Subject: Fwd: FW: Draft Research Memorandum on Senator Dunn Issues
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Date: Tue, 15 May 2001 14:56:00 -0700 (PDT)

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Date: Tue, 15 May 2001 09:16:47 -0700
From: "Debbie Castro" <[email-masked]>
To: "Michael Kirby" <[email-masked]>
Cc: "Stephen Chapple" <[email-masked]>
Subject: Fwd: FW: Draft Research Memorandum on Senator Dunn Issues
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From: "Fergus, Gary S." <[email-masked]>
To: "Andy Pickens (E-mail)" <[email-masked]>,        "Barrett H. Reasoner (E-mail)" <[email-masked]>,        "David J. Noonan (E-mail)" <[email-masked]>,        "Debbie Castro" <[email-masked]>,        "Emison, Theo" <[email-masked]>,        "Jean Frizzell (E-mail)" <[email-masked]>,        "Jeff Alexander (E-mail)" <[email-masked]>,        "Meringolo, Peter" <[email-masked]>,        "Mike D. Smith (E-mail)" <[email-masked]>,        "Molland, Michael" <[email-masked]>,        "Richard B. Sanders Esq. (E-mail)" <[email-masked]>,        "Robert C. Williams (E-mail)" <[email-masked]>,        "Smith, Amanda" <[email-masked]>,        "Susan Bisop (E-mail)" <[email-masked]>
Subject: FW: Draft Research Memorandum on Senator Dunn Issues
Date: Tue, 15 May 2001 09:01:17 -0700

FYI.
Thanks.
Gary

> -----Original Message-----
> From:	Fergus, Gary S.
> Sent:	Monday, May 14, 2001 7:45 PM
> To:	Michael L. Kirby (E-mail)
> Cc:	Molland, Michael E.; Smith, Amanda D.
> Subject:	Draft Research Memorandum on Senator Dunn Issues
>
> Mike,
>
> 	Here is the draft research memo that Amanda prepared on some of the
> questions surrounding Senator Dunn's investigation (some of this you saw
> before):
>
> Legislative Committee Subpoena Power
>
> Government Code Section 9401, provides that "a subpoena requiring the
> attendance of any witness before the Senate, Assembly, or a committee may
> be issued by the President of the Senate, Speaker of the Assembly, or the
> chairman of any committee before whom the attendance of the witness is
> desired if permission has been secured from the rules committee of the
> respective house."
>
> There is a relative dearth of case law interpreting Govt. Code 9401 et
> seq. and the Govt. Code reporters cross reference to the Code of Civil
> Procedure Sections on issuance of subpoenas (C.C.P. 1985, et seq.).
> Therefore, it is possible that the provisions of both the Govt. Code and
> the C.C.P. will govern the issuance and enforceability of a subpoena
> issued by a legislative committee.
>
> Govt. Code Section 9402 provides that a subpoena is sufficient if it "(a)
> states whether the proceeding is before the Senate, Assembly or a
> committee. (b) is addressed to the witness [presumably the custodian of
> records when documents are sought]. (c) requires the attendance of the
> witness at a time and place certain and (d) is signed by the President of
> the Senate, Speaker of the Assembly or chairman of the committee before
> whom attendance of the witness is desired."
>
> If the witness does not appear or refuses to testify or "neglects or
> refuses ... to produce upon reasonable notice any material and proper
> books, papers or document sin his possession or under his control, he has
> committed a contempt."  Govt. Code Section 9405.   If the contempt is
> committed while the Legislature is in session, Govt. Code Section 9407
> provides that the committee shall report the contempt to the Senate or
> Assembly "for such action as may be deemed necessary by the Senate or
> Assembly."  If the Legislature is not in session, "the superior court in
> and for the county in which any inquiry, investigation hearing or
> proceeding [is] held ... may compel the ... production of books, papers,
> documents and accounts, as required by the subpoena issued by the
> committee, on the filing by the committee of a petition to the court
> asking that the witness be so compelled."
