State of Iowa Ex Rel. Thomas J. Miller, Attorney General of Iowa v. Associated Community Services, Inc. ( 2014 )

IN THE COURT OF APPEALS OF IOWA
No. 13-0878
Filed November 26, 2014
STATE OF IOWA ex rel. THOMAS J. MILLER,
ATTORNEY GENERAL OF IOWA,
Plaintiff-Appellee,
vs.
ASSOCIATED COMMUNITY SERVICES, INC.,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Douglas F. Staskal,
Judge.
A foreign corporation appeals a district court order requiring it comply with
an investigatory subpoena. AFFIRMED.
Thomas M. Boes of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des
Moines, for appellant.
Thomas J. Miller, Attorney General, and Steve St. Clair, Assistant Attorney
General, for appellee.
Heard by Vogel, P.J., and Vaitheswaran and Potterfield, JJ.
2
VAITHESWARAN, J.
We must decide whether the district court abused its discretion in
enforcing an investigative subpoena issued by the Iowa Attorney General
pursuant to the Iowa Consumer Fraud Act.
I. Background Proceedings
The State of Iowa, through Attorney General Thomas J. Miller, sued
Associated Community Services, Inc. (“ACS”) for claimed violations of Iowa’s
Consumer Fraud Act. See Iowa Code § 714.16 (2013). The suit culminated in a
consent judgment resolving “any and all claims by the Iowa Attorney General
against Defendant for alleged violations of the [Consumer Fraud Act] that
occurred prior to the effective date of this Consent Judgment in connection with
the acts and practices addressed in the Petition in this cause.” ACS was to
“refrain from engaging, directly or indirectly, in acts or practices that violate the
Iowa Consumer Fraud Act . . . in connection with the solicitation of contributions
for charitable purposes, either directed to Iowa residents or from an Iowa
location.”
The acts and practices alleged in the petition occurred in 2009 and 2010.
The consent judgment was signed by a representative of ACS on March 11,
2011, and was fully executed and approved on March 31, 2011.
After ACS signed the consent judgment but before its effective date, the
attorney general received a complaint of solicitation by ACS. The attorney
general later received a second complaint. Two investigative subpoenas were
issued seeking information about ACS’s role in soliciting and receiving donations
from Iowa consumers. One of the subpoenas demanded “a list of all recordings
3
in [ACS’s] possession or control of solicitation calls made to Iowa residents on or
after May 1, 2011.” The subpoena also demanded “a copy of all recordings that
both (i) are or should be on the list . . . and (ii) were made on behalf of
Foundation of American Veterans.”
When ACS did not comply with the subpoenas, the attorney general filed a
district court application to enforce them. Following arguments, the court issued
an order mandating compliance within thirty days. The court rejected ACS’s
contention that the subpoenas violated the terms of the consent judgment. The
court further found moot ACS’s constitutional free-speech challenge to the
attorney general’s request for an injunction, noting this request was previously
withdrawn. ACS appealed the order but later dismissed the appeal.
In time, the attorney general issued a third investigative subpoena—
subpoena 2308—directing ACS to appear in Iowa and give evidence under oath
regarding “[t]he completeness of the set of recordings” produced pursuant to one
of the prior subpoenas. ACS refused to appear and the attorney general again
sought district court enforcement. The court ordered ACS to comply with
subpoena 2308 and enjoined ACS from “making solicitations for donations in any
manner to any person in the State of Iowa and, further, from receiving or
collecting any donation from the State of Iowa” until it fully complied with this
subpoena.
On appeal of this order, ACS contends: (A) “subpoena no. 2308 and the
district court’s ruling to enforce the subpoena exceed the powers and authority
granted by the Iowa Consumer Fraud Act,” (B) “the injunctive relief granted by
the district court is an unconstitutional prior restraint on the free speech rights of
4
ACS,” and (C) “the prior consent judgment agreed to by the State and ACS and
entered by the district court bars the State from seeking relief via subpoena
2308.”
