Subject: FW: Atty Gen Subpena Enforcement procedures and related tactical issues for Enron
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Fri, 20 Jul 2001 10:21:40 -0700 (PDT)

Bob: You asked us to analyze our trial court and appellate tactics
in the face of the enforcement proceeding filed against EES by the AG
yesterday. My partner, Tom Peterson, drawing on the earlier work of Peter
Meringolo and Amanda Smith, looked at this issue yesterday afternoon and I
have discussed it with him. Here, briefly, is our initial analysis. The
bottom line: if EES decides to raise issues relating the confidentiality of
the documents and the bias of Lockyer in conjunction with the enforcement
action, it probably needs to file either a cross complaint or separate
action with the court to address to these issues.  Mike and I will call you
when we return from court this afternoon to discuss this further. A summary
of Tom's initial analysis follows.

     1.  Under Gov code section 11188, the AG  probably must file the
contemplated special proceeding to enforce the subpoena and obtain an order
compelling production before proceeding further.  Under section 11188, the
language ("shall") suggests there is no discretion about the issuance of the
order to show cause, which acts like a summons and probably only is
"adjudicatory" in the sense that it specifies dates by which the issues on
the petition will be joined.  See also Brovelli, 56 Cal.2d 524 (1961).
Therefore, we probably cannot object  to the proceedings today being
conducted before a Commissioner .  We probably can object if he refuses to
order a hearing before a superior court judge.

     2.  The limits of the review available  by the court concerning issues
raised by an enforcement action under section 11188  are unclear.  The
statute says that the court shall order compliance with the subpoena "[i]f
it appears to the court that the subpoena was regularly issued ...."  There
is case law suggesting, on the one hand, that this scheme "provides an
opportunity for adjudication of all claimed constitutional and legal rights
before one is required to obey the command of a subpoena duces tecum issued
for investigative purposes."  People v. West Coast, 10 Cal.App.3d at 470.
On the other hand, the court has no power to grant equitable remedies and a
party is not entitled to all of the protections by way of hearing and the
like that might be available by way of a motion to quash.  Fiedler, 23
Cal.App.3d at 40; see also Franchise Tax, 164 Cal.App.3d at 539.
	On the one hand, it would seem that we should be able to argue
territoriality objections--these seem jurisdictional and related to the
power of the AG.  On the other hand, we can't get any relief like a
declaration or an injunction, because that is equitable.  (This seems to
have been a major part of the reason that Reliant, etc., sued in a separate
action in LA, because they wanted to enjoin the AG from sharing the material
that they produced to the AG.)  Of course, if we can assert objections as
legal and constitutional reasons not to produce, we may not need equitable
relief, just an order finding that the administrative subpoena is not
"regularly issued" under the Gov Code scheme.    It is very unclear as to
whether  possible objection on the ground that the AG should be disqualified
could be considered by the court as part of the AG's enforcement action. One
might be able to argue that a lawfully constituted and conducted
investigation by a duly qualified officer is part of the calculation
implicit in "regularly issued...."  Conversely, a disqualification motion is
not within the contemplation of the immediate code sections surrounding
section 11188 and the court might consider this such a significant motion
that it would be reluctant to think it proper under the Gov Code scheme.

     3.  In view of 2, we may want to file an action for declaratory relief,
either because we really think that the section 11188 proceeding may not be
the proper vehicle to adjudicate our objections or because we want to take
away any issue for the AG who will probably assert that an enforcement
action under the government code permits only very narrow review.  We could,
therefore, file such an action and say that we are doing this because we
want to obviate any procedural issues and clear the path so we can get the
court to resolve all the disputes, and not have a piecemeal process.

     4.  Assuming we decide for whatever reason to file an action for
declaratory relief, we could file our own action, and try to get it joined
with the section 11188 proceeding, or we could consider filing a
cross-complaint in the section 11188 action.  The ability to do the latter
is debatable.  There is a well-recognized difference under the California
codes between an action and a special proceeding.  The Gov Code matter is a
special proceeding.  In Tide Water, the supreme court said that under the
then prevailing cross-complaint statute, a suit for special proceeding would
not support a cross-complaint, 43 Cal. 2d at 821.  However, the code has
since been amended and may permit a cross complaint for the following
reasons.  First, CCP section 428.10 now uses the word "action" in a border
sense.  It says a party may file a cross-complaint against any other party
who has filed a complaint against him.  It says that this does not authorize
a cross-complaint under section 1230.010--but that code section isn't an
"action" in the code sense but a special proceeding, so you can say the
meaning of the word "action" in the old section, construed by the supreme
court in Tide Water, has been completely changed, and the Legislature has
now expanded the definition to refer to a proceeding in court, whether an
"action" or a "special proceeding".  The AG will probably argue that the Gov
Code action is commenced by a petition, rather than a complaint, and thus
will not support a cross complaint- we would need to analyze this further.
Also in support of filing a cross-complaint under the new, amended code is
CCP section 426.60(a) which says that the compulsory cross-complaint rules
do not apply to special proceedings.  If the parts of the CCP applicable to
joinder did not otherwise apply to special proceedings, then there would not
be any reason to codify this carve out.  Finally, Tide Water says that the
court has discretion, based on "inherent power" (CCP section 187) to
entertain what would otherwise amount to an unauthorized cross-complaint
appended to a special proceeding.  (N.B. (a) Be aware that there is some
authority for the idea that parts of the CCP applicable to actions (Part 2)
do not apply to special proceedings unless expressly incorporated.  See
ALRB, 149 Cal.App.3d at 713; compare CCP 1109 [adopting "action" rules into
"special proceedings" of mandate, review, and prohibition].  (b) Be aware
that an action for declaratory relief is itself a special proceeding.

     In summary, we should consider responding to the AG's case with a
cross-complaint for declaratory relief or file one independently.  We'd lean
toward the cross-complaint and take our chances on a motion to dismiss it
procedurally, since we think the court would want to get all the issues
resolved.

     5.  There is a split of authority on whether the disposition of the
section 11188 proceeding is appealable.  I think it may be a distinction
without a practical difference, since a writ of mandate is available.  If we
want to seek appellate review of an order for us to produce, issued under
the Gov Code,  whether we proceed by appeal or writ of mandate/prohibition,
we would have to make a prompt filling and seek urgent relief and the issue
would come to a head that way: by the decision whether or not to defer
compliance while appellate review proceeds.

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