Representing Business Clients in State Attorney General Investigations

Vol. 5, No. 1

Mr. Annino is the managing member of Annino Law Firm, LLC. Mr. McConnell is a partner of McConnell & Sneed, LLC. Based in the Atlanta area, the authors represent clients subject of attorney general investigations on a nationwide basis. Mr. Annino can be reached via email at brian@anninolawfirm.com and Mr. McConnell can be reached via email at tsm@mcconnellsneed.com.

This article is intended to provide a brief overview of suggested procedures counsel should consider when representing business clients subject of state attorney general investigations. This article is not intended to provide legal advice to any business or attorney and should not be construed as such.

State attorneys general are given authority pursuant to pertinent statutes to investigate businesses regarding alleged violations of state law. Typical subject matters of an investigation include allegations of unfair or deceptive business practices, deceptive advertising and marketing, fraud, conducting business without a proper license, and general consumer protection law violations. Such allegations sometimes arise from consumer complaints, but can also arise from investigation conducted on an attorney general’s own initiative.

A client typically first becomes aware of an investigation when it receives a subpoena or civil investigative demand (collectively, CID). Clients should be counseled in advance to immediately contact counsel upon receipt of a CID, and a copy of same should be immediately forwarded to counsel for review.

CID response deadlines are set forth within the document in accordance with pertinent state law. It is important to note that response deadlines can be very short, and can substantially differ from the timeline to file a responsive pleading to a lawsuit in accordance with state civil procedure. Special attention should be taken to properly calendar the deadline.

A CID typically sets forth information and/or document requests directed to the client. Such requests are typically comprehensive, particularly if generated at an early stage of an attorney general’s investigation.

Perhaps the most important steps that a client and counsel will take occur at the early stages of the investigation.

First, the deadline for compliance must be noted, as further discussed above.       

Second, the client and its custodian of records should be instructed to place a litigation hold on all documents and electronically stored information to preserve potentially relevant evidence in anticipation of production in the investigation. Failure to properly protect these documents and information can lead to additional fines and penalties from the attorney general’s office, place the client under strict scrutiny, and call into question the credibility and integrity of the client’s responses to the CID.

Furthermore, counsel should undertake an initial investigation into the CID requests and the client’s alleged conduct within the state. Counsel should ascertain the identity of employees or independent contractors within the client’s organization that have information relevant to the CIDs. Additionally, contact should be made with those individuals to remind them of their duties to preserve information and to obtain such information necessary to respond to the CID.

A lawyer should also take great care to review applicable law subject of an attorney general’s allegations. Counsel should take note of the penalties per violation in order to obtain an understanding of the client’s potential exposure.

Counsel should make contact with the assistant or deputy attorney general who issued the CID at an early stage. The initial discussions with the attorney general’s office are crucial to establishing a good working relationship. The lawyer (and the client) should keep in mind that the attorneys conducting the investigation are public servants typically handling extensive caseloads. Although the very future of a client’s business may hinge on the result of the investigation, special care should be taken to ensure that communications with the attorney general’s office are centered on respect and decorum.

In many cases, additional time may be required to work with the client in responding with the CIDs. Counsel should make a request for additional time at the earliest possible stage, and preferably in the initial communication. Except in extraordinary cases, the assistant or deputy attorney general handling the matter should be willing to grant a reasonable amount of additional time to respond, particularly if there is an understanding that relevant information will be forthcoming. The extension should be memorialized in writing.

Counsel should also utilize the initial communication to confirm whether their client is subject of the investigation or was issued a CID to seek information regarding an investigation of a third party.

Counsel should inquire as to whether the attorney general’s office is open to settlement discussions at the initial stage. In most circumstances, the attorney general’s office will require at least some of the information requested through the CIDs to make a determination as to how the matter can be resolved.

The initial communications with the attorney general’s office should also be utilized to advise of any known concerns or issues the client may have in responding to the CID. This leads to a more efficient path to resolving disputes over requested information.

