Civil Investigative Demand (CID)

Potentially, yes. State and federal authorities have broad power when issuing civil investigative demands, and CIDs will frequently seek to compel disclosure of “potentially relevant” documents spanning a multi-year time period. If the CID meets the limited legal standards for enforceability, you are under an obligation to comply – even if that means taking on an extremely onerous burden.

That said, most times, it may be possible to negotiate a CID recipient’s disclosure obligations. Often, the agency that issues a CID will not initially understand the volume of records implicated by a request, and narrowing the focus of the government’s inquiry can be beneficial to both parties. However, CID recipients cannot selectively choose to comply with investigative requests, and a limited disclosure should be made only after conferring with the relevant government authority and on the advice of the best federal defense legal counsel.

Yes, but only under limited circumstances. As a form of administrative subpoena, the courts defer to agency powers regarding the scope and enforceability of CIDs, and filing a successful challenge in such court requires clear evidence that an agency has overstepped its bounds in issuing a CID. At the federal level, the courts will only consider challenges to a civil investigative demand on four specific grounds.

• The demand creates an “undue burden” for the recipient considering the scope and nature of the investigation and the volume of information being requested.
• The demand seeks the production of information that is irrelevant to the agency’s investigation.
• The demand seeks the production of information that is already within the investigating agency’s possession.
• The investigating agency has engaged in abuse of the judicial process.

As you can see, these are not strict legal standards, but subjective borders that are open to interpretation. As a result, challenging a CID is a challenge. Recipients of CIDs will often have other more-effective and less costlyless-costly methods of limiting their disclosure obligations (even if a court challenge is successful, the most likely result is that the CID would be modified rather than quashed entirely).

Once you receive a CID, you have two primary obligations: (i) to produce the requested information within the applicable time frame (subject to negotiating a limited disclosure obligation or filing a successful challenge in court), and (ii) to implement an effective “legal hold” in order to prevent the deletion or destruction of “potentially relevant” information.

The “legal hold” is a critical step, and one that needs to be taken quickly in order to avoid potential negative ramifications. This involves taking adequate measures to ensure that any records that might be responsive to the government’s request – both hard copy and electronic – are preserved as long as necessary. Companies that have regularly-scheduled purges and backupback-up tape re-writes will need to halt their standard operating procedures, and the appropriate IT personnel and records custodians should be notified promptly with clear instructions on what is required in order to meet the company’s legal obligations.

While civil investigative demands are used in a variety of types of civil investigations, some of the types of cases in which we most-commonly see the use of CIDs include:

• Antitrust violations – The FTC and the Antitrust Division of the DOJ both routinely use CIDs in the course of antitrust investigations.
• CFPB investigations – The CFPB is the federal agency responsible for enforcing the laws that protect consumers in financial product and service transactions.
• Medicaid fraud – Both state and federal authorities use CIDs to investigate cases of suspected Medicaid fraud.
• Medicare fraud – Allegations that a healthcare provider has submitted “false or fraudulent” claims for Medicare reimbursement can lead to substantial liability in civil cases.

An important way that you can protect yourself and your company after receiving a civil investigative demand is by seeking legal representation. Regardless of whether you are the target of the government’s investigation, you need to take the CID seriously; and, due to the complex and varied legal issues involved, you should seek out the best federal defense attorney to advise you regarding appropriate courses of action. Other steps you can take to protect yourself after receiving a CID include:

• Make sure you know the deadlines that apply.
• Make sure you understand what you are (and aren’t) required to disclose.
• Make informed decisions about whether to negotiate or challenge the scope of your CID.
• Promptly institute a compliant legal hold.
• Begin preparing your response, and do not assume that your disclosure obligations will change (unless otherwise advised by your legal counsel).
• Ensure that your means of responding comply with the requirements set forth in the CID.
• Determine whether you, your company, or a third party is the target of the government’s investigation.

State and federal authorities use civil investigative demands to collect information from multiple sources, not just the targets of their investigations. If you have received a CID and you are not currently under investigation, this generally means that the investigating agency believes you have information that could help to establish a third party’s civil liability. However, it is also possible for an entity that is not being targeted to become the target of an investigation as a result of its disclosure of information in response to a CID, and this is yet another reason why it is critical to hire the best legal counsel to advise you in all aspects of your CID response.