>
> Govt. Code Section 9409 provides that "any witness neglecting or refusing
> to attend in obedience to subpoena may be arrested...."  It is unclear how
> this provision would (or whether it could) be applied to a subpoena issued
> to the custodian of records of a non-resident company.
>
> Motion to Quash Subpoena
>
> California courts have held, under C.C.P. Section 1985, that a motion to
> quash is the procedurally appropriate method of testing the validity of a
> subpoena duces tecum.  See e.g. People ex rel. Dept. of Public Works v.
> Younger (1970) 5 Cal.App.3d 575.  My research has revealed no case in
> which a subpoena issued by a legislative committee has been challenged by
> a motion to quash, but, as noted above, there appear to be only a very few
> cases interpreting Govt. Code 9401 et seq.   Therefore, it appears that a
> superior court may be able to grant a motion to quash a subpoena issued by
> a legislative committee (assuming that we want to take the risk of state
> court jurisdiction).
>
> In one early case, the Court of Appeal held that the contempt order and
> accompanying affidavit issued by the Court upon the request of a Senate
> Committee were fatally defective.  Ex Parte McLain (1950) 99 Cal.App.2d
> 274.  In McLain, the Senate Interim Committee on Social Welfare served
> upon Mr. McLain, the Chairman of the Board of Trustees of a corporation a
> subpoena calling for the production of various books, papers and
> documents.  Mr. McLain appeared before the committee but refused to answer
> questions or produce the documents.  Upon representation of the Committee,
> the Superior Court issued an order directing Mr. McLain to produce the
> documents.  Mr. McLain again appeared before the Committee and again
> refused to produce the documents at which point, an affidavit was filed in
> Superior Court stating:
>
> "That, based upon evidence in its possession, the said Senate Interim
> Committee has determined that each of the books, papers, and documents
> specified in said subpoena duces tecum is material to the matters now
> under investigation by the said Senate Interim Committee, and the
> production of such books, papers and documents is necessary in order to
> enable said Senate Interim Committee properly to perform the duties
> imposed upon it and to report to the Senate of the State of California
> pursuant to said Senate Resolution No. 162." and "That each of the books,
> papers and documents specified in said subpoena duces tecum is material to
> the matters now under investigation by the said Senate Interim Committee
> and that the production of such books, papers and documents is necessary
> in order to enable said Senate Interim Committee properly to perform the
> duties imposed upon it and to report to the Senate of the State of
> California pursuant to said Senate Resolution No. 162."
>
> The Superior Court found Mr. McLain guilty of contempt and ordered him
> committed to the sheriff until he produced the records.  The Court of
> Appeals found that the order and affidavit were defective because "a
> witness who is otherwise orderly and respectful cannot be adjudged guilty
> of contempt unless the order affirmatively sets forth the materiality and
> pertinency of the books and papers called for.  In cases of constructive
> contempt, as is this, not only the order but also the affidavit upon which
> it is based must sufficiently charge the alleged facts constituting the
> offense."  McLain at 276.
>
> This holding appears to be somewhat consistent with cases interpreting
> C.C.P. 1985, which hold that the subpoena and affidavits must allege
> material facts rather than conclusory statements.  See e.g. Grannis v.
> Board of Medical Examiners (1971) 19 Cal.App.3d 551.
>
> However, cases interpreting C.C.P. 1985 also require the subpoena to
> demonstrate a level of specificity, materiality and relevance to be held
> proper.  See e.g. Pacific Auto Ins. Co. v. Superior Court (1969) 273
> Cal.App.2d 61.  It is unclear whether subpoenas issued by legislative
> committees are held to this same standard.
>
> What is the likely impact of a legislative committee subpoena issued
> against the Enron' custodian of records, an out-of-state resident,
> intended to affect the production of out-of-state Enron documents?
>
>
> Here are the threshold questions:
>
> A.  Since we have found so few cases interpreting Govt. Code Section 9401,
> to what extent would a legislative committee subpoena be governed by the
> same procedural and substantive rules as a subpoena issued in a pending
> civil state court action?
