Options for Businesses Unable to Comply With Onerous Federal Subpoenas

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Last Updated on: 2nd October 2023, 05:52 pm

 

Options for Businesses Unable to Comply With Onerous Federal Subpoenas

Getting hit with a federal subpoena can be scary for any business. These demands for documents and information often come with tight deadlines and broad requests that can overwhelm a company’s resources. What can you do if complying fully is going to be difficult or impossible?

First, don’t panic. You have options. But you need to act quickly and strategically to protect your interests. Here are some tips on navigating federal subpoenas when compliance seems out of reach:

Carefully Review What They’re Asking For

Read through the subpoena closely. Make sure you understand what information and documents they are requesting, as well as the timeframe covered. Highlight areas that seem overly broad or unduly burdensome. Look for requests that seem irrelevant to the stated purpose of the investigation.

Get Legal Help Right Away

You’ll want an experienced attorney on your side to help assess the subpoena and negotiate with the issuing agency. Your lawyer can identify objectionable portions and discuss modifying the requests. They can also explain your options, rights and obligations. Don’t try to handle it alone.

Negotiate the Scope

Often, agencies are willing to narrow the requests if you explain the issues and propose reasonable modifications. Your attorney can contact the agency to discuss tailoring the subpoena to reduce the burden. Be cooperative and suggest productive alternatives.

Assert Relevance Objections

For any requests that seem irrelevant to the investigation or overly broad, your lawyer can raise formal objections on those grounds. The agency then has to demonstrate relevance and need before a court will compel compliance on those items.

Request an Extension

If you just need more time to comply fully, you can request an extension on the deadline. Explain what you realistically can produce by the original date and propose a reasonable timeline for full compliance. Agencies often agree to reasonable extension requests.

Make Timely Partial Productions

Provide the agency with the responsive documents and information you can produce by the deadline, along with an explanation of what remains outstanding. This shows a good faith effort to comply and may help avoid enforcement action.

Petition to Modify or Quash

As a last resort, your attorney can file a petition asking the court to modify or quash (cancel) the subpoena based on undue burden, lack of relevance, or other grounds. But courts rarely grant these petitions, so focus first on negotiating with the agency.

Consider Privilege Issues

If the subpoena encompasses documents covered by attorney-client privilege, work product doctrine or other protections, be sure to formally assert those privileges and produce a privilege log. Your lawyer can raise objections to disclosing privileged material.

Dealing with federal subpoenas is tricky, but taking prompt strategic action can help businesses avoid getting buried under onerous demands. Consult experienced counsel to protect your rights while demonstrating cooperation.

What Laws Govern Federal Subpoenas?

Federal subpoenas are governed by a mix of statutes, procedural rules, and case law precedents. Some key sources include:

• Federal Rules of Civil Procedure, Rule 45 – sets rules for subpoenas in federal civil cases
• Federal Rules of Criminal Procedure, Rule 17 – governs subpoenas in federal criminal cases
• Administrative Procedure Act – regulates subpoenas from federal agencies
• Right to Financial Privacy Act – limits subpoenas for banking records
• Electronic Communications Privacy Act – restricts subpoenas for electronic communications
• Case law on subpoena burdens and enforcement

In addition, individual federal statutes authorize subpoena powers for specific agencies, such as the SEC, FTC, EPA, etc. Both civil and criminal subpoenas are subject to constitutional requirements as well.

When Can Businesses Challenge Federal Subpoenas?

Recipients can challenge subpoenas on several grounds, including:

• Undue Burden – complying would impose excessive hardship or cost
• Lack of Relevance – the requests are not relevant to the investigation
• Privileged Information – subpoena seeks documents protected by privilege
• Unreasonable Breadth – scope of requests is overly broad
• Improper Purpose – subpoena is meant to harass the recipient

However, courts generally expect recipients to cooperate with lawful subpoenas. So the bar is high for quashing them outright. Negotiating the scope is often more fruitful.

Can Businesses Recover Compliance Costs?

Usually not. Recipients are expected to bear the costs of complying with lawful subpoenas as part of their civil obligation. However, courts can order the requesting party to pay costs if the subpoena was issued in bad faith or led to extreme hardship.

Businesses facing federal subpoenas should consult counsel to assess options. With the right strategy, many find ways to substantially reduce the burden and come into compliance.

How Do Privileges Apply to Federal Subpoenas?

Recipients can withhold subpoenaed information covered by certain privileges, such as:

• Attorney-client privilege – protects confidential communications between attorney and client
• Work product doctrine – shields materials prepared in anticipation of litigation
• Fifth Amendment – provides privilege against self-incrimination
• Doctor-patient privilege – covers communications between doctors and patients
• Priest-penitent privilege – protects communications with clergy

However, privileges are narrowly construed. Details matter when asserting them. Get advice from counsel on preserving privileges when responding to federal subpoenas.

What About Financial and Banking Records?

Financial services companies face special considerations when responding to federal subpoenas. The Right to Financial Privacy Act limits government access to banking records. And regulations restrict disclosure of Suspicious Activity Reports (SARs) filed with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

Banks must take care not to improperly reveal SARs or the existence of any related investigations when complying with subpoenas. Work closely with counsel to avoid missteps that could lead to harsh penalties.

What Agencies Issue Federal Subpoenas?

Federal subpoenas come from a wide array of government authorities, including:

• Department of Justice (civil, criminal, and antitrust investigations)
• Federal Trade Commission (consumer protection probes)
• Securities and Exchange Commission (securities law inquiries)
• Consumer Financial Protection Bureau (financial sector investigations)
• Environmental Protection Agency (environmental compliance reviews)
• Federal grand juries (criminal inquiries and prosecutions)
• Congressional committees (hearings and investigations)

When facing a subpoena, it’s important to understand the issuing agency’s authority and jurisdiction. An experienced attorney can help navigate the process.

What Are Typical Subpoena Compliance Steps?

The basic process for responding to federal subpoenas often includes:

1. Reviewing the subpoena for breadth and burden
2. Asserting objections and privileges as applicable
3. Meeting with agency representatives to discuss scope
4. Negotiating modifications to reduce undue burden
5. Crafting a compliance plan, including search protocols
6. Collecting responsive documents and information
7. Producing privilege log for any withheld materials
8. Making timely productions and status reports
9. Seeking extensions if necessary

Having experienced counsel guide you through the process can help make compliance less disruptive to business operations.

What Are the Consequences of Noncompliance?

Ignoring or resisting a federal subpoena can lead to serious consequences, including:

• Civil contempt sanctions
• Subpoena enforcement action
• Fines for noncompliance
• Jail time for continued defiance
• Adverse inferences at trial
• Reputational harm

However, courts recognize that some noncompliance is inevitable when subpoenas impose undue burdens. Work in good faith with agencies to modify requests and propose alternatives.

How Can Businesses Reduce Subpoena Risks?

Some practices can help minimize disruptive subpoenas:

• Have compliant document retention policies
• Conduct self-audits to fix problems early
• Train employees on responding to investigations
• Designate point persons to handle inquiries
• Consult counsel at first sign of investigation

But even with best practices, any business can face burdensome subpoenas. Knowing your rights and options is key.

Federal subpoenas should not be ignored. But various defenses and negotiation strategies can help businesses avoid undue burdens. With prompt, strategic legal help, many companies reach satisfactory outcomes.