What Corporate Counsel Should Remember When the State Attorney General Calls
Jan 18, 2012 QuickCounsel Download PDF
By Steven L. D'Alessandro and Michelle T. Hess
Unless your building is on fire, the government’s appearance at your company’s door is rarely a welcome sight. Even a simple inquiry can expend substantial internal resources, cause unnecessary concern and otherwise distract the company from its business. While most envision the federal government playing the role of investigator, state attorneys general have been increasingly seen playing the part. This is not surprising. Whether working alongside the federal govern mentor pursuing an independent investigation, state attorneys general have substantial investigative powers and a focus that is particular, if not altogether different, from their federal colleagues. For example, some states have created unique investigation units to address state-specific issues, such as the environment (see e.g., Maryland Environmental Crimes Unit) or identity theft (see e.g., California eCrime Unit). Whoever is running the investigation, however, the impact on a company can be crippling.
In most instances, the initial contact from a state attorney general will be in the form of a subpoena for records or a civil investigative demand, although it can also take the more dramatic form of a search warrant. In any circumstance, company counsel is in a unique position to take steps to appropriately and effectively respond, not simply in marshalling the company's resources, but also interfacing directly with the government’s attorney and providing leadership with critical advice on how to proceed. This QuickCounsel offers some practical steps to follow when a company receives a subpoena.
What To Do Within The First Six Minutes…
Take the first six minutes after a subpoena is handed to you to review it for crucial information. First, when is a response demanded? Keep that date in the front of your mind as you continue your review. Not only is this the deadline by which the company must respond -- on pain of contempt, but it may also serve as the undoing of the request itself. Indeed, a subpoena that demands too much too quickly may be ripe for a motion to quash, although this is typically resolved with an extension of the response date.
Second, does the subpoena identify particular state statutes or regulations? If so, this is a likely window into the government’s investigation and can provide real insight intoits purpose.
Third, does the subpoena indicate on its face whether the company is a target, subject, or witness in the state's investigation? Identifying the way the government views the company will provide context as you begin to formulate a game plan for responding.
Fourth, what do they want? Knowing what is being asked for, the form the production is to take (e.g., the type of electronic format) and the time span of the request are critical. Apart from sharpening your understanding of the investigation, this information will guide you to the likely sources of responsive information and assist in managing internal resources.
Now that the subpoena has some context, your first call should be to your IT Department. Alert them to the subpoena. Inform them of the type of information being sought. Most importantly, direct them to immediately suspend any automatic deletion or destruction of such data. Regardless of whether a response is ultimately tendered, the subpoena places obligations on the company that, if offended through the destruction of materials, can have devastating results, even if the investigation goes nowhere.
Within The First Six Hours…
Consider those departments and employees who potentially have responsive information and documents. If it is a small enough group, take the time to alert them individually to the receipt of the subpoena, instruct them that any potentially responsive documents must be maintained and schedule a time to discuss their obligations in greater detail at a later date.
Whether in supplement to or substitution for these contacts, it is crucial that you circulate a document hold memorandum within the company. For the likely key custodians of records, consider including a questionnaire to determine how they maintain documents and information. This will assist in streamlining the collection process later. In the memorandum, do not simply regurgitate the subpoena’s language or circulate a copy of it, describe the types of documents being requested and with an expansive view. Once again, irrespective of whether any of these materials are turned over, the goal here is protecting the company.
Within The First Six Days…
By this time, you should have received completed questionnaires from your key custodians. You should have also consulted with your IT department regarding the most cost effective way to capture any electronic documents that are potentially responsive. Included in that conversation is the process to identify, review, and produce responsive documents, and whether it will be necessary to include an outside vendor.
If you are going to handle the response internally, rather than through an outside law firm, it is a good idea for you to reach out to the state attorney general and introduce yourself. Prior to making that call, conduct some due diligence on the office -- if possible, review the biographies of the attorneys identified on the subpoena, as well as any press releases in which they have been mentioned. This will give you a sense of the level of sophistication and experience of the attorney running the investigation, as well as the types of cases in which they are typically involved.
State attorney generals conduct investigations most often pursuant to state statutes that may include options to modify or challenge a subpoena. Possible reasons to modify or challenge include:
The goal of reaching out to the state attorney general's office is to establish a working relationship. While the subpoena may identify the state statutes being focused on, it may be possible through your dialogue to gain additional insights into the office's theories and perceptions of your company's activities. To the extent it is unclear or unknown, you should use this opportunity to confirm whether your company is a target, subject, or witness in the investigation.
By the time you make the call, you will likely have identified the universe of potentially responsive documents and information. If the universe is very expansive (and production very expensive), one option to consider with the government is using key word searches to help narrow the company's efforts, and save costs. Culling down the amount of documents to review benefits the government as well, allowing them to conduct a more efficient and focused investigation.
Another topic to broach in your discussion with the state is the potential need for a confidentiality agreement. Consider whether the disclosure of responsive documents implicates any confidentiality or settlement agreements the company may be bound by or whether the information requested constitutes company trade secrets or other proprietary business information. You will want to discuss options for limiting the disclosure of the information provided such concerns are in fact implicated.
By now, you should have a firm grasp on your method of locating, collecting and reviewing materials, as well as the likely sources of that information. Optimally, your discussion with the government should provide you with additional insights that you can incorporate into the review and production process. Keep in mind that the goal of the review is not simply to identify documents for production to the government, but identify the potential issues, as well as the key witnesses who and documents that can speak to them. To that end, it may be appropriate to conduct an internal investigation beyond the confines of the subpoena. Knowing the story will allow you to stay one step ahead of the government in your analysis and advice.
Within the First Six Months…
Assuming your advice was to respond to the subpoena, within the first six months, it is likely you will have completed the production, or at least begun it on a “rolling basis,” along with a privilege log of withheld documents. Irrespective of the status of the production, the six-month marker is a good time to issue a reminder regarding the document hold and to ensure that preservation of responsive documents continues.
If you conducted an internal investigation, you may want to propose a meeting with the state attorney general to learn about the status of the investigation and, if appropriate, present your theories, including mitigating factors that may weigh against further government action. For strategic reasons, however, you may decide against taking any proactive measures with the government.
Whether proactive or reactionary, you should consider whether litigation with the state may be a possible outcome and prepare. Not so with private litigants, state attorney generals are neither motivated solely by securing compensatory damages nor discouraged by the potential costs of the litigation. Rather, as publicly-elected officials, they are driven by more amorphous factors, such as public perception. For this reason, should litigation ensue, it is likely that publicity will as well. Counsel should consider these attendant public relations issues and whether professional assistance is necessary.
The above is by no means an exhaustive list of issues that presented when the state attorney general comes to call. It is equally incomplete on all the various ways to respond to them. But by considering the issues identified above, along with proper planning, informed corporate counsel can help their clients respond to inquiries efficiently and effectively. This QuickCounsel provides a brief overview of how to react when those inquiries arise.
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Published August 3, 2009 (Updated January 18, 2012)
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