>
> B.  Would a court determining the validity of a legislative committee
> subpoena make reference to the Code of Civil Procedure Sections governing
> subpoenas "generally" (i.e. C.C.P. 1985 et seq.) or those governing
> "deposition subpoenas" (i.e. C.C.P. 2020 et seq.)?  This is a toss-up and
> the answer may well be "both."  The Government Code reporter sections on
> legislative subpoenas cross references to C.C.P. 1985 et seq. ("subpoenas
> generally").  However, the "deposition subpoena" provisions (C.C.P. 2025
> et seq.) more closely resemble the "discovery" process that the Senator
> seems to be undertaking.
>
> Subpoenas against out-of-state residents under C.C.P. 1985 et seq.
>
> C.C.P. 1989 is entitled "Residency requirements for attendance of
> witnesses" and provides that "A witness, including a witness specified in
> subdivision (b) of Section 1987, is not obliged to attend as a witness
> before any court, judge, justice or any other officer, unless the witness
> is a resident within the state at the time of service."
>
> There is a statutory limitation on the residency requirement imposed by
> Section 1989.  Section 1987.3 provides "[w]hen a subpoena duchess mecum is
> served upon a custodian of records or other qualified witness as provided
> in Article 4 (commencing with Section 1560) of Chapter 2 of Division 11 of
> the Evidence Code, and his personal attendance is not required by the
> terms of the subpoena, Section 1989 shall not apply."  (Evade. Code 1650
> lays out the terms for compliance with a subpoena for business records
> where the business is "neither a party nor the place where any cause of
> action is alleged to have arisen.")
>
> On commentator noted the following with respect to C.C.P. 1987.3:
>
> "The rule limiting subpoenas to California "residents" (C.C.P. 1989) does
> not apply to subpoenas duchess mecum served on custodians of records
> unless their personal attendance is required. See C.C.P. 1987.3; Amoco
> Chem. Co. v. Certain Underwriters at Lloyd's of London (1995) 34
> Cal.App.4th 554, 561 fn. 9.  Thus, a nonresident custodian of business
> records may be required to respond to a subpoena duces tecum served upon
> him or her while present in California, by producing the records in
> accordance with Cal. Evid. Code 1560 (delivering copies of the records and
> accompanying affidavit to the court clerk)... [However], C.C.P. 1987.3
> probably applies only where the nonresident custodian is employed by a
> business entity subject to California jurisdiction. Otherwise, there would
> be no way for the court to enforce compliance with a subpoena served on a
> nonresident.  See Amoco Chem. Co. v. Certain Underwriters at Lloyd's of
> London, supra."
>
> Werner, Fairbanks & Epstein, Rutter Group, California Practice Guide:
> Civil Procedure & Trials at 1.57-58
>
> Moreover, in one unpublished case, Allee v. King (1988) 206 Cal.App.3d
> 1081, the court held that it lacked power to compel a nonresident
> defendant to produce original out-of-state documents at trial.  In so
> holding, the court stated that:
>
> "even though King apparently voluntarily attended the trial, his presence
> does not confer jurisdiction on the court to oblige him to deliver the
> out-of-state documents.   Although section 1989 uses the word "witness"
> and does not refer to documents, it has long been presumed under common
> law that documents in other states are outside the court's territorial
> jurisdiction, so that a court will allow the use of copies or other
> secondary evidence instead of originals.  (See, e.g., Heinz v. Heinz
> (1946) 73 Cal.App.2d 61, 66, 165 P.2d 967, and cases cited therein.)   The
> recognition that out-of-state documents are not subject to the court's
> process is in conformity with the general rule under common law that,
> absent a statute properly conferring broader powers, the extent of a
> state's subpoena power and its accompanying subpoena duces tecum power is
> coterminous with its borders.  (See 97 C.J.S., Witnesses, S 17, p. 367, S
> 23, p. 375, S 25, p. 380;  81 Am.Jur.2d, Witnesses, S 8, p. 32, S 14, p.
> 39.)
>
> However, the Allee court notes that the "state-border" limitation on
> subpoena power has not been extended to local branches of national
> corporations who are subpoenaed to deliver documents which are
> out-of-state.  Therefore, even under Allee, if a subpoena was issued to a
> California Enron entity that possessed responsive documents, that Enron
> entity may be obligated to respond.  See Boal v. Price Waterhouse & Co.