II. Analysis
A. Authority to Issue Subpoena
ACS specifically argues (1) the attorney general lacks authority to
subpoena an out-of-state witness, (2) Iowa Code section 714.16(3)(b) does not
authorize the attorney general to produce a representative to give a statement
under oath, and (3) the Iowa Consumer Fraud Act does not allow for injunctive
relief. Our review is for an abuse of discretion. State ex rel. Miller v. Publishers
Clearing House, Inc., 633 N.W.2d 732, 736 (Iowa 2001). “In exercising such
discretion, a court should keep in mind the broad scope of the attorney general’s
subpoena power under the consumer fraud statute.” Id.ACS’s first contention does not find support in statute or case law. The
Consumer Fraud Act authorizes the attorney general to issue investigative
subpoenas. Iowa Code § 714.16(4)(a). The pertinent provision states:
To accomplish the objectives and to carry out the duties prescribed
by this section, the attorney general, in addition to other powers
conferred upon the attorney general by this section, may issue
subpoenas to any person, administer an oath or affirmation to any
person, conduct hearings in aid of any investigation or inquiry,
prescribe such forms and promulgate such rules as may be
necessary, which rules shall have the force of law.
Id. “Person” is broadly defined as:
any natural person or the person’s legal representative,
partnership, corporation (domestic and foreign), company, trust,
business entity or association, and any agent, employee,
salesperson, partner, officer, director, member, stockholder,
associate, trustee or cestui que trust thereof.
5
Id. § 714.16(1)(j). The State cited section 714.16(4) in its subpoena and its
application to enforce the subpoena. “We may decide an issue presented to, but
not decided by, the district court when it is urged on appeal by the appellee as an
alternative ground for affirmance.” Star Equip., Ltd. v. State, 843 N.W.2d 446,
457 n.7 (Iowa 2014).
Several Iowa Supreme Court opinions have confirmed the State’s broad
investigative subpoena authority. In State ex. rel. Miller v. Smokers Warehouse
Corp., 737 N.W.2d 107 (Iowa 2007), an out-of-state corporation challenged the
attorney general’s authority to issue a civil investigative demand. After finding
the demand was essentially an administrative subpoena, the court concluded the
demand was authorized by section 714.16(4). Smokers Warehouse Corp., 737
N.W.2d at 109-10. The court characterized the defendants’ reading of the statute
as “too narrow and restrictive” and stated, “to adopt the defendants’ argument
would place form over substance, a result inconsistent with the broad
interpretation historically given to the investigative powers of administrative
agencies in general and to the investigative powers authorized by the Consumer
Fraud Act in particular.” Id. at 110 (citing Publishers Clearing House, Inc., 633
N.W.2d at 737-38).
In Publishers Clearing House, the court cited United States Supreme
Court precedent likening an agency investigation to a grand jury, “which does not
depend on a case or controversy for power to get evidence but can investigate
merely on suspicion the law is being violated, or even just because it wants
assurance that it is not.” 633 N.W.2d at 736-37 (citing United States v. Morton
Salt, 338 U.S 632, 642-43 (1950)). The court also cited Iowa City Human Rights
6
Commission v. Roadway Express, Inc., 397 N.W.2d 508, 510 (Iowa 1986), which
reaffirmed an agency’s broad authority “to conduct preliminary investigations and
issue administrative subpoenas in the field of public interest assigned to it.”
Publisher’s Clearing House, 633 N.W.2d at 736.
This brings us to ACS’s second argument: Iowa Code section 714.16(3)(b)
does not authorize subpoena 2308. Having concluded section 714.16(4)
furnishes authority for the issuance of the subpoena, we find it unnecessary to
address this argument.
ACS’s third contention that injunction relief is unavailable to the attorney
general was not raised in the district court, nor was it addressed. Accordingly,
the issue was not preserved for our review. See Meier v. Senecaut, 641 N.W.2d
532, 537-38 (Iowa 2002).
