Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Timothy Sandefur (033670) 500 E. Coronado Rd. Phoenix, AZ 85004 (602) 462-5000 [email protected] Attorneys for Amicus Curiae Goldwater Institute
COP
IN THE SUPERIOR COURT OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA
KADIMA. VENTURES, LLC, et al.,
Plaintiffs,
vs.
ARIZONA CORPORATION COMMISSION, et al.,
Defendant.
Case No. LC2018-000163-001 DT
MOTION FOR LEA VE TO FILE BRIEF AM/CVS CURIAE IN SUPPORT OF PLAINTIFFS
(The Honorable Daniel Kiley)
Pursuant to Ariz. R. Civ. P. 7.1 and this Court's inherent authority to regulate its own
proceedings, amicus curiae Goldwater Institute hereby respectfully moves for leave to file the attached
brief amicus curiae in support of the Plaintiffs.
All parties to this proceeding were notified of the Goldwater Institute's intent to file this motion
on or before May 30, 2018. This motion is supported by the following memorandum of points and
authorities.
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTEREST OF AMICUS CURIAE
The Goldwater Institute was established in 1988 as a nonpartisan public policy and research
foundation dedicated to advancing the principles of limited government, economic freedom, and
individual responsibility through litigation, research papers, editorials, policy briefings and forums.
Through its Scharf-Norton Center for Constitutional Litigation, the Institute litigates and files amicus
briefs when its or its clients' objectives are directly implicated.
Among the Institute's main priorities is to ensure that administrative agencies, particularly at the
state level, are kept within carefully delineated boundaries. Institute attorneys have therefore
participated in proceedings involving state administrative agencies and have litigated cases involving the
powers of these agencies, including Arizona Free Enter. Club 's Freedom Club PAC v. Bennett, 564 U.S.
721 (2011), Boice v. Aune, No.CV2011-021811 (Maricopa Cnty. Super. Ct. 2012), Vong v. Aune, 235
Ariz. 116 (2014), cert. denied, 135 S. Ct. 1845 (2015), and Goldwater Institute v. US Dep 't of Health
& Human Servs. , (D. Ariz. No. CV-15-01055-PHX-SRB) (pending). Institute scholars have also
published extensively on the dangers of excessive administrative power, including TIMOTHY SANDEFUR,
THE PERMISSION SOCIETY (2016), Christina Sandefur, PP A CA 's Corrupting Lawlessness, Regulation,
Winter 2013-14 1•
II. THE ATTACHED AMICUS CURIAE BRIEF WILL AID THE COURT IN CONSIDERATION OF THIS CASE.
This Court has the inherent authority to regulate its own proceedings and broad discretion to
determine whether or not to allow an appearance by an amicus curiae. Although uncommon, amici do
appear at times in Superior Courts, see, e.g., State v. Wagner, 2015 WL 1395226, *l ,i 5, n.1 (Ariz. App.
Mar. 26, 2015) (amicus appearance in Superior Court); State v. Jessup, 2015 WL 1605349 at *2 ,i 5, n.2
(Ariz. App. Apr. 9, 2015) (same); Cubbison v. Cubbison, 45 Ariz. 14, 18 (1935) (same).
Amici "perform a valuable role for the judiciary" because they "facilitate informed judicial
consideration of a wide variety of information and points of view that may bear on important legal
1 https://object.cato.org/sites/cato.org/files/serials/files/regulation/2014/1 /regulation-v36n4-1 . pdf 2
questions" and help broaden the court' s perspective on issues raised by the principal litigants. Connerly
v. State Pers. Bd., 129 P .3d 1, 5-6 (Cal. 2006) ( citations omitted). That is particularly true in a case
that- like this one- involves issues that are recurring and are the subject of controversy throughout the
state or the nation. City of Flagstaff v. Mangum, 164 Ariz. 395, 397 (I 990). This case involves the
power of administrative agencies to assert jurisdiction with virtually no recourse on the part of the
regulated individual- a matter that is often the subject of judicial controversy. See, e.g. , U.S. Army
Corps of Eng 'rs v. Hawkes Co., 136 S. Ct. 1807 (2016), Sackett v. E.P.A., 566 U.S. 120 (2012).
