Indiana Code chapter 4-6-3 gives the Attorney General a powerful tool to use at his discretion to investigate nonprofit corporations - the civil investigative demand, or “CID.” The CID is available to the Attorney General whenever he has “reasonable cause to believe that a person may be in possession, custody, or control of documentary material, or may have knowledge of a fact that is relevant to an investigation conducted to determine if a person is or has been engaged in a violation of . . . any . . . statute enforced by the attorney general.”
The CID can take the form of interrogatories, requests for production, and depositions. (Ind. Code section 4-6-3-3.) But, although similar to a pre-litigation discovery demand, the CID is different in that the Attorney General need not make any special showing of an extraordinary need for it before issuing it. Moreover, in the event the Attorney General must petition a court to enforce compliance with the CID, the Attorney General must simply show that it is directed to a person who the Attorney General has reasonable cause to believe has information relevant to an investigation being conducted within the Attorney General’s authority. (Nu-Sash of Indianapolis, Inc. v. Carter, 887 N.E.2d 92, 93-94 (2008)). The Attorney General need not show anything regarding the likelihood that a violation of law has occurred. (See, Everdry Marketing and Management, Inc. v. Carter, 885 N.E.2d 6, 10 (Ct.App. 2008) (“The main function of the CID is not to allege that the subject of the CID has committed a violation of law, but rather to address ‘whether [the subject] may have certain information relevant to an investigation.’” (citing Auto-Owners Ins. Co. v. State, 692 N.E.2d 935, 938 (Ct.App. 1998)).)
Certain statutory protections accompany the CID. It must contain: a general description of the subject matter being investigated and a statement of the applicable provisions of law; the date, time, and place at which the CID respondent is to appear, answer written interrogatories, or produce documentary material or other tangible items; and, when production of documents or other tangible items is required, a description of those documents or items by class with sufficient clarity so that they might be reasonably identified. (Indiana Code section 4-6-3-4.) The CID must allow at least ten days to respond. (Indiana Code section 4-6-3-4.) These requirements provide notice to the CID respondent of the subject of the CID and other information facilitating the respondent’s response. They also provide basic information permitting the respondent to determine whether it has a good faith basis to refuse to respond to all or part of the CID.
The CID must be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome. (Auto Owners Ins. Co. v. State, 692 N.E.2d 935, 939 (Ct. App. 1998).) It may not require the giving of oral testimony, the production of written answers to interrogatories, or the production of documentary material that would be privileged from disclosure if demanded by a subpoena duces tecum issued by a court in aid of a grand jury investigation. (Indiana Code section 4-6-3-5.)
Indiana Code section 4-6-3-9 automatically mandates confidentiality for the responses provided by CID respondents. The section provides that the Attorney General must keep confidential all documentary material, answers to written interrogatories, and transcripts of oral testimony that are provided pursuant to an investigative demand. (Indiana Code section 4-6-3-9.) For this reason, and because the CID statute prohibits requiring the disclosure of information that would be privileged if demanded in a grand jury’s subpoena duces tecum, (see above) “[g]enerally, an assertion by the recipient of a CID that it should not be compelled to disclose certain information on the basis that it is privileged information is considered premature when raised in a proceeding to set aside the CID.” (Everdry Marketing and Management, Inc., 885 N.E.2d at 15.) This logic applies equally to CID respondents’ refusal to disclose information because it is confidential or proprietary.
The Attorney General’s obligation to keep the information confidential under Indiana Code chapter 4-6-3 is not absolute. It ceases if he files an action against a person for a violation of the matters being investigated (Indiana Code section 4-6-3-9), although nothing prevents a party from seeking a protective order continuing the confidentiality under appropriate trial rules. The Attorney General’s obligation also ceases if disclosure is authorized by a court for the purposes of interstate cooperation in law enforcement of state or federal laws. (Indiana Code section 4-6-3-9.) Finally, the Attorney General’s obligation ceases if both the person being investigated and the person who has responded to the CID waives confidentiality. (Indiana Code section 4-6-3-9.)
Indiana Code section 4-6-3-6 provides the Attorney General the means to secure court-ordered compliance with the CID in the event its respondent fails or refuses to respond to all or part of it. The section provides that the Attorney General may petition an appropriate circuit or superior court for an order requiring the respondent to respond. If, after notice and a hearing, the Attorney General demonstrates to the court that the CID is proper, the court must order the respondent to comply with the demand. (Indiana Code section 4-6-3-6.) But the court may modify the demand, and may for good cause “make any further order in the proceedings which justice requires to protect the person from unreasonable annoyance, embarrassment, oppression, burden, expense, or to protect privileged information, trade secrets or information which is confidential under any other provision of law.” (Indiana Code section 4-6-3-6.) Finally, if the court finds that either party has acted in bad faith in seeking or resisting the CID, it may order that party to pay the other reasonable expenses, including attorneys’ fees. (Indiana Code section 4-6-3-6.)
