PRACTICE AREA : Trial & Litigation

FREQUENTLY ASKED QUESTIONS ABOUT CIVIL INVESTIGATIVE DEMANDS

Never assume the consumer protection division will close the investigation after your company produces documents. Always assume the division will seek fines or penalties.

• What is a civil investigative demand?

A civil investigative demand, or CID, is a request for documents by the consumer protection division of the attorney general’s office when investigating a suspected violation of the Texas Deceptive Trade Practices Act. During the investigation, the division also may request the company to file a written statement or report, under oath, or that a representative of the company provide sworn testimony. The attorney general also can issue a CID under the Texas Free Enterprise and Antitrust Act to investigate suspected antitrust violations.

• Who issues civil investigative demands?

For suspected violations of the Deceptive Trade Practices Act, the consumer protection division will issue the CID. For suspected antitrust violations, the antitrust division will issue the CID. The remainder of this piece will address only CIDs issued by the consumer protection division.

• If my company is served with a civil investigative demand, does that mean my company has done something illegal?

Not necessarily. Sometimes, after reviewing the documents produced pursuant to the CID, the consumer protection division decides there has been no violation of the applicable law. In that case, the consumer protection division may simply close its investigation. Or, it may be that another company is the target of the investigation, and the consumer protection division needs documents from your company to determine whether the other company has violated a particular statute. However, if your company has received a CID, you should operate on the assumption that it is your company that is under investigation.

• Are there any requirements the attorney general must follow in issuing a civil investigative demand?

Yes. The Texas Business & Commerce Code provides that each CID shall:

(1) state the statute and section under which the alleged violation is being investigated, and the general subject matter of the investigation;

(2) describe the class or classes of documentary material to be produced with reasonable specificity so as to fairly indicate the material demanded;

(3) prescribe a return date within which the documentary material is to be produced; and

(4) identify the members of the consumer protection division to whom the documentary material is to be made available for inspection and copying.

• Does my company need to respond to a civil investigative demand?

Yes. The law states that a person shall comply with the terms of the CID unless otherwise provided by a court order. Also any person who, with intent to avoid compliance with a CID, removes, conceals, withholds, destroys, mutilates, alters, or falsifies any documentary material is guilty of a misdemeanor, punishable by a fine of not more than $5,000 or by confinement in jail for not more than one year, or both.

• Is there a deadline by which my company has to respond to the civil investigative demand?

Yes. If there is a return date specified in the CID, you must respond by that date. If your company decides to file suit to modify or set aside the CID, the suit must be filed within 20 days after the demand has been served or by the response date, whichever period is shorter. Your company should consider retaining experienced counsel well before the return date to make sure you do not waive any valuable rights.

• What are the different ways my company can respond to a civil investigative demand?

One way is to produce the requested documents by the response time stated in the CID. If your company needs more time, the consumer protection division usually will agree to an extension of time.

There are many legitimate reasons for legally resisting production of certain documents. For example, a company may feel the requested documents are not relevant to the stated purpose of the investigation. Or, the CID may request documents that are privileged. In either example, if you cannot reach an agreement with the consumer protection division to withdraw or narrow the request, it may be necessary to file suit to modify the requests in the CID. Once suit is filed, a court can decide which documents need to be produced in response to the CID.

• How should my company respond to a civil investigative demand?

As a general rule, your company should cooperate with the consumer protection division as much as possible. Other than that general rule, the decision must be made on a case-by-case basis. There are many instances where it is necessary to file suit to set aside or narrow the scope of the requests.

• What can the Attorney General do with the documents my company produces?

The consumer protection division may use the documents as it deems necessary in the enforcement of the Deceptive Trade Practices Act, including presenting the documents before any court. Other than that, the consumer protection division is prohibited from disclosing the contents of the documents unless (1) they have the consent of the person who produced the material, or (2) after a showing of good cause, a court orders them to do otherwise.

• What if the responsive documents contain trade secrets?

The consumer protection division is prohibited from using any material containing trade secrets, except with the approval of the court in which the action is pending, and only after adequate notice to the person furnishing the material.

• How are civil investigative demands usually resolved?

If the consumer protection division believes a violation of the Deceptive Trade Practices Act has occurred, the division typically will try to resolve the matter through an assurance of voluntary compliance, or AVC. In an AVC, a company may, for example, agree to refrain from engaging in certain conduct. Or, an AVC may require the repayment of money to affected consumers. An AVC may also require the payment of a fine or penalty, which may be substantial.

If the investigation cannot be resolved through an AVC, then the consumer protection division likely will file suit against the company. In that situation, the matter will proceed much the same as any other piece of litigation.

Never assume the consumer protection division will close the investigation after your company produces documents. Always assume the division will seek fines or penalties.

DISCLAIMER:

The above information is intended only as general information, and is not intended as a substitute for legal advice regarding a specific factual situation. If you believe you have an issue regarding a civil investigative demand, you should consult competent legal counsel. No Attorney-Client relationship is created unless and until we formally accept representation of you. Please contact us for further information at (512) 225-5800.

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ATTORNEYS
Craig M. Douglas
Michael Klein
Lisa M. Magids
Wallace M. Smith



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Specialization unless expressly indicated.

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