The attached amicus brief particularly focuses on the question of whether the Corporation
Commission's issuance of a mandatory subpoena- premised on the Commission' s assertion that
Kadima is engaged in the purchase or sale of securities-qualifies as a final action asserting jurisdiction.
If it is, amicus contends, Kadima is entitled by the principles of due process of law to a hearing in the
ordinary course to challenge that jurisdictional determination, or, at a minimum, to review of that action
under the Administrative Procedures Act.
In Sackett, the U.S. Supreme Court ruled that a property owner was entitled to a hearing to
challenge a determination by the Environmental Protection Agency that held that the property owner
was violating the Clean Water Act. The Agency argued that the determination was not a final act but
only a preliminary contention by the Agency that the property owner appeared to be in violation; the
property owner could- the Agency said-simply disregard the order, and then argue that the Agency
lacked jurisdiction once an enforcement action was brought. The Court rejected this and held that the
property owner was entitled to some form of hearing to challenge the Agency's jurisdiction. 566 U.S. at
126-27. In Hawkes, the Court extended this reasoning to "jurisdictional determinations" that fall short
of a substantive command or judgment. 136 S. Ct. at 1814. Amicus contends that the subpoena in this
case functions as a jurisdictional determination and that Kadima is therefore entitled to challenge the
jurisdiction of the agency and quash the subpoena.
Amicus believes its experience and policy expertise will aid this Court in consideration of this
case.
3
CONCLUSION
The motion for leave to file a brief amicus curiae should be granted.
RESPECTFULLY SUBMITTED this 31st day of May, 2018 by:
Isl Timothy Sandefur Timothy Sandefur (033670) Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Attorneys for Plaintiffs
CERTIFICATE OF SERVICE
ORIGINAL FILED this 31st day of May, 2018, with:
Clerk of the Maricopa County Superior Court
COPY hand-delivered May 31 , 2018 to:
The Honorable Daniel Kiley Superior Court of Arizona, Maricopa County East Court Building-911 Phoenix, AZ 85003
COPIES mailed and emailed May 31, 2018 to:
Alexander Michael del Rey Kolodin KOLODIN LAW GROUP PLLC 3443 N. Central Ave., Ste. 911 Phoenix, AZ 85012 [email protected] Attorneys for Plaintiffs
Paul Kitchin ARIZONA CORPORATION COMMISSION 1300 W. Washington, 3rd Fl. Phoenix, AZ 85007 pki [email protected] Attorneys for Defendants
Isl Kris Schlott Kris Schlott, Paralegal
4
Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Timothy Sandefur (033670) 500 E. Coronado Rd. Phoenix, AZ 85004 (602) 462-5000 liti ation oldwaterinstitute.or
C y 8 1 2018
CHk ~ ~•'" U,:,E. CU:RK A~ t<O 1::RO
D~Pun CL. ·1~K
Attorneys for .,_1?:ft,jq,tjjs iC i1S[UV1C1 e G,u):;{w1,fe,rvnSfiJvcf-e_
IN THE SUPERIOR COURT OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA
KADIMA. VENTURES, LLC, et al.,
Plaintiffs,
vs.
ARIZONA CORPORATION COMMISSION, et al.,
Defendant.
Case No. LC2018-000163-001 DT
BRIEF AMICUS CURIAE IN SUPPORT OF PLAINTIFFS
(The Honorable Daniel Kiley)
The Plaintiffs ("Kadima") have received a subpoena from the Arizona Corporation Commission
("ACC"), pursuant to A.R.S. § 44-1822, on the grounds that Kadima is involved in the purchase and sale
of securities. Kadima has no statutory mechanism to quash the subpoena or to otherwise challenge
ACC's jurisdiction. This Court should hold that Kadima is entitled to challenge ACC's jurisdiction
here-and that the ACC does, in fact, lack jurisdiction.
When an administrative agency asserts jurisdiction over a matter as the result of a decision
making process, and that determination gives rise to direct and appreciable legal consequences, it
constitutes final agency action for purposes of the Administrative Procedure Act ("APA"). United 1
States Army Corps of Eng 'rs v. Hawkes Co., 36 S. Ct. 1807, 1813- 14 (2016). Although a subpoena is
an investigative tool, it can also constitute a final determination by the agency that it believes it has
jurisdiction over a matter. That appears to be the case here. When that is so, the affected individual has
a right to challenge that assertion of jurisdiction under the AP A, even aside from the validity of the
subpoena.
