|
RISKVUE ARCHIVE | FEATURE STORIES
Civil Investigative Demand Practice:
Things Everyone Should Know Before Responding to a “Civil Investigative Demand”
By Thomas F. Pursell
One of the most powerful investigative tool in the hands of those who enforce antitrust and consumer protection laws is the “civil investigative demand” or CID. Recently, there has been publicity over the CIDs served on insurance brokers and insurance companies. The United States Department of Justice and the Federal Trade Commission issue CIDs under federal law.1 Most state attorneys general also have CID or equivalent authority, and many of them use that authority aggressively. Minnesota CID statute and process are similar to those in many states. This article briefly explains the Minnesota CID process, then answers what are, in the author’s experience, the most commonly asked questions concerning Minnesota’s CID statute and the wide ranging powers it gives to the Minnesota Attorney General. This issue should be of particular concern to insurers because the Minnesota AG’s enforcement authority extends to the business practices of insurers, even though the result may duplicate or conflict with Insurance Department regulation.2
The Minnesota Legislature gave CID power to the state attorney general in Minn. Stat. § 8.31.3 The AG can issue CIDs whenever there is suspicion of violations of consumer fraud, antitrust, charities fraud, non-profit governance or other Minnesota laws “respecting unfair, discriminatory, and other unlawful practices in business, commerce, or trade....”
The question of how to respond to any government investigation can only be intelligently answered as part of a broad review of the involved person or organization’s interests in the investigation. When considering a CID, that review should include consideration of the answers to the following commonly asked questions:
If I get a CID, does that mean I’m the target of the investigation?
Not necessarily, but it usually does. CIDs can be served on third parties who are believed to have important information as well as investigative targets.4 Usually, the wording of the CID itself will make it clear whether the recipient is a target; and if it doesn’t, the issuing assistant attorney general often will. If in doubt, ask the assistant attorney general directly, and document the answer.
Do I need a lawyer?
We strongly suggest that a qualified attorney be retained to represent parties involved in CID proceedings, whether or not they are targets of the investigation. State investigations are high stakes games, and there are too many legal nuances involved for lay persons to feel comfortable representing themselves.
Do I have to answer the CID?
You can decline to answer at first, but the attorney general may be able to make you. While the statute gives the recipient a stated number of days to respond to various types of discovery requests, it places the burden on the attorney general to move the district court to enforce the CID if you don’t respond. There is no penalty for simply not responding, or for opposing a motion to enforce. District court decisions on motions to compel or on motions for protective orders (see below) may be appealed to the court of appeals.5
Should I notify my insurance company?
If you are named a target, you should consider notifying your insurance company. Indeed, in some cases, the insurance policy requires you to give notice. If you are named a target, some directors’ and officers’ insurance will pay for your attorneys’ fees and costs.
What is the timetable for responding to a CID?
The statute allows at least 15 days to produce documents or appear for a deposition, and at least 20 days to answer interrogatories.6 However, either the attorney general or the party receiving the CID may go to court to reduce or extend the time requirements.7 The CID itself will recite the expected return dates.
How rigid are the deadlines?
Historically, not very. The attorney general has a great deal of discretion here, and the office has typically been very flexible in granting extensions. It saves the attorney general’s office a fair amount of work in drafting and filing a motion to compel—a lengthy process in its own right.
What will happen to the information I give to the State?
CID information is normally confidential while the investigation in ongoing.8 However, unless the information is otherwise classified under the Minnesota Government Data Practices Act (for example, as trade secret information), it may become public under several different circumstances.9 The best strategy for attempting to ensure confidentiality of information is to apply to the district court for a protective order.10
What evidence does the attorney general need to issue a CID?
To issue or enforce a CID the attorney general must have “information providing a reasonable ground to believe that any person has violated, or is about to violate” one of the statutes the attorney general enforces.11 “Reasonable ground to believe” is a lesser standard than “probable cause.” In addition, the CID must specify the nature of the violation and the information sought and confine itself to matters relevant to the supposed violation.12
If it’s called a “civil investigative demand,” is there any ramification for possible criminal prosecution?
Yes. The Minnesota Supreme Court has held that information collected by CID may form the basis for criminal charges.13 If criminal liability is a concern, and in an antitrust or consumer fraud investigation it might be, a CID recipient’s remedy is to invoke the Fifth Amendment when appropriate. Corporate CID recipients, of course, do not have that right.14
Should I talk to the assistant attorney general and if so, what should I say?
It is almost always a good idea to open a line of communication with the issuing staff attorney. In addition to finding out whether you are a target, or negotiating deadlines, you may be able to narrow the scope and therefore, the burden of answering the CID, get some greater sense of the origins of the investigation, and find out how great a priority it is.
What might lead me to challenge the CID in court?
Again, how to respond to a CID should be part of a global assessment of the recipient’s interests in the investigation, including the likelihood of eventual liability and the impact on other legal proceedings, such as investigations in other jurisdictions. A challenge may be the right response if the assessment suggests that the attorney general is acting outside his jurisdiction, that the breadth of the CID will be unreasonably expensive and disruptive for your business, or if you need court-ordered protection for the information you are being asked to produce. You, as a CID recipient, may take the initiative in a challenge or wait for the attorney general to bring a motion to enforce. Requiring the attorney general to prove the “reasonable ground to believe” that a violation has occurred may also tell you more than you already knew about the nature of the investigation.
How long do investigations usually take?