> (1985) 165 Cal.App.3d 806.
>
> Therefore, if a subpoena is issued which requires the attendance of an
> out-of-state officer of Enron, Enron has a very good argument that that
> witness is not obligated to attend under C.C.P. 1989.  It also seems
> probable that, under Amoco and Allele cited above, if a subpoena is served
> on an Enron custodian of records who is employed by a non-California Enron
> entity, the subpoena may be invalid.  However, if a subpoena seeking the
> production of documents is served on the custodian of records (or someone
> similarly situated) who is employed by an Enron entity that possesses
> responsive documents and is subject to personal jurisdiction in
> California, that Enron entity most likely is obligated to produce the
> documents.  It is an open question whether that custodian of records
> (employed by an Enron entity in California) would only be required to
> produce the Enron documents in the possession of the Enron California
> entity or whether that person's obligation would extend further -- to
> produce out-of state documents (i.e. documents from non-California Enron
> entities)  (This question is addressed somewhat in the commentary on the
> C.C.P. 2020 statutory scheme, see below, but is still open)
>
>
> Subpoenas against out-of-state residents under C.C.P. 2020 et seq.
>
> Additional threshold question:  If the legislative subpoena was treated as
> a "deposition subpoena," would a court deciding the enforceability of a
> legislative subpoena treat Enron as a "party" or as a "non-party"?
>
> The rules governing the reach of discovery in California are obviously
> different for the two.  The deposition of a party or party-affiliated
> witness may be noticed (without a subpoena) for a place within 75 miles of
> the witness' residence.  It is unclear how a court would resolve this
> issue.  After all, if a court was resolving the issue at all, an Enron
> entity will have appeared before it. and would be a "party."  However, it
> seems moderately more likely that the court would treat Enron's
> obligations under the legislative committee subpoena as similar to its
> obligations if it was served with a "non-party" subpoena.
>
> There are three types of "deposition subpoena":  a "testimony only
> subpoena" (requires only the attendance and testimony of the witness), a
> "business records subpoena" (requires only the production of business
> records) and a "records and testimony subpoena" (requires both -- also
> formerly called subpoena duces tecum).  The second of these is the most
> relevant to Enron.
>
> The attendance of an non party out-of-state witness or the production of
> documents can be compelled only under the law of the place where the
> deposition is to be taken.  C.C.P. 2026 (b)(2).  Specifically, C.C.P.
> 2026(b)(2) provides "If the deponent is not a party to the action or an
> officer, director, managing agent, or employee of a party, a party serving
> a deposition notice under this section shall use any process and
> procedures required and available under the laws of the state, territory,
> or insular possession where the deposition is to be taken to compel the
> deponent to attend and to testify, as well as to produce any document or
> tangible thing for inspection, copying, and any related activity."
>
> Some states issue subpoenas routinely, some require a showing of
> materiality or relevancy, and some require a commission from the court
> where the action is pending.    This question will depend on the law of
> the state when the custodian of records resides.
>
> Regarding the question of whether the service of a deposition subpoena on
> an in-state custodian of records would compel the production of
> out-of-state documents.  Weil & Brown, Rutter Group, California Practice
> Guide: Civil Procedure Before Trial at 5:540.4 notes:
>
> "It is unclear whether service of a "business records" subpoena on a
> nonparty corporation in California compels production of its records
> located outside the state. ... C.C.P. 2020(d) requires that the subpoena
> be directed to the records "custodian" (or someone authorized to certify
> the records). Whether "custodian" requires actual custody of the records
> is unclear. If it does, serving an officer or agent in California would
> not compel production of business records located elsewhere.... The result
> is different where a "records and testimony" subpoena is used. That
> procedure extends to records in control of the subpoenaed party, not
> merely in his or her custody."
>
> If the State of California files civil suit against Enron to obtain
> discovery of the requested documents, does the fact that the State is the
> plaintiff (rather than a private party) affect Enron's prospects for
> removal of the suit to federal court?
