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Unfair and Deceptive Acts and Practices: 13.3.3 Standards of Review for Compulsory Process
The fundamental standards courts utilize in determining the propriety of a civil investigation demand or subpoena are whether “the inquiry is within the authority of the agency, the demand is not too indefinite, and the information sought is reasonably relevant.”103 These standards, articulated by the Supreme Court under the Fourth Amendment’s prohibition of unreasonable searches and seizures,104 should be construed liberally in favor of the government because of the remedial purposes of UDAP le
Unfair and Deceptive Acts and Practices: 13.3.4.1 Due Process
Courts consistently uphold subpoenas and CIDs against due process challenges.139 Procedural due process is satisfied where there is specific notice of documents to be produced and a meaningful opportunity to be heard.140 Court review of the state’s subpoena is sufficient protection against unconstitutional searches.141 While a subpoena ordering production of records “forthwith” without sufficient opportunity to consult counsel may deny the responde
Unfair and Deceptive Acts and Practices: 13.3.4.2 Self-Incrimination
A respondent’s constitutional protection against self-incrimination is a legitimate ground for resisting a subpoena in some circumstances. However, to invoke the Fifth Amendment the defendant cannot simply refuse to respond to the subpoena, but must appear and then object to specific document requests.146
Unfair and Deceptive Acts and Practices: 13.3.4.3 Unreasonable Search and Seizure
Respondents may try to quash a subpoena by raising the Constitution’s protection against unreasonable search and seizure.
Unfair and Deceptive Acts and Practices: 13.3.4.4 The First Amendment
Only in rare cases will First Amendment issues be a problem when a state seeks information pursuant to its authority under the UDAP statute.
Unfair and Deceptive Acts and Practices: 13.3.5.1 Reasonable or Probable Cause
In a number of states, enforcement officials must have “reasonable cause” or “probable cause” to believe the UDAP statute has been violated before they can issue a CID or subpoena.
As a general rule, the state need not have reasonable or probable cause unless there is an express requirement in the authorizing statute.165 Nevertheless, some state courts do read a reasonable cause requirement into the UDAP legislation.166
Unfair and Deceptive Acts and Practices: 13.3.5.2 Other Preconditions
The UDAP statute may require other conditions to be met for the issuance of a CID or subpoena.
Unfair and Deceptive Acts and Practices: 13.3.6 Defects on the Face of a Subpoena
State enforcement officials should be careful in drafting CIDs and subpoenas to make sure that the compulsory process fulfills all statutory requirements. Litigious respondents will scrutinize the process hoping to find a technical defect. While it is good practice not to give respondents grounds for objecting to the form of the subpoena, courts will usually enforce compulsory process even if there are complaints as to form.
Unfair and Deceptive Acts and Practices: 13.3.7.1 Is Information Protected?
Particularly when the state seeks to obtain a company’s customer lists or sensitive financial information, the company may seek to quash the process on the basis of confidentiality or trade secrets.
Unfair and Deceptive Acts and Practices: 13.3.7.2 Attorney General Approaches to Dealing with Confidentiality Claims
One method of dealing with a respondent that argues that requested data is a trade secret or confidential is to require production of all documents, but allow the respondent to indicate which specific portions are confidential, with the state giving notice to the respondent before making that specific information public.
Unfair and Deceptive Acts and Practices: 13.3.8 Obtaining Information from Lawyers and Parties Who May Be Exempt
A civil investigative demand or subpoena directed to an attorney raises special issues. An Oregon court required an attorney to produce a client list over objections based on the attorney-client privilege.216 The court also required the attorney to produce documents that the clients had provided them through a non-lawyer third party.
Unfair and Deceptive Acts and Practices: 13.3.9 Different Forms of Discovery Distinguished
State enforcement officials must be careful to keep in mind the requirements and limitations of the particular type of discovery they are using. Each discovery technique, even though closely resembling another investigatory method, will have its own rules and requirements.
Unfair and Deceptive Acts and Practices: 13.3.10 Test Purchases, Visits
An important investigative technique is for an enforcement agency investigator to pose as a consumer and witness the seller’s practices. Common examples are taking a pre-inspected automobile or appliance to a repair shop, or shopping at a supermarket to determine if goods are available and sold at advertised sale prices.
