Nobody likes big brother watching over them. And nobody likes to be investigated by the State. But the State has the awesome power to collect documents or testimony from individuals and businesses alike through its civil investigative demand powers. So when the State comes knocking, it is imperative to react appropriately.
What is a Civil Investigative Demand (“CID”)?
The Attorney General, under the Texas Business and Commerce Code, may issue civil investigative demands as a means to collect testimony and documents for an investigation it is pursuing under the Texas Free Enterprise and Antitrust Act or for violations of the Texas Deceptive Trade Practices Act (“DTPA”). For suspected antitrust violations, the Attorney General may issue a CID for documentary evidence, interrogatories, or oral testimony pursuant to Tex. Bus. & Com. Code § 15.10.
At first blush, the Attorney General’s CID authority appears more limited under the DTPA. The Attorney General may issue a CID for documents only under its statutorily outlined civil investigative demand authority for suspected DTPA violations pursuant to Tex. Bus. & Com. Code § 17.61. Nevertheless, the Attorney General may still seek oral testimony under oath for suspected DTPA violations under Tex. Bus. & Com. Code § 17.60, for which non-compliance is punishable in the same fashion as the DTPA CID. To see sample civil investigative demands, visit the website of the Office of the Attorney General.
What do you do if you receive a Civil Investigative Demand?
As an initial matter, if you receive a civil investigative demand from the Texas Attorney General, it does not necessarily mean that you are the subject of the investigation. CIDs may be issued to the target of the investigation, but may also be issued to other individuals or entities that may have information related to the investigation.
And because the Attorney General will describe the investigation only in very general terms, it is imperative to take appropriate precautions, regardless of whether you think you are the subject of the investigation or merely have relevant documents or other information.
First, upon receiving a CID, immediate consultation with experienced counsel is highly recommended. Intentionally failing to comply with a CID may result in significant penalties, such as a fine of not more than $5,000, a year in jail, or both, so responding to the CID is critical. But there may be alternatives for how one can respond after receiving a CID. Experienced counsel can engage in discussions with the Attorney General in an attempt to understand more about the investigation, the documents being requested, or other information being sought. Moreover, experienced counsel can assess whether the CID issued complies with the relevant statute and whether it is within the authority of the Attorney General. If the Attorney General has exceeded his authority or the CID fails to comply with certain statutory requirements, counsel, within 20 days of the service date (or the return date if earlier), may file a motion to set aside or modify the CID. To fully assess these options and how to appropriately respond, depending on the request, counsel must be contacted quickly.
Second, document retention is critical. Upon receiving a CID, it is important to take efforts to preserve the types of documents subject to the CID. Therefore, any automatic deletion mechanisms should be disabled so that documents responsive to the CID are not destroyed. The Attorney General is empowered with this awesome CID authority to investigate suspected violations of antitrust or consumer law without the need of filing a lawsuit or explaining the allegations fully. Responding to a CID can be like navigating treacherous waters because it is imperative to cooperate with the Attorney General, while at the same time, protect your interests and the interests of your business.