Third-Party Subpoenas: Handling Federal Requests for Customer Information
Contents
Third-Party Subpoenas: Complying with Federal Requests for Customer Data
When a federal agency serves a subpoena on your company seeking customer information, it can raise challenging legal issues. As a third party not directly involved in the government’s investigation, you may have questions about your responsibilities and options for responding. This article provides an overview of common scenarios where federal agencies subpoena customer data from third parties, as well as best practices for handling the requests.
Background on Federal Subpoenas
Federal agencies like the FBI, SEC, and IRS have broad authority to issue administrative or grand jury subpoenas to further their investigations. These subpoenas allow the government to obtain documents, records, testimony or other evidence relevant to an ongoing case.Third-party subpoenas specifically demand information from companies or individuals not directly under investigation but who may have useful information. For example, an internet company may receive a subpoena seeking IP addresses or account details tied to a customer under investigation. Or a bank may get a subpoena for a customer’s financial records.Ignoring or failing to fully comply with a federal subpoena can lead to contempt charges and substantial fines or jail time for company executives. However, businesses do have certain rights when responding to these requests.
Analyzing Third-Party Subpoenas
Upon receiving a federal subpoena, legal counsel should carefully review it to determine appropriate next steps. Key items to evaluate include:
- Originating agency: What federal agency issued the subpoena? Does it fall within their jurisdiction? For example, an SEC subpoena would be expected in an insider trading probe.
- Underlying authority: What specific federal law or regulation grants the agency subpoena power for this purpose? This will be cited in the subpoena.
- Scope and relevancy: Does the request specifically and clearly identify the customer records sought and tie them to the underlying investigation? Overly broad or vague subpoenas may be challenged as irrelevant.
- Production timeframe: What date(s) are given for producing records? The timeframe must be reasonable.
- Sensitive information: Does the subpoena sweep in legally protected information like trade secrets, privileged communications or private consumer data unaffected by the probe? This information may require special handling.
- Production logistics: Where and how do the records need to be produced? Typical methods include emailing an encrypted file or mailing physical copies.
Carefully vetting these elements enables companies to respond appropriately to valid requests while also asserting legal protections around overly broad, irrelevant or sensitive subpoena demands.
Notifying Affected Customers
An important consideration when handling federal subpoenas is whether and when impacted customers should be informed of the requests.
- For individual account requests, the Right to Financial Privacy Act requires banks and similar firms to notify individuals of subpoenas for their financial records, allowing them time to challenge the subpoena in court.
- For commercial customer subpoenas, contractual notice requirements may also apply. Cloud computing or web hosting contracts often contain provisions requiring advance customer notice of any third-party legal requests for their data.
- Outside of these situations, no federal law generally mandates customer notice of subpoenas. However, giving a “heads up” where possible is smart business practice and maintains positive customer relations during difficult legal processes.
Deciding whether to inform customers of data requests requires balancing competing priorities:Reasons to notify
- Builds trust and transparency around how a company handles sensitive customer information
- Allows the customer to legally intervene or narrow the scope of requests
- Manages customer expectations if data sharing causes service disruptions
Reasons not to notify
- Surprise factor aids criminal investigations where targets might destroy evidence or flee
- Legal prohibitions on disclosure (i.e. gag orders)
- Risk of customer interfering with request
While balancing these factors is situational, having established internal policies and procedures around customer notifications can guide decision-making.
Producing Records to Federal Agencies
Once a subpoena’s validity is confirmed, the next step is timely and complete production of the records it specifies. As large volumes of data may require compilation, companies can sometimes negotiate reasonable extensions for federal document requests.However, the timeframe should not excessively delay investigations. Agencies can impose daily fines for contempt if production lags without justification.Other best practices include:
- Assigning responsibility: Have clear ownership of subpoena compliance whether by legal, IT or specialized security operations teams. Specialized software can also help track and manage legal requests.
- Verifying data completeness: Confirm all data covered by the scope is fully provided, with relevant context. Incomplete productions will expect further agency follow-up.
- Providing certification: Include a written certification that documents provided represent complete disclosure per the subpoena’s specifications.
- Using encryption: Encrypt sensitive customer data during transmittal and get written agency confirmation of secure receipt.
Documenting the production process while following these measures demonstrates the company’s good faith in complying with federal orders.
Challenging Overly Broad Subpoenas
While federal agencies have wide authority to compel information, checks on that power also exist. Third parties can raise legal objections to subpoenas requesting excessively wide-ranging customer data or imposing unreasonable burdens in compiling it.Common bases for challenging subpoenas in court include:
- Relevancy: The customer data lacks clear pertinence to the underlying investigation
- Undue burden: Compliance imposes unwarranted difficulty or expense
- Privileged information: Inclusion of protected trade secrets or private communications
- Insufficient specificity: Poorly defined data demands or unclear scope
- Improper purpose: Suspected abuse of subpoena power
Motions to quash or modify problematic subpoenas may persuade investigators to narrow their requests. Alternately, bringing the issue before a federal judge can prompt court-ordered changes to the subpoena’s breadth or production timeline.However, companies should use caution with wholesale resistance that seems intended to impede investigations. This risks aggravating federal agencies and potential contempt charges. The better approach is reasoned, evidence-based objections showing willingness to comply within appropriate boundaries.
Subpoena Compliance Software
Finally, purpose-built software and services can assist companies with efficient, compliant handling of federal subpoenas and data requests. Features to look for include:
- Automated validation checks on subpoena requests
- Encrypted customer communication tools
- Dashboards for tracking multiple legal requests
- Access control restrictions for sensitive data
- Chain-of-custody logging for strict accountability
- Production tools for exporting, formatting and delivering requested records
Leveraging such solutions, especially for larger or complex data requests, helps systematize compliance while reducing risk.
Conclusion
Responding to federal subpoenas creates challenges for companies trying to balance customer trust with legal obligations. While exceptions exist, cooperating fully with valid government investigations is usually the prudent approach. Maintaining constructive engagement, supported by clear policies and efficient processes, can guide organizations through difficult data sharing scenarios. With an understanding of federal subpoena powers and best practices around notifications, record production and challenging overreach, businesses can appropriately handle these sensitive situations as they arise.
Resources
- How to Respond to a Federal Grand Jury Subpoena as a Third Party – Overview of federal subpoena process
- What is a Federal Administrative Subpoena? – Background on agencies’ subpoena authority
- Third Party Subpoenas: You Get Served – Article on responding to subpoenas seeking customer data