Most significantly, the initial communications with the attorney general’s office can be utilized to better explain the client’s operations and its compliance efforts. In our experience, some attorney general investigations are launched without a complete understanding of a client’s business operations (and often in response to a one-sided consumer complaint). Accordingly, the assistant or deputy attorney general handling the case appreciates having a better understanding of the client’s operations at an early stage, as opposed to waiting until the first responses to the CID are received. This can help shorten the timeline of the investigation.

Counsel should also note the procedure for properly objecting to certain requests, and if necessary, for modifying or setting aside the CID in its entirety. In many cases, a civil action must be filed to modify or set aside the CID and great care must be taken to properly follow such procedure to protect the client’s rights.

On this topic, counsel will need to ascertain if local counsel is needed in the jurisdiction from which the CID is issued. Special attention should be taken to the Rules of Professional Conduct in the counsel’s state in addition to the state where the investigation is pending. It is also advisable to consult with the assistant or deputy attorney general handling the case to gain an understanding of their preferences and expectations of working with general counsel and/or local counsel. As a practice tip, working with local counsel experienced in applicable substantive and procedural can be indispensable in resolving investigations.

It is important to allocate sufficient time to carefully review information and documents provided by the client that may be responsive to the CID. If such information or documents amounts to confidential information, care should be taken to ensure that same is either protected from disclosure to third parties by applicable law or that the attorney general’s office has authority to enter into a confidentiality agreement protecting the disclosure of confidential information.

Responses to the CID are typically made under oath and subject to penalty of perjury. Carefully review the responses with the client to ensure accuracy, and discuss any objections that can be made to the subpoena.

Upon submitting responses to the CID, it is advisable to confirm receipt and to follow up with the attorney’s office within 5–10 days if no earlier communication is received from the office. This helps continue the dialogue with the attorney general and continue the path toward resolution.

In some cases, the attorney general’s office is willing to consider potential resolution after receiving the initial responses. In other cases, additional CIDs or information requests will be required. Furthermore, the attorney general may feel the need to proceed with litigation if it determines that amicable resolution cannot be reached. Counsel should always be prepared to litigate the matter to protect the client’s interest in the event amicable resolution is not possible.

In certain cases, the attorney general may be willing to enter into an Assurance of Voluntary Compliance, or similar document which memorializes a settlement reached with the client (collectively referred to as an AVC).

An AVC can include monetary fines and penalties, cessation or restrictions upon a client’s business activity, payment of restitution to consumers, and the acquisition of a certain type of license. As in considering any type of settlement, the client must conduct a cost-benefit analysis to determine if the terms of an AVC may be more beneficial than the hazards of a continued investigation or ensuing litigation that could expose the client to excessive penalties and negative publicity.

In recent years, some larger companies subject of attorney general investigations have undertaken political lobbying efforts directed at attorneys general with an intent to stop or dissuade investigations. Such efforts create potential ethical issues, and many states are proposing legislation and rules to combat such efforts. Such lobbying efforts are not a proper replacement for effective legal representation of a client subject of an attorney general investigation.

In conclusion, counsel plays a critical role in working with a client subject of a state attorney general investigation. Clients should be directed to immediately advise counsel of the receipt of a CID. Counsel should carefully review the CID and applicable law with the client and coordinate initial contact with the attorney general’s office. Objections and challenges to the CID should be properly made in accordance with applicable law. Counsel should consider utilization of local counsel to facilitate resolution or defense. Counsel should also maintain open lines of communication with the attorney general’s office to explore amicable resolution. Counsel should also be prepared to zealously defend a client in any litigation brought resulting from the investigation.

 

Next Article > > >

Advertisement

LawPay Ad
Zola Suite
Thomson Reuters Legal: Matter Management Checklist for Overworked Attorneys
  • About GPSolo eReport

  • Subscriptions

  • More Information

  • Contact Us

GPSolo -- Your Success, Our Mission