We conclude the district court did not abuse its discretion in finding
authority for the issuance of subpoena 2308.
B. Injunction is Unconstitutional Prior Restraint
ACS next raises a First Amendment challenge to the district court’s grant
of injunctive relief. The attorney general responds with an error preservation
concern, which ACS discounts. In its view, counsel’s assertion in the district
court that subpoena 2308 represented “a total abuse of State power” was
sufficient to preserve error. To the contrary, this assertion was too vague and
general to preserve a constitutional challenge for our review. See Sievers v.
Iowa Mut. Ins. Co., 581 N.W.2d 633, 638 (Iowa 1998).
7
As a fallback position, ACS notes the First Amendment issue “was fully
briefed and argued in its resistance to” the first subpoena enforcement
application. However, the issue was never decided in the court’s ruling on the
application. As noted, the attorney general withdrew its request for injunctive
relief in the first subpoena enforcement proceeding, leading the court to conclude
the issue was moot. Accordingly, even if we could look back to ACS’s arguments
in resistance to the first application, we have nothing to review. For these
reasons, we decline to address the merits of ACS’s First Amendment challenge
to the attorney general’s request for injunctive relief in subpoena 2308.
C. Prior Consent Judgment as Bar to Relief
Finally, ACS contends the district court abused its discretion in concluding
the consent judgment was no bar to the issuance of subpoena 2308. The
attorney general again responds with an error preservation concern because this
issue was only raised in connection with the first enforcement application, not the
second.
The Attorney General is correct. ACS did not raise an argument regarding
the effect of the consent judgment on subpoena 2308. In fact, at the hearing on
the second enforcement application, ACS conceded it was not challenging the
legitimacy of the original subpoena. It is clear the issue was not raised in this
subpoena enforcement proceeding.
That said, the issue was arguably decided because the district court’s
second ruling was predicated on “the same reasons stated in the court’s” first
ruling and the first ruling addressed the effect of the consent judgment.
Accordingly, we elect to address the issue on its merits.
8
As noted, the consent judgment stated in pertinent part:
This Consent Judgment constitutes a full and final resolution
of any and all claims by the Iowa Attorney General against
Defendant for alleged violations of the CFA that occurred prior to
the effective date of this Consent Judgment in connection with the
acts and practices addressed in the Petition in this cause.
For several reasons, this and other language in the consent judgment did not bar
the issuance or enforcement of subpoena 2308. First, the “acts and practices
addressed in the Petition” underlying the consent judgment pertained to
complaints in 2009 and 2010 and the complaints which were the subject of
subpoena 2308 occurred in 2011. Second, the consent judgment barred “claims”
rather than the investigation of claims. As the district court stated in its first
ruling, “[a] subpoena for information from ACSI is, plainly, not a claim against it
for an alleged violation of the [Consumer Fraud Act].” Third, while the consent
judgment set forth certain procedures for future conduct, the district court
correctly found these procedures limited ACS rather than the attorney general
and did not restrict “the attorney general’s authority to request information.”
Finally, ACS asserts the consent judgment did not require maintenance of all
recordings. But, as ACS acknowledges, there was a caveat: “5% of all calls
made into Iowa by ACS [had to be] recorded and preserved intact for 45 days in
compliance with the Consent Judgment.” In light of the 2011 complaints, the
attorney general was entitled to investigate whether this condition was satisfied.
As the court stated in Publishers Clearing House, “[t]o adopt [the defendant’s]
argument that it is excused from producing all of the information requested by
producing some of it would allow it, rather than the attorney general, to determine
the scope of the discovery.” 633 N.W.2d at 737-38. This language also resolves
9
ACS’s related contention that its partial compliance with the consent judgment
renders the subpoena 2308 enforcement application moot. Id.We conclude the district court did not abuse its discretion in ordering
compliance with subpoena 2308 and in enjoining activity directed to Iowans
pending compliance.
AFFIRMED.