If you have been served with a CID, we strongly encourage you to seek legal representation. We offer free initial case assessments, and our defense attorneys are happy to meet with you in confidence to develop an action plan for moving forward. In addition, we would encourage you to read 10 Key Facts about Federal Civil Investigative Demands, prepared by our attorneys.

For most practitioners and business owners, their first question upon receiving a Civil Investigative Demand is, “Why?” Federal civil investigations almost always come as a surprise; and, at this stage, the federal government holds all of the cards.

When preparing a response to an FTC CID, it is important to determine your (or your business’s or practice’s role) in the investigation. Are you a witness, a suspect, or a target? At this stage, each of these options has an equal probability; and, while you must comply regardless of your posture in the investigation, knowing whether you are presently at risk of prosecution is critical to making informed and strategic decisions.

Regarding the substance of the investigation, the list of possibilities is much longer. While your business or practice may signal the purpose of the investigation (i.e. if you are a healthcare provider, the investigation may target allegations of Medicare, Medicaid, Tricare, DOL, or VA fraud, or related to false claims act investigations for a false claims law investigation), you cannot afford to make any assumptions about the government’s motives. Examples of the types of allegations commonly investigated through the issuance of CIDs include:

• Antitrust violations
• Consumer fraud in the financial products and services sector
• Healthcare fraud (Medicaid, Tricare, DOL, and VA fraud)
• False Claims Act

Although compliance with a CID is mandatory (subject to any modifications your defense attorneys can negotiate with the issuing agency or secure through a motion filed in federal district court), it can also be risky. From unnecessarily disclosing information to failing to preserve the attorney-client privilege, there are several ways that DOJ Civil Investigative Demand recipients can expose themselves to avoidable risk during the response process.

Ultimately, the biggest risk with compliance is that the CFPB Civil Investigative Demand recipient will disclose information that the government is subsequently able to use against it in a civil or criminal enforcement proceeding. However, within this broader concern, there are several discrete risks of which CID recipients need to be aware as well. For example, compliant disclosure in response to a general records request could result in tipping off the government to issues that were not previously on its radar. Likewise, if you are currently being treated as a witness, there are various considerations you may need to address in order to avoid placing yourself at the center of the government’s investigation.

What if you don’t comply with the CID? Or, what if you only selectively disclose information in your response? Even though a CFPB CID – or any other type of Civil Investigative Demand – is an admin subpoena (rather than a court-issued subpoena), failure to comply still constitutes civil contempt. If federal agents discover that you have withheld information (either intentionally or unintentionally) through other sources, then you could face a contempt charge even if you are simply a witness and are not otherwise at risk for facing charges because of the investigation.

Antitrust is a complex and constantly evolving area of the law that few companies fully grasp, but which can lead to significant civil liability (and even criminal prosecution) in the event of a substantial violation. At the federal level, antitrust cases are investigated by the Antitrust Division of the U.S. DOJ and the Federal Trade Commission (FTC), often with other state and federal law enforcement agencies. Like other federal authorities, the Antitrust Division and the FTC have broad jurisdiction over businesses that operate in the United States, and they have extensive powers that facilitate their investigation of companies suspected of engaging in federal antitrust violations.

One of the powers is the ability to issue a CID. According to the Antitrust Division Manual, the Antitrust Division will initiate an investigation only if:

• “[T]here is reason to believe that an antitrust violation may have been committed.”
• Commerce has been substantially affected.
• Allocating resources from the Antitrust Division, “fits within the needs and priorities of the Division.”

The provisions governing CIDs in federal antitrust investigations are set forth in 15 U.S.C. Section 1312. Pursuant to subpart (a):

“Whenever the . . . Antitrust Division . . . has reason to believe that any person may be in possession, custody, or control of any documentary material, or may have any information, relevant to a civil antitrust investigation . . . [it] may, prior to the institution of a civil or criminal proceeding by the United States thereon, issue in writing, and cause to be served upon such person, a civil investigative demand . . . .”

