United States: Five Important Questions For Addressing An Investigative Request

Global Crisis Management Series:  This post is part 11 in a series concerning topics further elaborated on in Cleary Gottlieb's Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis.  The current version is available  here.

Upon receiving a request for information from a governmental authority or other agency, it is critical to make early strategic decisions about how to respond to the request and effectively frame the scope of the inquiry.  Generally speaking, there are two overarching goals that typically inform a company's strategy for responding to requests for information: (i) to provide the requesting authority the information it seeks as efficiently as possible while maintaining credibility and (ii) to appropriately frame and cabin the scope of inquiry to minimize the burden on the company.  To do so, the party receiving the request should first explore a number of foundational questions to understand the context of and motivation for the request.

  1. Is the request compulsory?

Certain requests for information are mandatory and enforceable by the relevant government agencies or a court.  Compulsory requests might take the form of grand jury subpoenas, administrative subpoenas, financial industry regulatory requests, state-level subpoenas, or even search warrants.  Failure to comply with compulsory requests can result in civil or criminal contempt, sanctions, or other disciplinary proceedings.

Other requests are non-compulsory, meaning the receiving party is not legally required to comply.  For example, a company may receive a voluntary request when a regulator or enforcement authority: (i) has not yet reached the stage of an investigation where it has compulsory power to issue subpoenas, (ii) views the company as merely a fact witness rather than a subject or target of an investigation, or (iii) has determined that the company is likely to comply fully with the voluntary request to preserve goodwill, so compulsory process is not necessary.

Even when facing a voluntary request, however, it will often be in the receiving party's best interest to respond.  The requesting authority may have the power to issue a compulsory request, so responding to the voluntary request may allow the company to avoid a more formal investigative inquiry.  Responding may also provide more leeway for the recipient to frame the inquiry, facilitate building credibility with the investigating authority, and lay the foundation for receiving cooperation credit to the extent that there is an eventual resolution of the matter.

  1. Does the requesting authority have jurisdiction?

The recipient of a request should also consider whether the requesting authority has jurisdiction to issue such a request and collect the requested documents and information.  Providing information to an agency that does not have jurisdiction can result in a waiver of jurisdictional arguments (as well as the unnecessary production of documents, of course), so it is of paramount importance to consider this issue before responding to a request.

Analyzing whether a requesting authority has jurisdiction is typically a fact-intensive inquiry, and will depend on, among other factors, the requesting authority's location and geographic authority, the location of the company and its affiliates, and the location of the information to be produced.  Investigating authorities often seek documents and information from foreign entities by serving requests for information on U.S.-based parent companies, subsidiaries, or affiliates.  Responsibility to produce the requested information can turn on whether the domestic affiliate has sufficient control of the responsive overseas documents to render them subject to production in the United States rather than in the location of the requested information.

  1. What is the underlying purpose of the request?

Understanding the purpose of the request—what the authority is investigating and why it has issued the request—can potentially enable the company to narrow the focus of the request in a way that alleviates the burden on the company while also allowing for more effective and efficient cooperation with the requesting authority.  Initiating an early conversation with the authority about the context of the request can help determine which aspects of the request are true priorities and most important to the requesting authority, allowing the company to stage its response.  Depending on the circumstances, this will include clarifying with the authority whether it considers the company a witness providing documents and information, or the actual subject or target of the investigation—which will obviously have broader implications beyond just responding to the document request.

In addition, whether a company is receiving a request as part of an industry-wide investigation of a number of peer institutions for similar conduct or is the sole recipient and focus of the investigating authority's inquiry will influence not only how the company responds to the request but also overarching strategic and advocacy decisions.  In industry-wide investigations, for example, it may be appropriate and useful to engage in joint-defense discussions with peer institutions who may be further along in the investigation process, to gain additional information before preparing a response.

  1. Is the scope of the request reasonable?

Subpoenas are subject to the reasonableness standards of the Fourth Amendment, and must be "sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome."1  Authorities are typically open to a conversation about the request and its reasonableness.  Even in the case of voluntary document requests, it will be important to have a discussion with the requesting authority about the scope of the request, the burdens of complying (including the volume of documents likely to be produced, the task of gathering and reviewing the documents, and the timeframe for making the production), and whether information is likely to be helpful to the authority's investigation.

In some circumstances where negotiations with the investigating authority about the scope and burden of the request are at an impasse, the recipient may want to consider whether there are grounds to quash or modify the subpoena or request, which requires a showing that the request is unreasonable.  However, there is a high bar to quashing a subpoena, and the burden frequently is on the moving party to demonstrate that the request is unreasonable.  Courts may also quash or modify a grand jury subpoena on the grounds that the materials or testimony sought are protected by a valid, recognized privilege, that the subpoena will infringe upon a constitutional right, or that the government has abused the grand jury process.2  Abuse of the grand jury process occurs, for example, where a subpoena is used improperly to obtain information for a parallel civil litigation.3

Additionally, some jurisdictions may have blocking statutes4 or data privacy laws5 that restrict cross-border access to information stored in certain countries, and certain foreign authorities may require notification regarding requests implicating data stored in their jurisdiction and/or that information be provided through a local authority as a conduit.  These jurisdictional requirements may provide an opportunity to negotiate narrowing the scope of a request.

  1. What is the timing for the response?

If the information requested will take considerable time to review and prepare for production, the company may consider proposing a schedule for providing partial responses on a regular basis through rolling productions.  It is almost always better to be upfront about challenges and realistic about timeframes.  Overpromising and then needing to seek extensions or changes to the investigative plan is almost always worse that proposing reasonable deadlines, explaining why they are necessary, and sticking to them.  This consistency will help build credibility and rapport with the investigating authority and contribute to a smooth investigative process.

Footnotes

1 Carpenter v. United States, 585 U.S. ____ (2018) (Kennedy, J. dissenting) (quoting Donovan v. Lone Steer, Inc., 464 U.S. 408, 415 (1984)).

2 See, e.g., United States v. Williams, 504 U.S. 36, 48 (1992) ("[T]he court will refuse to lend its assistance when the compulsion the grand jury seeks would override rights accorded by the Constitution . . . or even testimonial privileges recognized by the common law.").

3 See, e.g., United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958) ("[The] 'indispensable secrecy of grand jury proceedings,' must not be broken except where there is a compelling necessity." (citation omitted)).

4 Robert L. Haig, Business and Commercial Litigation in Federal Courts § 21:97 (4th ed. 2017).

5 See Council Directive 95/46, of the European Parliament and of the Council of 24 Oct. 1995 on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data, 1995 O.J. (L. 281) 31; General Data Protection Regulation (GDPR) 2016/679, 2016 O.J. (L. 119).

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