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You are sorting through your morning mail. Copy of the Texas Lawyer? Check. Your monthly American Express bill? Check. A letter from the Texas attorney general advising you of an investigation into certain aspects of your company’s operations and requesting dozens of categories of documents be produced for inspection and copying in about 30 days?

Your heart races, and you think: As the general counsel, what do I do? Where do I turn? How do I respond? This article will answer those questions.

The AG has the authority, under certain statutes, to serve companies and individuals at corporations with a civil investigative demand (CID) requesting documents; he may even take sworn statements before filing a suit.

Paul Carmona, chief of the consumer protection division of the Texas Office of the Attorney General, says, “A civil investigative demand from the attorney general’s consumer protection division does not necessarily mean that there will be an enforcement action. Oftentimes, a CID is merely a way for the attorney general to protect the investigation itself and the materials produced in response to the CID, due to the confidentiality provided by statute. However, a CID does indeed indicate that an investigation has commenced, and that the recipient must fully cooperate.”

General counsel who receive a CID should consider the following:

* Challenging the Texas attorney general’s authority. The AG gets authority to conduct a CID from specific statutes covering a wide variety of subjects. Those statutes have different provisions on the scope of the CID, confidentiality and other aspects of the investigation. A GC should carefully review the statute that forms the basis of the CID received.

A detailed discussion of each of the laws that provide the AG with authority to conduct a CID is beyond the scope of this article, but some examples are found on page 7. [See "When an AG May Serve a CID. "]

A general counsel can challenge a CID by filing a suit against the AG; the venue of that suit does not appear to be mandatory in Travis County, so a GC can file it in the company’s home county. (See Attorney General of Texas v. Allstate Insurance Co. (1985), decided by the 5th Court of Appeals in Dallas.)

However, if a general counsel is concerned about publicity, he may not want to file a suit challenging the AG’s authority. Once a GC files suit on behalf of a company, the nature of the investigation, which may otherwise be confidential by statute, is made part of the public record.

Filing a suit against the AG may have other unintended consequences. For instance, if the investigation is based on consumer-protection issues, a suit may invite the filing of separate civil suits by consumers and may well invite other consumers to come forward with their own complaints.

Objecting to a CID. The AG may have the right to take discovery before filing a suit, but a general counsel has the same right to object to discoverability and scope as he would against a private litigant. Therefore, a GC may challenge a CID on privilege and work product grounds and may object to the scope of discovery.

To object to a CID, assuming the general counsel cannot resolve his objections by discussing them with the assistant AG handling the investigation, a GC may file a suit in his own jurisdiction objecting to the CID in much the same way he objects to third-party discovery served on the company in a case in another jurisdiction. Before filing a suit to object to a CID, make certain to try to resolve objections with the assistant AG. Filing suit has some of same risks that challenging the AG’s authority does, but at least the GC picks the venue.

Investigation Costs

* Complying with a CID. Compliance with a CID saves time and money. Refusal to comply invites a suit by the AG against the company.

The AG’s office usually will work with the subject company of an investigation. Call the assistant AG who signed the CID and ask to meet with him or her. Many times, the assistant AG will agree to narrow the scope of the document request. Ask the assistant AG what documents he or she really needs to complete the investigation.

A GC who needs more time to comply should get an agreement in writing from the assistant AG; be clear about communicating not only the extension of time to comply, but also the extension of time to make objections to particular requests in the event the GC intends to do so.

A GC who produces documents in response to a CID should Bates-stamp and clearly mark each page of each document with the legend “produced in response to CID dated (fill in the blank).”

If the company produces documents as exhibits to a statement taken under oath by the AG, remember to mark those documents clearly.

Furthermore, make sure to obtain the assistant AG’s agreement to return any documents produced, within a specified number of days after the conclusion of the investigation.

Take great care in producing documents to the AG to preserve the confidentiality of investigations where that confidentiality is provided for by the relevant statutes authorizing the investigation. Otherwise, the AG may produce documents that are not clearly marked and left in the custody of the AG, in response to a Texas Open Records Act request.

Resolving a CID. The AG must engage in enough due-diligence to come to a recommendation on resolving the investigation. The AG resolves many investigations with an agreed voluntary compliance (AVC), a written agreement with the AG specifying the remedial action the subject company agreed to take, and stating that the remedial action is an acceptable resolution of the investigation. Most AVCs also provide for the subject company to reimburse the AG for the costs of the investigation. As such, it pays to meet with the AG as soon as possible, before the company expends significant investigation costs.

When an AG May Serve a CID

The AG may serve a CID under the Texas Free Enterprise and Antitrust Act (Texas Business & Commerce Code (TBCC) §15.01); in cases involving charities under Texas Property Code §123.002; in cases involving the Texas Fair Housing Act under Texas Property Code §301.131; under the Texas Deceptive Trade Practices Act (TBCC Code §17.61); under Texas Election Code §273.023; when representing the Texas banking commissioner under Texas Finance Code §185.203; in cases of Medicaid fraud and abuse (Texas Human Resources Code §36.054); when representing the boards of public retirement systems under Texas Government Code §801.205; under the Texas Local Firefighter’s Retirement Act (Texas Revised Civil Statutes Article 6243e); to investigate crime victims’ compensation claims under the Texas Code of Criminal Procedure (Article 56.38); under Texas Health and Safety Code §314.003; when representing the Texas insurance commissioner under Texas Insurance Code §36.154; when representing the Council on Sex Offender Treatment under Texas Occupations Code §110.255; under Texas Tax Code §111.0043; when representing the Texas Transportation Department under Texas Transportation Code §21.153; under the Texas Blue Sky Laws (Texas Revised Civil Statutes Articles 581-25-1, 581-32); and when representing the boards regulating certain professions under the Texas Occupations Code. Those professions include podiatrists (§202.507), dentists (§263.008), nurses (§301.161), speech pathologists and audiologists (§401.2535), hearing instrument fitters and dispensers (§402.154), athletic trainers (§451.110), physical therapists §453.353), occupational therapists (§454.306), psychologists (§501.207), marriage and family therapists (§502.2045), licensed professional counselors (§503.2545), social workers (§505.2545), medical physicists (§602.1525), perfusionists (§603.2041), orthotists and prosthetists (§605.2021), dieticians (§701.2041), health spas (§702.558), veterinarians (§801.158), accountants (§901.166), engineers (§1001.213), geoscientists (§1002.154), architects (§1051.204), real estate brokers (§1101.157), real estate appraisers (§1103.454), property tax professionals (§1151.205), plumbers (§1301.256), structural pest control companies (§1951.204) and athlete agents (§2051.403).

Steven M. Zager is a partner in Akin Gump Strauss Hauer & Feld in Houston. He thanks fellow Akin Gump partner Fred Williams, as well as Paul Carmona, chief of the consumer protection division of the Texas Office of the Attorney General, for contributing to this article.

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