I. THE SUBPOENAS ARE PLAINLY OVERBROAD AND UNREASONABLE.
The ACC asserts that it can investigate just to assure itself that the law is not being violated.
Defs.' Mot. to Dismiss ("MTD") at 3 ( citing Carrington v. Arizona Corp. Comm 'n, 199 Ariz. 303, 305 ,i
8 (App. 2000)). But that is a misreading of Carrington, where the agency acted only after it was aware
that the company was issuing what it believed to be securities. Id. at 305-6 ,i 11. Here, by contrast, the
ACC does not assert any basis for its demands except that the documents it seeks "might reveal" the
sales of securities. MTD at 6. This "might reveal" standard is plainly overbroad. It indicates nothing
more than a "fishing expedition" with no specific grounds of suspicion. State ex rel. DeConcini v.
Superior Ct., in &for Pima Cnty., 20 Ariz. App. 33, 35 (1973) ("mere 'fishing expeditions' are not to be
countenanced.") (citation omitted); US. E.E.O.C. v. Aaron Bros. Inc., 620 F. Supp. 2d 1102, 1105 (C.D.
Cal. 2009) (citation omitted) ("administrative subpoena[s] may not ... 'be so broad so as to be in the
nature of a " fishing expedition.""'). Carrington did not hold that agencies have absolute discretion to
subpoena whomever they please on the off-chance that the information sought might reveal lawbreaking.
Amazingly, the ACC even contends that the burden is not on it, but on Kadima- that Kadima
must "prov[e] [the] irrelevance" of the items subpoenaed. MTD at 5. That is not how the law works
or ought to work. It is black-letter law that the initial burden of making the (minimal) showing of
relevance rests with the party seeking the information, cf Bartlett v. Superior Ct. , in &for Pima Cnty.,
150 Ariz. 178, 183 (App. 1986), because it is impossible to prove a negative. Of course, once that initial 2
showing is made, the person seeking to quash the subpoena bears the burden of proving his contention
that the subpoena is faulty, Helge v. Druke, 136 Ariz. 434, 438 {App. 1983), but that is true only where
the law provides a mechanism for quashing the subpoena- which is lacking here.
Information should be "sought by narrow, pointed discovery without wholesale invasion of ...
confidential records." Styers v. Superior Ct., in &for Cnty. of Mohave, 161 Ariz. 477, 480 (App. 1989).
However broad the ACC's authority may be, it has no authority to demand the inspection ofrecords
without some specific grounds of suspicion. In Resolution Trust Corp. v. Walde, 18 F.3d 943, 949 (D.C.
Cir. 1994), the court of appeals put the point well:
Justice Holmes observed: "Anyone who respects the spirit as well as the letter of the Fourth Amendment would be loath to believe that Congress intended to authorize one of its subordinate agencies to sweep all our traditions into the fire and to direct fishing expeditions into private papers on the possibility that they may disclose evidence of crime .. . . " [T]he Court has traveled some distance since [Holmes' day, but subsequent precedents] ... dealt with the power to investigate suspicions of wrongdoing.... If the [agency] has no such specific basis, however, upon which to suspect that the target engaged in wrongdoing, then the subpoena cannot be enforced.
Id. (quoting FTC v. American Tobacco Co., 264 U.S. 298, 305-06 (1924)).
True, agencies can issue administrative subpoenas without probable cause- but the initial
burden of showing grounds for the subpoena still rests with the agency. And the U.S. Supreme Court
has explained that subpoenas without probable cause are legitimate only where there is some statutory
mechanism in place that offers "an opportunity for precompliance review." City of L.A., Cal. v. Patel,
135 S. Ct. 2443, 2454 (2015); see also See v. City of Seattle, 387 U.S. 541 , 544-45 (1967)
("administrative warrants" without probable cause are permissible only where "the subpoenaed party
may obtain judicial review of the reasonableness of the demand prior to suffering penalties for refusing
to comply."). Arizona law provides no such mechanism in the case of ACC subpoenas. That means
Kadima must comply, not only at significant financial cost to themselves, and risk of the public
3
disclosure of the information provided, but also at the cost of being subjected to ACC's jurisdiction.
That concern was what led the Carrington court to say that "a party may resist the Commission' s
subpoena on grounds that the inquiry is not within its scope of authority." 199 Ariz. at 305 ,r 9.