The two leading cases construing Indiana’s CID statute are Auto-Owners Ins. Co. v. State, 692 N.E.2d 935 (Ct.App. 1998), and Nu-Sash of Indianapolis, Inc. v. Carter, 887 N.E.2d 92, 2008). The former demonstrates the breadth of information the Attorney General can obtain under his CID authority and makes clear the proper focus of any inquiry into the propriety of a CID. The latter demonstrates the low burden Indiana law places upon the Attorney General to show the propriety of a CID when it is challenged.
In Auto-Owners Ins. Co., the CID respondent challenged a CID seeking information about its acquisitions and sales of total loss vehicles over a three-year period, arguing it was unenforceable because it sought information about matters falling outside the applicable two-year statute of limitations period for the violations under investigation, the Attorney General did not have a reasonable basis to believe there had been violations of law, and the request for production of documents was unreasonable (because it sought information on matters falling outside the applicable statute of limitations period). (Auto-Owners Ins. Co., 692 N.E.2d at 937.) The Appellate Court held that 1) the Attorney General may appropriately issue CIDs on matters falling outside the statute of limitations period, 2) the CID statute requires the Attorney General to have a reasonable basis to believe the CID recipient has information related to an investigation, not a reasonable basis to believe there has been a violation of law, and 3) the standard of reasonableness for a CID information request is that the request must be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome. (Id., at 938-939.)
The Court rejected the CID respondent’s first argument based on the statute of limitations. The Court stated that Auto Owners' argument was based on the faulty premise that the only purpose or the primary purpose for the Attorney General to conduct an investigation is to file legal action. (Id., at 938.) The Court noted that there are enforcement mechanisms short of filing legal action that are available to the Attorney General as part of his enforcement authority. (Id., at 938.) For example, under certain statutes the Attorney General can enter into assurances of voluntary compliance with a person who has engaged in, who is engaging in, or who is about to engage in one or more violations of law. (Id., at 938.)
The Court further noted that the CID statute’s plain language itself provides for the Attorney General’s investigation into whether a person “is or has been” engaged in a violation of any statute he enforces. (Id., at 938.) The fact that the acts triggering the Attorney General’s investigation fall outside the applicable limitation period for a cause of action thus does not prohibit the Attorney General from conducting an investigation into these acts. (Id., at 938.)
The Court rejected the challenge that the Attorney General was seeking information without a reasonable basis to believe a violation had been committed by noting that the plain wording of the CID statute - “reasonable cause to believe that a person may be in possession, custody, or control of documentary material, or may have knowledge of a fact that is relevant to an investigation” (Ind. Code section 4-6-3-3) - shows that the reasonable cause requirement is not directed to the commission of a violation of law, but is instead directed to whether a person may have certain information relevant to an investigation. (Auto-Owners Ins. Co., 692 N.E.2d at 938.) Finally, the Court rejected the CID respondent’s challenge that the CID was unreasonable by noting that the CID statute adopted the standard of reasonableness applicable to subpoenas in grand jury proceedings, which requires subpoenas (and thus CIDs) to be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome. (Id., at 939.)
In Nu-Sash of Indianapolis, Inc. v. Carter, the CID respondent appealed a trial court’s enforcement order requiring respondent’s compliance without the Attorney General having presented any evidence supporting his contention that the CID was proper. (Nu-Sash of Indianapolis, Inc., 887 N.E.2d at 94.) The Indiana Supreme Court held that when seeking a court order enforcing compliance with a CID, the Attorney General must establish, through a verified petition or admissible evidence, that there is an investigation and that there are reasonable grounds to believe that the person to whom the CID is directed has information relevant to that investigation. (Id., at 93-94.) The Court noted that this requirement affords persons receiving a CID some protection against “fishing expeditions” or retaliatory or abusive CIDs that are unrelated to legitimate investigations, and it imposes a mild deterrent to the arbitrary use of government authority. (Id.,at 96.) But the Court made clear that Indiana law places a low burden on the Attorney General to show that a CID is proper. The Court stated that a verified petition asserting that the Attorney General is conducting an investigation and that the CID respondent is reasonably believed to have relevant information will suffice to establish the requisite showing. (Id., at 96.)
For further information about the topics discussed on this page, see:
Auto-Owners Ins. Co. v. State, 692 N.E.2d 935 (Ct.App. 1998)
Nu-Sash of Indianapolis, Inc. v. Carter, 887 N.E.2d 92 (2008)
Everdry Marketing and Management, Inc. v. Carter, 885 N.E.2d 6 (Ct.App. 2008)