, 2017).
Contingency Fee Contract with Outside Counsel is Permissible
As has been the case in other states, defendants’ challenge to the New Hampshire attorney general’s contingency fee contract with outside counsel was dismissed. The state of New Hampshire retained an outside law firm to assist the Attorney General’s Office in investigating and litigating potential claims of fraudulent marketing of opioid drugs. The attorney general issued documentary subpoenas to several defendants. The defendants refused to respond to the subpoenas, the state moved to enforce them, and the defendants counterclaimed that the attorney general’s retention of outside counsel on a contingent basis was unlawful. Defendants sought a protective order seeking to “bar the attorney general from engaging contingent fee counsel.” The defendants argued that the fee agreement violated New Hampshire statutes and common law, was ultra vires because the attorney general did not obtain legislative and executive approval before entering into the contract, violated the doctrine of separation of powers, violated the New Hampshire Rules of Professional Conduct, and violated their due process rights. The trial court found that the defendants had standing to raise the issues, that the contingency fee contract was invalid because the attorney general had not received proper approval from the governor and legislature, but that there were no ethical violations or violations of due process rights. The attorney general appealed.
The New Hampshire Supreme Court first addressed the standing of defendants to challenge a government contract to which they are not a party. The court dismissed the defendants’ claim that the contract was ultra vires on the grounds that defendants’ claimed injury (the inherent bias of the outside counsel) would not be remedied if proper procedures had been followed. The court also held that the defendants could not challenge the contract as a violation of the New Hampshire statutes that require any funds obtained through litigation or settlement be deposited in a consumer protection escrow account. The defendants argued that this statute prohibited contingency fee contracts because all funds must be deposited in the escrow account. The court held that the defendants’ injury was neither actual nor imminent, since there might never be any funds at all. The court also dismissed defendants’ allegations that the contingent fee contract violated the state’s Ethics Code on the grounds that the Code provided no private right of action.
Defendants also argued that the contingency fee contract violated New Hampshire common law, because “[w]hen a private lawyer represents the State in a matter in which the lawyer has a personal interest, that interest compromises the ‘impartiality’ required of all government lawyers and creates at least the appearance of impropriety.” The court held that the outside law firm was not a “public attorney” for purposes of the common law. The Attorney General’s Office “retains direct authority over all aspects of the investigation” and the attorney general “will determine, in its sole discretion, whether to move forward to litigation.” Because the outside firm had no authority to make key decisions, it is not representing the state as a “substitute” for the attorney general. Finally, the court affirmed the district court’s ruling that the agreement did not violate due process. The court cited state Supreme Court precedent for the proposition that “the “rigid requirements of [neutrality], designed for officials performing judicial or quasi-judicial functions, are not applicable to those acting in a prosecutorial or plaintiff-like capacity.” State of New Hampshire v. Actavis Pharma, 2017 N.H. Lexis 134 (N.H. June 30, 2017).
Authority to Issue Investigatory Subpoenas
The interplay of investigatory subpoenas and First Amendment rights was explored in a recent New York case. The New York attorney general issued investigatory subpoenas to a non-profit operator of crisis pregnancy centers. The attorney general was investigating whether the centers were engaging in the unauthorized practice of medicine when they counseled pregnant women not to terminate their pregnancies. The attorney general sought information on whether the facilities were designed to look like medical offices and whether women were misled into believing they were being seen by a medical doctor when they were not. The attorney general’s subpoena sought documents about “petitioner’s corporate structure and facilities, the names, education, and credentials of all of its staff members, the materials it provides to clients, its medical services, equipment, and supplies, and the source of its funding.” The non-profit entity sought a protective order on the grounds that the subpoena was an attack on its views. The trial court denied the motion for protective order and the petitioner appealed.
The appellate court first held that the attorney general had the authority to issue the subpoena even if the party to whom it was issued was not operating for commercial gain because the authorizing statute includes no such limitation. The court also held that the attorney general had an adequate factual basis to support the issuance of the subpoena. The materials supporting its issuance included testimony from the city council and evidence that the crisis pregnancy centers were set up to look like medical offices, with medical staff. The court held that this was a sufficient factual basis for the subpoena in this case. The court also held that the documents sought by the attorney general were reasonably related to the subject of the investigation.