>
>
> If the action filed by the State of California presents a federal
> question, then under the rationale of the court in People of the State of
> California v. Steelcase Inc. (C.D. Cal. 1992) 792 F.Supp. 84, the case
> should be removable to federal court.
>
> In People of the State of California v. Steelcase Inc. (C.D. Cal. 1992)
> 792 F.Supp. 84, the District Attorney of the County of Los Angeles brought
> suit alleging violations of the Cartwright Act and the Unfair Competition
> Statutes (Cal. Bus. & Prof. Code 16720 and 17200).  The District Court
> found that, although the district attorney is only allowed to prosecute
> Cartwright Act violations on behalf of the county or public agencies
> located in the county, the unfair competition statutes expressly provide
> that suit be brought "in the name of the people of the State of
> California."  Id. at 85.  Therefore, for the purposes of the Unfair
> Competition Claims, the Court found that the State of California was the
> real party in interest.
>
> The Court then found:
>
> (1) that "for diversity purposes, a state is not a citizen of itself.
> Therefore it cannot sue or be sued in a diversity action."  Id.
> Specifically, the Court found that: "[e]ven assuming arguendo that
> defendant is correct that the County of Los Angeles is the real party in
> interest and the proper party in the Cartwright Act claim, diversity
> jurisdiction does not lie because, under long- established teaching, there
> must be complete diversity, i.e., all plaintiffs must be diverse from
> defendant.   E.g. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed.
> 435 (1806).   Here, there cannot be complete diversity because, to repeat,
> the State of California is not a citizen of any state. "  Id.
>
> (2) that "[i]ndependent of its failure to meet the complete diversity
> test, the court lacks jurisdiction over this case because of the bar of
> the Eleventh Amendment to the Constitution.   The Eleventh Amendment is a
> grant of sovereign immunity to a state against suit in federal court.   It
> is in "the nature of a jurisdictional bar."  .... Defendant, relying on
> the literal wording of the Eleventh Amendment, contends that this is not a
> "suit ... against one of the United States ..." because the State is the
> plaintiff.   However, since the immunity granted by the Eleventh Amendment
> is an immunity from being made an involuntary party to an action in
> federal court, it should apply equally to the case where the state is a
> plaintiff in an action commenced in state court and the action is removed
> to federal court by the defendant." Id.  (internal citations removed).
>
> However, the Court noted that "where removal is predicated on federal
> question jurisdiction, removal is permitted even where a "non-removable"
> claim is joined with the removable claim...." Id.
>
> If a criminal case (price gouging, etc.) is brought against Enron, is
> there any theory (preemption, primary jurisdiction or double jeopardy)
> which would allow that criminal proceeding to be dismissed, stayed or
> removed given the criminal penalty provisions of the Federal Power Act?
>
>
> Our preliminary research shows that there is a body of substantive law
> dealing generally with the question of whether criminal proceedings are
> subject to the primary jurisdiction doctrine, but no case which considered
> this question with respect to the Federal Power Act specifically.