Carrington supported that statement with a citation to People ex rel. Babbitt v. Herndon, 119
Ariz. 454, 456 (1978), which said that "a party may resist an administrative subpoena on any appropriate
grounds," including "that the inquiry is not within the agency's scope of authority." Id. As for how to
do that, the court said, "[t]he only effective method ... is to require the Attorney General, if challenged
on that ground, to make some showing at the enforcement hearing that there is reasonable cause to
believe that there has been a violation of the [law]." Id.
Yet here, the ACC is demanding nothing short of a roving commission to subpoena businesses
without suspicion, simply because the records "might reveal" that the company is selling securities. It
provides no other basis for its demands. An administrative subpoena is valid only where "the inquiry is
within the authority of the agency, the demand is not too indefinite and the information sought is
reasonably relevant." United States v. Morton Salt Co. , 338 U.S. 632, 652 (1950). Yet the ACC has not
shown any basis for thinking that Kadima is within its jurisdiction. Its demands are indefinite, and the
closest it can come to relevancy is to say that its demands "might" yield useful information.
That is not appropriate. It is "ancient law" that the government may not "conduct an unlimited
and general inquisition into the affairs of persons within its jurisdiction solely on the prospect of
possible violations oflaw being discovered, especially with respect to subpoenas duces tecum." Matter
of A 'Hearn v. Committee on Unlawful Practice of Law of N.Y. Cnty. Lawyers ' Ass 'n, 23 N.Y.2d 916,
918 (1969). Instead, there must be "some basis for inquisitorial action" beforehand. Id. " [E]ven under
broad investigation statutes the [government] does not have an ' arbitrary and unbridled discretion as to
the scope of his investigation." ' Id. (citations omitted). 4
II. IN THE ABSENCE OF AN OPPORTUNITY FOR PRE-ENFORCEMENT REVIEW, THE SUBPOENA OPERA TES AS A JURISDICTIONAL DETERMINATION WHICH SHOULD ENTITLE PLAINTIFFS TO DISPUTE THE ACC'S JURISDICTION.
There is no statutory mechanism to challenge ACC's subpoena or requirement that the ACC
show reasonable cause. Rather, as noted in paragraph 6 of the Plaintiffs' complaint, the statutes give
them no option but to disregard the subpoena and wait for the ACC to enforce it with penalties. See
A.R.S. § 44-3134. But that raises due process concerns.
Those due process concerns were central to Sackett v. E.P.A., 566 U.S. 120 (2012), which held
that a "compliance order" issued by the Environmental Protection Agency ("EPA") was a final action by
the Agency which the recipient could challenge under the federal AP A. The EPA argued that such
review was improper, because the order did not technically require the recipient to do anything; she
could, in theory, disregard it, and wait for the EPA to bring an enforcement action. At that point, it
argued, the recipient would have the opportunity to challenge the EPA' s jurisdiction. Id. at 129.
The Court rejected this argument because "the next step will either be taken by the Sacketts (if
they comply with the order) or will involve judicial, not administrative, deliberation (if the EPA brings
an enforcement action)." Id. The order represented a conclusion by the EPA that the recipient was
violating the law and that the Agency had jurisdiction; it was therefore a final agency action under the
AP A. If the property owner had no such right, then it would have offended due process. See id. at 132
(Alito, J ., concurring).
A similar situation is presented here. In the absence of some "opportunity for precompliance
review," Patel, 135 S. Ct. at 2454, the subpoena in this case operates in substance as a finding by the
ACC that it has jurisdiction over Kadima. The ACC offers no option other than breaking the law and
awaiting enforcement- the same illusory option offered in Sackett.
Sackett might be distinguishable because the compliance order officially found the recipient to 5
have violated the law. But in Hawkes, the Court broadened the Sackett rule when it applied the same
reasoning to a "jurisdictional determination" that lacked any finding ofliability. Such determinations
were still not "advisory in nature," the Court held; they represented a conclusion by the agency that it
had authority in the matter. 136 S. Ct. at 1812- 13. "By issuing respondents an approved [jurisdictional
determination]," the Court noted, "the [agency] for all practical purposes 'has ruled definitively' that
respondents' property contains jurisdictional waters." Id. at 1814. Here, notwithstanding the ACC' s
representation of the subpoena as a mere inquiry, that subpoena operates- in the absence of some
mechanism for precompliance review- as a finding by the ACC that the plaintiffs' business falls within
its authority.