The court then turned to the question of petitioner’s First Amendment rights. Under New York law, petitioner first must make a showing that its rights are damaged by producing the information. Petitioner did so by evidence that its long-standing contract with a hospital for ultrasound services had been terminated, among other effects. The burden then shifted to the attorney general to show that the subpoena related to a compelling government interest. The attorney general also satisfied this requirement, asserting an interest in prohibiting fraudulent or illegal acts. However, the court held that the subpoena must be narrowly tailored and limited the subpoena to documents which pertain to the potential provision of medical or medical-related services. To implement its order, the court required production of documents responsive to the original subpoena for an in camera review by the trial court, which will determine which documents will be produced to the attorney general. In the Matter of Evergreen Association v. Schneiderman, 2017 N.Y. App. Div. LEXIS 5021 (N.Y. App. Div. June 21, 2017).
Attorney General Representation of Private Parties
The South Dakota Supreme Court addressed the question of attorney general representation of private parties in a recent decision. Owners of the land under a large lake filed suit to enjoin the use of the lake by the general public. South Dakota law provides that all waters in South Dakota are held by the state in trust for the public. Owners of the land under the lake complained to the state Department of Fish and Game when numerous people used the lake for boating or ice fishing. The agency responded that, if people accessed the lake legally, they were entitled to use the lake. The landowners sued for declaratory and injunctive relief against the Department of Fish and Game, its secretary, the state of South Dakota, and the individuals who were using the water. The trial court designated a class for purposes of the case, which included all persons who have used or intended to use the waters. The secretary of the Department of Fish and Game was designated the class representative. The trial court issued an injunction in favor of the landowners and the attorney general appealed.
The state argued that the trial court erred in naming the secretary of the Department of Fish and Game as the class representative, thereby compelling the Attorney General’s Office to represent the private individuals who were also members of the class. The attorney general argued that the interests of the state and the private parties were not identical, so that the secretary would not be an adequate class representative. In support of that argument, the Attorney General’s Office noted that it is not authorized to represent private citizens, and South Dakota law provides that the attorney general “shall not actively engage in the private practice of law.” The court held that, although there are private individuals in the class, “This case concerns the interest of the public at large, and, in defending the action, the Attorney General’s Office is pursuing a matter in which the State is both a ‘party’ and ‘interested.’ The Attorney General is not engaging in the private practice of law.” The court concluded that, in the absence of a legislative act, neither the landowners nor the general public had a superior right. The court enjoined the state from “facilitating” access for members of the public. Duerre v. Hepler, 2017 SD 8, 892 N.W.2d 209 (S.D. 2017).
Attorney General Communications Not Categorically Exempt from FOI Requests
A Vermont court has ordered the Attorney General’s Office to release documents pursuant to a Freedom of Information (FOI) request that the attorney general argued are covered by attorney-client privilege. The plaintiff sought documents relating to the attorney general’s participation in a Common Interest Agreement with the attorneys general of several other states on the subject of climate change. Specifically, the plaintiff sought documents that reflect requests to share records and responses to those requests, in particular refusals to divulge information pursuant to FOI requests. The Attorney General’s Office denied the request on the grounds that the release of the documents would cause the custodian to violate ethics standards and to violate statutory or common law privilege (two statutory exceptions to FOI requests). The attorney general argued that, since the state as a whole and the public interest are the attorney general’s client, “all of its work, including all of its records, qualifies for the professional ethics confidentiality exemption.” The court noted that although “many documents possessed by the Attorney General will be confidential or privileged, [the statute] cannot be read to reflect legislative intent that all records in the Attorney General’s Office would be completely exempt.” Turning to the common interest agreement, the court stated that, even if a common interest privilege were recognized in Vermont, the documents to which it applied would have to be subject to some underlying privilege, for example attorney-client or work-product privileges. The court held that the plaintiff’s request was for records “showing that requests were made by a party to the Agreement to share records, and records showing consent was given or objection made to such requests.” Characterizing these documents as having to do with “frequency and timing . . . and not with content,” the court held that the Attorney General’s Office must produce the documents. Energy & Environment Legal Institute v. Attorney General of Vermont, No. 558-9-16 (Vt. Super. Ct., Washington Unit, July 27, 2017).