Unfair and Deceptive Acts and Practices: 13.3.11 Access to FTC Investigational Records
The FTC Act specifies the limitations on the Commission’s authority to release investigatory documents to state attorneys general. The FTC Act also sets requirements concerning use of such documents by state attorneys general that contain trade secrets or other confidential information.
Section 6(f) of the FTC Act (15 U.S.C. § 46(f)), as amended, states:
Unfair and Deceptive Acts and Practices: 13.3.12 Respondent’s Discovery of the State’s Case or Policies
Courts consistently hold that investigated companies do not have a right to compel the state to produce the evidence it is accumulating against that company.245 One rationale preventing discovery against an attorney general’s office is that the attorney general is not a party to the action, but the “people” are plaintiffs for whom the attorney general sues in a protective capacity.246 Also, work product for impending litigation from an investigatory file is usually protected from disclosure.
Unfair and Deceptive Acts and Practices: 13.3.13 Public’s Access to Results of State’s Civil Investigation
When the plaintiff in a private UDAP case wants access to the state’s non-privileged materials from a civil investigation of the defendant, the courts may apply a different standard than they apply when an investigated company seeks to discover the evidence the state has gathered against it. There are two routes by which a consumer plaintiff may obtain access to these materials.
Unfair and Deceptive Acts and Practices: 13.4.1.1 States That Have Such a Requirement
In general, there is no requirement that a state offer voluntary compliance or notify the respondent before commencing an enforcement action, unless the UDAP statute includes such a requirement.
Unfair and Deceptive Acts and Practices: 13.4.1.2 Where UDAP Statute Requires Offer of Voluntary Compliance or Notice
While the state should comply strictly with a statutory notice requirement, if the seller offers an assurance of voluntary compliance that is inadequate, the state can reject the offer and instead bring the enforcement action.264 Moreover, having obtained an assurance of voluntary compliance, the state need not give the defendant further notice when it seeks an injunction against continuing violations of that assurance.265 The Ohio UDAP statute requires that the respondent be given an opportunit
Unfair and Deceptive Acts and Practices: 13.4.2 Reason to Believe That the Act Has Been Violated As Statutory Precondition to Enforcement
Some state UDAP statutes require that the state institute enforcement proceedings only if it has cause to believe that the statute has been violated.275 Where this requirement exists, it is not an essential element of the action that must be proved at trial. Instead, the requirement only forces the state to show the evidence leading it to believe a deceptive practice has occurred if the defendant raises this issue early in the proceedings.276
Unfair and Deceptive Acts and Practices: 13.4.3 Do Preconditions to Private Actions Apply?
Certain UDAP statutes require consumers to suffer actual damage before bringing UDAP actions. This limitation should not apply to an action brought by the state, which need only show that a practice has a capacity or tendency to deceive, not that there is any actual deception.280 Similarly, while Missouri affords a private cause of action only to a person who has made a purchase or lease, the attorney general can bring suit regarding deception that has not yet resulted in a transaction.281
Unfair and Deceptive Acts and Practices: 13.5.1 Standing Issues and Scope of State's Authority; Venue; Arbitration
The attorney general has standing to bring UDAP claims even where the entity that suffered damage would not have the right to sue.289 For example, even though it is a business that is damaged, and under the state UDAP statute only consumers can sue, the state can still bring the action. The Arkansas Attorney General has standing to bring a UDAP action as a means of enforcing state usury laws, even though only a borrower has standing to bring a usury action.290
Unfair and Deceptive Acts and Practices: 13.5.2 Selective Enforcement and the “Everyone Does It” Defense
A common challenge to a state enforcement action is that the state’s selective enforcement action violates the Equal Protection Clause.
Unfair and Deceptive Acts and Practices: 13.5.3 Challenges to State Administrative UDAP Proceedings
In some states, the state enforcement agency conducts the investigation, files charges, and holds hearings to determine whether the UDAP statute has been violated. Such a combination of powers has been held to meet due process standards,317 as set out in the leading United States Supreme Court case of Withrow v. Larkin.318
Unfair and Deceptive Acts and Practices: 13.5.4 Removal to Federal Court
When the state enforcement authority files a UDAP suit in state court against a citizen of another state, some defendants may attempt to remove the case to federal court on the ground that the parties are citizens of different states. But the state itself is the real party in interest in such a suit, even when it is seeking restitution for consumers, and removal is inappropriate since a state is not a citizen.322