There are no time guidelines governing the attorney general’s review of or action on CID materials. Investigations often take six months to a year, or longer.
Will I know when the investigation ends?
Maybe. Nothing requires the attorney general to notify people when an investigation ends or is closed and the author’s experience is that there is often no “closure.” 
Notes:
1 See 15 U.S.C. 1311, et seq (Department of Justice Antitrust Division) and 15 U.S.C. §§ 57B-1 and 1312 (Federal Trade Commission).
2 State by Hatch v. American Family Ins. Co., 609 NW.2d 1 (Minn. Ct. App. 2000).
3 The statute provides in pertinent part:
Subdivision 1. Investigate offenses against the provisions of certain designated sections; assist in enforcement. The attorney general shall investigate violations of the law of this state respecting unfair, discriminatory, and other unlawful practices in business, commerce, or trade, and specifically, but not exclusively, the Nonprofit Corporation Act (sections 317A.001 to 317A.909), the Act Against Unfair Discrimination and Competition (sections 325D.01 to 325D.07), the Unlawful Trade Practices Act (sections 325D.09 to 325D.16), the Antitrust Act (sections 325D.49 to 325D.66), section 325F.67 and other laws against false or fraudulent advertising, the antidiscrimination acts contained in section 325D.67, the act against monopolization of food products (section 325D.68), the act regulating telephone advertising services (section 325E.39), the Prevention of Consumer Fraud Act (sections 325F.68 to 325F.70), and chapter 53A regulating currency exchanges and assist in the enforcement of those laws as in this section provided.
Subd. 2. Attorney general to assist in discovery and punishment of illegal practices. When the attorney general has information providing a reasonable ground to believe that any person has violated, or is about to violate, any of the laws of this state referred to in subdivision 1, the attorney general shall have power to investigate those violations, or suspected violations, and to take such steps as are necessary to cause the arrest and prosecution of all persons violating any of the statutes specifically mentioned in subdivision 1 or any other laws respecting unfair, discriminatory, or other unlawful practices in business, commerce, or trade. In connection with investigation under this section the attorney general upon specifying the nature of the violation or suspected violation may obtain discovery from any person regarding any matter, fact or circumstance, not privileged, which is relevant to the subject matter involved in the pending investigation, in accordance with the provisions of this subdivision. The discovery may be obtained without commencement of a civil action and without leave of court, except as expressly required by the provisions of subdivision 2a. The applicable protective provisions of rules 26.02, 26.03, and 30.04 of the Rules of Civil Procedure for the district courts shall apply to any discovery procedures instituted pursuant to this section. The attorney general or any person to whom discovery is directed may apply to and obtain leave of the district court in order to reduce or extend the time requirements of this subdivision, and upon a showing of good cause the district court shall order such a reduction or extension. In order to obtain discovery, the attorney general may:
(a) Serve written interrogatories on any person. Within 20 days after service of interrogatories, separate written answers and objections to each interrogatory shall be mailed to the attorney general.
(b) Upon reasonable written notice of no less than 15 days, require any person to produce for inspection and copying any documents, papers, books, accounts, letters, photographs, objects, or tangible things which are in the possession, custody, or control of that person.
(c) Upon reasonable written notice of no less than 15 days, take the testimony of any person by deposition as to any fact or opinion relevant to the subject matter involved in the pending investigation.
For the purposes of this subdivision the term “person” has the meaning specified in section 325F.68.
Subd. 2a. Failure to comply. If any person fails or refuses to answer interrogatories, to produce materials, or to be examined under oath, as required by the provisions of subdivision 2, the attorney general may apply to a district court, upon notice, and the court, on a showing by the attorney general of cause therefor, may issue such order as may be required to compel compliance with the discovery procedures authorized by this section.
4 Minn. Stat. § 8.31, subd. 2.
5 In the Matter of GlaxoSmithKline plc, 699 N.W.2d 749 (2005).
6 § 8.31, subd. 2(a).
7 § 8.31, subd. 2.
8 Minn. Stat. § 13.39.
9 See Minn. Stat. § 13.39 and In the Matter of GlaxoSmithKline plc, (April 18, 2006), 713 N.W.2d 48 (Minn. Ct. App. 2006).
10 See Section 8.31, subd. 2, making the “protective provisions of [civil procedure] rules 26.02, 26.03 and 30.04” applicable to CID proceedings.
11 Minnesota Twins Partnership v. State ex rel Hatch, 592 N.W.2d 847 (Minn. 1999), certiorari denied 528 U.S. 1013, 120 S.Ct. 517.
12 § 8,31, subd. 2; State by Humphrey v. Kohn, 336 N.W.2d 292, 297-98 (Minn. 1983), citing with approval 338 U.S. 632, 70 S.Ct. 357 (1950) and Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 66 S.Ct. 494 (1946).
13 State v. Kohn, 336 N.W.2d at 298-299.
14 Id.
ABOUT THE AUTHOR
Tom Pursell is a partner with the law firm of Lindquist & Vennum, PLLP. Formerly senior counsel to the Minnesota Attorney General, Tom represents clients in a variety of investigations and proceedings before state agencies and also advises on matters of antitrust. He can be reached at 612-371-3201 or tpursell@lindquist.com.
This article is only a general summary for informational purposes and does not constitute legal advice. Consult a qualified and experienced insurance advisor for your specific situation or particular questions.
riskVue | The webzine for risk management professionals
March 2007
|
