Enron, Arthur Andersen, WorldCom. It is virtually impossible to hear those names and not think about the multiple investigations that have been and are being conducted by the Securities and Exchange Commission, the Justice Department, and various state agencies and attorneys general. Those companies, however, are not alone in attracting the scrutiny of investigative agencies. Each year, state and federal governmental entities conduct investigations pursuant to powers provided to them by their respective state legislatures. In Florida alone, there are at least 50 provisions of the Florida Statutes that authorize the issuance of subpoenas in connection with such investigations. (1) As a result, it is possible that you may have a client who will be subpoenaed regarding his or her business practices. This article will survey the Florida and federal cases that have addressed some of the most common defenses asserted in response to investigative subpoenas.
Defenses That Rarely Succeed
The first reaction that many individuals and companies have upon receiving a subpoena is to assume that they can defeat it by proving their innocence. If they have not violated any law, then why should the government be able to demand the production of their documents and information? Does not the issuance of a subpoena under those circumstances violate the Constitution's prohibition against unreasonable searches and seizures?
The short answer is no. In a series of four cases, the U.S. Supreme Court has made it clear that the Constitution imposes "rather minimal limitations on administrative action." (2) United States v. Powell, 379 U.S. 48 (1964); United States v. Morton Salt Co., 338 U.S. 632 (1950); Oklahoma Press Publ'g Co. v. Walling, 327 U.S. 186 (1946); Endicott Johnson Corp. v. Perkins, 317 U.S. 501 (1943). For purposes of the Fourth Amendment, administrative subpoenas do not have to satisfy the stringent standards imposed on search warrants. (3) Instead of analyzing investigative subpoenas with such a critical eye, the U.S. Supreme Court views them as if they were issued by a grand jury. (4) As with grand jury subpoenas, one of the few limitations on investigative subpoenas relates to the scope of documents to be produced. So long as investigative subpoenas are not overly broad or unduly burdensome, the U.S. Supreme Court has had little difficulty upholding the broad authority of agencies to use them in situations that arguably fall short of probable cause:
Even if one were to regard the request for information in this case as caused by nothing more than official curiosity, nevertheless law-enforcing agencies have a legitimate right to satisfy themselves that corporate behavior is consistent with the law and the public interest. (5) The justification for this view is that an investigation is different than litigation. "The purpose of an investigatory proceeding ... `is to discover and procure evidence not to prove a pending charge or complaint, but upon which to make one if, in the [agency's] judgment, the facts thus discovered should justify doing so.'" (6) In other words, an investigation does not determine guilt or innocence, but serves as the means by which agencies can collect the information needed to decide whether to file an action. Because liability will be determined in a later proceeding at which the defendant will be able to assert a vigorous defense, courts give agencies "more latitude ... in considering the foundation for a subpoena." (7) In particular, substantive issues that can be raised in defense to an action brought by an agency are considered "premature" in subpoena enforcement litigation. (8) Instead, courts have found it to be more efficient to defer consideration of those issues and allow the agency to investigate. (9)
In accordance with this view, courts have adopted a number of presumptions that favor enforcement of investigative subpoenas. Courts provide substantial leeway to a governmental entity's decision to open an investigation. (10) Courts do not require a detailed showing by the agency regarding the grounds for the investigation, (11) nor do they attempt to determine at the outset whether the governmental entity eventually will be able to prove whether a suspected violation has occurred or is occurring. (12) Instead, courts view their role as "strictly limited." (13) If the investigation appears to be authorized by the relevant statute, courts will leave it to the agency to conduct its own investigation and determine whether a violation has been committed. (14)
Applying these principles, courts have refused to quash subpoenas despite the possibility that the agency may ultimately agree with the subject of the investigation that they have not violated the law. (15) An agency does not need to know all of the answers before beginning an investigation, and it does not have to have already concluded that someone has violated the law to be able to investigate. (16) As one Florida appellate court has noted, "[a] rule that an agency could investigate before filing charges only if it already had all the information it needed to file charges has little to recommend it. ... An agency `may take steps to inform itself as to whether there is probable violation of the law,' without first alleging such a violation." (17) In short, an agency's subpoena power is not limited to those occasions where the subject of the investigation acknowledges that they have violated the law or where liability is clear. (18)
Two additional principles further limit the effectiveness of any challenge of an agency's authority to investigate. First, courts give some measure of deference to the agency's own view as to whether it has jurisdiction. (19) An agency need not conclusively prove that its investigation is authorized by statute, but need only make a "plausible" argument in support of its jurisdiction to investigate. (20) Indeed, courts have gone so far as to uphold the issuance of subpoenas that were designed to determine whether an agency had jurisdiction to investigate in the first place. (21) As one federal appeals court has explained in a case involving the Equal Employment Opportunity Commission, "[t]o do otherwise would be to `not only place the cart before the horse, but to substitute a different driver for the one appointed by Congress.'" (22)
Second, courts typically will avoid any effort to turn a subpoena enforcement proceeding into a full-blown trial on the ultimate merits of the investigation. With few exceptions, subpoena enforcement proceedings are "summary" in nature. (23) "The reasons for this rule are obvious. If parties under investigation could contest substantive issues in an enforcement proceeding, when the agency lacks the information to establish its case, administrative investigations would be foreclosed or at least substantially delayed." (24) As the U.S. Supreme Court has observed, turning an investigative hearing into such a "trial-like proceeding" would "make a shambles of the investigation and stifle the agency in its gathering of facts." (25)
* "Trying the Prosecutor"
Realizing that most courts are unwilling to consider a substantive challenge to an agency's decision to initiate an investigation, some subpoena recipients have attempted to focus their attacks on the motives of the individual agency employees involved in the investigation. In general, the U.S. Supreme Court has recognized that a court should refuse to enforce a subpoena that was issued for an improper purpose, "such as to harass the ... [subject of the investigation] or put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation." (26) The Supreme Court and other courts, however, have not made it easy to quash a subpoena on this basis. The burden of showing an abuse of the court's process is on the party challenging the subpoena. (27) This burden is a heavy one, and there are strong presumptions against holding an evidentiary hearing to consider such allegations or allowing discovery to assist in establishing such a claim. (28)
Because of these presumptions, very few bad faith claims are successful. Indeed, most courts view them with disfavor:
Recipients of administrative subpoenas often attempt to "try the prosecutor." These dilatory or obfuscatory tactics should not be condoned or encouraged by the courts. This is especially true in the context of CIDs which were specifically intended to permit the Justice Department to carry out its pre-complaint procedure in an efficient and cost-effective manner. Countenancing these tactics would undermine the purposes of the CID scheme, embroiling the Department in large-scale litigation before it has had an opportunity to decide whether or not to actually file suit against the target of the investigation. (29) These sentiments, however, have not always been enough to discourage subpoenaed parties from asserting bad faith claims. Such claims typically fall into one of three categories.
The first category is the "preconceived conclusion." In this type of bad faith claim, the subpoenaed party argues that the...