The lack of a procedure for quashing the subpoena also distinguishes this case from Commodity
Futures Trading Comm 'n v. Monex Deposit Co., 824 F.3d 690 (7th Cir. 2016), which held that the
company was required to comply with a subpoena issued by the Securities and Exchange Commission
before the question of jurisdiction could be resolved. The court said that the Hawkes rule did not apply,
id. at 692, because there was "no doubt" that the SEC had jurisdiction. Id. at 694. But in a case such as
this one, where "it was not established that the agency had any role to play and thus it was possible that
the information sought was not relevant," it would be proper for a court to "resolve a question of
statutory coverage before enforcing a subpoena." Id. That case relied on E.E.O. C. v. Sid ley Austin
Brown & Wood, 315 F .3d 696 (7th Cir. 2002), in which the court recognized that "a subpoena may be
challenged as unreasonable" if"the agency clearly is ranging far beyond the boundaries of its statutory
authority." Id. at 700. The Sidley Aus tin court held that " the district court acted prematurely in ordering
the subpoena complied with," because the agency that issued the subpoena "ha[ d] not earned the right to
force the law firm ... to go on and produce the voluminous and sensitive documentation" regarding a
matter over which the agency lacked jurisdiction. Id. at 707. Where a statutory mechanism exists for an 6
affected person to challenge a subpoena, then the person must use that. Sprecher v. Graber, 716 F.2d
968, 973 (2d Cir. 1983 ). But no such mechanism exists here.
These cases show that where there is some procedure whereby the recipient of the subpoena can
challenge it- and as part of that challenge, argue that the agency lacks jurisdiction- then the party can
be required to either comply or move to quash. But here, where no such process is available, the
subpoena functions as a jurisdictional determination as in Hawkes, and, as in that case, it would violate
due process to deny the recipient an opportunity to for a precompliance challenge ACC jurisdiction.
CONCLUSION
The motion to dismiss should be denied.
RESPECTFULLY SUBMITTED this 31st day of May, 2018 by:
Isl Timothy Sandefur Timothy Sandefur (033670) Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Attorneys for Plaintiffs
7
CERTIFICATE OF SERVICE
ORIGINAL FILED this 31st day of May, 2018, with:
Clerk of the Maricopa County Superior Court
COPY hand-delivered May 31 , 2018 to:
The Honorable Daniel Kiley Superior Court of Arizona, Maricopa County East Court Building-911 Phoenix, AZ 85003
COPIES mailed and emailed May 31 , 2018 to:
Alexander Michael del Rey Kolodin KOLODIN LAW GROUP PLLC 3443 N. Central Ave., Ste. 911 Phoenix, AZ 85012 Alexander. [email protected] Attorneys for Plaintiffs
Paul Kitchin ARIZONA CORPORATION COMMISSION 1300 W. Washington, 3rd Fl. Phoenix, AZ 85007 [email protected] Attorneys for Defendants
/s/ Kris Schlott Kris Schlott, Paralegal
8
Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Timothy Sandefur (033670) 500 E. Coronado Rd. Phoenix, AZ 85004 (602) 462-5000 [email protected] Attorneys for Amicus Curiae Goldwater Institute
IN THE SUPERIOR COURT OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA
KADIMA. VENTURES, LLC, et al. ,
Plaintiffs,
vs.
ARIZONA CORPORATION COMMISSION, et al.,
Defendant.
Case No. LC2018-000163-001 OT
[PROPOSED] ORDER GRANTING MOTION OF THE GOLDWATER INSTITUTE FOR LEAVE TO FILE AM/CVS CURIAE BRIEF IN SUPPORT OF PLAINTIFFS
(The Honorable Daniel Kiley)
Before the Court is the Goldwater Institute's Motion for Leave to File Amicus Curiae Brief in
Support of Plaintiffs. Having reviewed the Motion, the Comt finds that it should be and is hereby
GRANTED.
Accordingly, it is hereby ORDERED that the Goldwater Institute' s amicus brief in suppo11 of
Plaintiffs is hereby filed.
The Honorable Daniel Kiley Judge of the Maricopa County Superior Court