The Antitrust Division can issue a CID to any entity that it believes may have records that apply to an investigation – even if that entity itself is not under investigation. That said, companies that frequently get CIDs from the Antitrust Division are being targeted in investigations; and, if someone within your organization has received one (whether from the Antitrust Division or the FTC), your top priority needs to be to determine why you are being contacted by the antitrust arm of the DOJ.

Under 15 U.S.C. Section 1312(a), the Antitrust Division can require companies to:

(i) produce documents for inspection, copying, or reproduction;

(ii) answer written interrogatories;

(iii) provide oral testimony regarding documents or information; or

(iv) any combination thereof.

The FTC CID should provide sufficient specificity to identify the type (or types) of information requested and the manner in which it is to be disclosed. The FTC has similar powers under the Section 9 of the Federal Trade Commission Act, including the power to, “require by subpoena the attendance and testimony of witnesses and the production of all . . . documentary evidence relating to any matter under investigation.”

Potentially, yes. Although the Antitrust Division’s admin subpoena powers are not absolute, they are very broad. Regarding limits on information that can be requested, the law states:

“No [civil investigative] demand shall require the production of any documentary material, the submission of any answers to written interrogatories, or the giving of any oral testimony, if such material, answers, or testimony would be protected from disclosure under—(A) the standards applicable to subpoenas or subpoenas duces tecum issued by a court of the United States in aid of a grand jury investigation, or (B) the standards applicable to discovery requests under the Federal Rules of Civil Procedure, to the extent that the application of such standards to any such demand is appropriate and consistent with the provisions and purposes of this chapter.”

If confidential information is not excluded from production pursuant to a DOJ CID under the plain language of the law, companies may be able to seek to protect their information from public disclosure. However, even in these circumstances, the Antitrust Division will not guarantee protection. A standard response letter available on the DOJ’s website states:

“In your letter of [Date] you requested additional assurances of confidentiality beyond those provided in the Civil Investigative Demand (“CID”) statute, 15 U.S.C. §§ 1311-1314, and the Freedom of Information Act (“FOIA”), 5 U.S.C. §552, for documents called for by the CID recently served upon [Company Name].

“I cannot promise to notify you in advance if a document [Company Name] provided will be used in a CID deposition of a witness not affiliated with your client. The Division is authorized to use CID material without the consent of the producing party in “connection with the taking of oral testimony.” It is, however, rare that we disclose a document in such a manner . . . [and] the Division has an interest in seeing that competitors do not receive access to each other’s confidential information, is sensitive to confidentiality concerns, and does not unnecessarily reveal such information.

“You have also represented that [Company Name] considers certain information requested in the CID to be proprietary and confidential. . . . It is the Department’s policy not to use confidential business information in complaints and accompanying court papers unnecessarily. The Department, however, cannot provide assurance that confidential business information will not be used in such papers, and cannot assure [Company Name] of advance notification of the filing of a complaint or its contents.”

Yes, it can be challenged through the filing of a petition to limit, modify, or set aside (“quash,” in legal terms) the demand. However, there are strict timing and substantive limits on filing petitions to challenge CIDs. Challenges to a civil investigative demand are initially considered at the agency level; and, for federal agencies’ broad investigative authority, federal courts are deferential to agency-level decisions regarding the propriety of CIDs.

That said, companies should not simply assume that they are required to fully comply with a civil investigative demand from the Antitrust Division or the FTC. The costs and burdens of compliance can be substantial, and it may be possible to negotiate a more-limited disclosure obligation depending upon the scope and status of the investigation. Upon being served, a company’s executives or in-house counsel should promptly begin crafting an appropriate response with the help of outside federal defense attorneys.

There are multiple examples of federal antitrust violations that can lead to severe civil and criminal penalties. These penalties can include millions of dollars in fines, administrative remedies, and even federal incarceration. Companies charged with antitrust violations will frequently face charges for mail fraud, wire fraud, and other federal offenses as well – and these each carry the potential for substantial additional penalties.