>
> Generally, in one case concerning a District Court order staying criminal
> action involving allegations of conspiracy and fraud against a defense
> contractor pending the District Court's referral of various questions
> regarding the case to the Armed Services Board of Contract Appeals, the
> Ninth Circuit has said:
>
> "Our concern with the district court's stay and referral is heightened by
> the fact that this action is a criminal prosecution.   While it is true
> that the primary jurisdiction doctrine has been applied in criminal cases,
> see United States v. Pacific & A. Ry. & Navigation Co. (1913) 228 U.S. 87,
> 106-08; United States v. Yellow Freight Sys. (9th Cir.1985) 762 F.2d 737,
> 742, its use clearly interferes with the government's authority to
> prosecute criminal cases. ... We said in a related context:
>
> 'We approach the interpretation of the statute with a presumption against
> a congressional intention to limit the power of the Attorney General to
> prosecute offenses under the criminal laws of the United States.   In
> general, the "conduct [of] federal criminal litigation ... is 'an
> executive function within the exclusive prerogative of the Attorney
> General,' "  In re Subpoena of Persico, 522 F.2d 41, 54 (2d Cir.1975),
> quoting United States v. Cox, 342 F.2d 167 (5th Cir.1965) (Wisdom, J.,
> concurring).   Congress may limit or reassign the prosecutorial
> responsibility.   See Case v. Bowles, 327 U.S. 92, 96-97, 66 S.Ct. 438
> [440-41] 90 L.Ed. 552 (946);  Nader v. Saxbe, 162 U.S.App.D.C. 89, 92-93,
> 497 F.2d 676, 679-80 n. 19 (D.C.Cir.1974);  FTC v. Guignon, 390 F.2d 323,
> 324 (8th Cir.1968).   But "[t]o graft such an exception upon the criminal
> law would require a clear and unambiguous expression of the legislative
> will."  United States v. Morgan, 222 U.S. 274, 282, 32 S.Ct. 81, 82, 56
> L.Ed. 198 (1911).'  United States v. International Union of Operating
> Engineers, Local 701, 638 F.2d 1161, 1162 (9th Cir.1979), cert. denied,
> 444 U.S. 1077, 100 S.Ct. 1026, 62 L.Ed.2d 760 (1980)"
>
> United States v. General Dynamics Corp. (9th Cir. 1987) 828 F.2d 1356,
> 1366.  The General Dynamics Court went on to say that "only where an issue
> unambiguously requires initial agency determination under the primary
> jurisdiction doctrine ... and the referring court has the authority to
> review the agency's order, can the agency's regulatory interests be
> required or allowed to subordinate the government's authority to prosecute
> criminal offenses."  Id.
>
> In another context, the Ninth Circuit held that the exhaustion of
> administrative remedies before the Federal Election Commission was not a
> prerequisite to indictment under the Federal Election Campaign Act:
>
> "... neither the language nor the legislative history of the Act provides
> the kind of "clear and unambiguous expression of legislative will"
> necessary to support a holding that Congress sought to alter the
> traditionally broad scope of the Attorney General's prosecutorial
> discretion by requiring initial administrative screening of alleged
> violations of the Act. On the contrary, the language and legislative
> history indicates that while centralizing and strengthening the authority
> of the FERC to enforce the Act administratively and by civil proceedings,
> Congress intended to leave undisturbed the Justice Department's authority
> to prosecute criminally a narrow range of aggravated offenses."
>
> United States v. International Union of Operating Engineers, Local 701
> (1979) 638 F.2d 1161.  See also In re Grand Jury Investigation of Shipping
> Industry (D.D.C. 1960) 186 F.Supp. 298, 309 ("though the doctrine of
> primary jurisdiction may be applied to both civil and to criminal actions,
> it is more forceful in the civil regulatory type actions than in criminal
> actions for in the latter actions the violations of other federal statutes
> may more often be involved, and the regulatory scheme less affected.")
>
> Therefore, it seems clear that it will be difficult to invoke the doctrine
> of primary jurisdiction to dismiss or stay criminal proceedings against
> Enron, especially since the "criminal penalty" provisions of the Federal
> Power Act are relatively limited.
>
> In addition, at least one court has held, in the civil context, that the
> Federal Power Act was not designed to "shift the forum for the trial of
> anti-trust questions affecting power companies from the District Courts to
> the Power Commission [FERC's predecessor]"  Pennsylvania Water & Power Co.
> v. Consolidated Gas, Electric Light & Power Co. (4th Cir. 1950) 184 F.2d
> 552, 562.
>
> I have not been able to find any case directly on point which invokes
> "double jeopardy" type arguments.  (In other words, if there are possible
> criminal penalties under the Federal Power Act and the same conduct is at
> issue that was examined by FERC, would State law criminal charges based
> upon the same conduct be precluded.)  Further research on this point after
> the filing of a criminal claim (when the details of the allegations are
> known) may be productive.  Also, it may be worthwhile to look for
> regulatory statutes that consider language similar to that in the Federal
> Power Act to determine if preemption/primary jurisdiction case law exists
> in analogous situations.
>
>
>
>
>
>
>

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