United States: The Subpoena Power Of The NYC Department Of Consumer Affairs

On May 3, 2016, the Madison Square Garden Company filed a petition in New York state court seeking to quash two subpoenas served by the New York City Department of Consumer Affairs. The subpoenas were issued in connection with the DCA's investigation into MSG's compliance with the City's paid sick leave law, and they demand that MSG produce the personal contact information of every one of the thousands of MSG employees covered by the law and documents showing the amount of paid sick time accrued and used by each employee. The subpoenas also request all 18 of MSG's collective bargaining agreements with its union employees so that the DCA can audit them to ensure that they either comply with the paid sick leave law or that the laws were expressly waived by the unions.

Expansive requests from the DCA are not unusual, but there are limits under the law.

The legal arguments in MSG's petition provide a useful compendium of factors that can invalidate a DCA subpoena. MSG argues that the subpoenas are overbroad, not reasonably related to any investigation, and seek irrelevant information and documents. Additionally, MSG argues that the subpoenas lack any factual basis that shows, with sufficient specificity, that the investigation is based on authentic underlying complaints. This requirement was discussed in Myerson v. Lentini Bros. Moving & Storage Co., 33 N.Y. 2d 250, 256 (1973), where the court stated that "[No] agency of government may conduct an unlimited and general inquisition into the affairs of persons within its jurisdiction solely on the prospect of possible violations of law being discovered" (internal citations omitted). See also New York Shredding Corp. v. New York City Dep't of Investigation, 184 Misc. 2d 174 (Sup. Ct. N.Y. Co. 2000) (denying motion to quash where the DCA and DOI provided an adequate factual basis for the investigation to justify enforcement of the subpoena by the court). According to the court in Lentini, this requirement is not that the Commissioner must show probable cause for the investigation, but that "the basis for [the subpoena's] issuance be more than isolated or rare complaints by disgruntled customers." Id. at 258.

Before reviewing further examples of contests over DCA subpoenas, however, it is important to understand where the DCA gets the power to issue subpoenas. There are several sources. The first is New York City Charter, § 2203, which establishes the powers of the Commissioner of the DCA. That section gives the Commissioner many powers, including the power to "receive and evaluate complaints and initiate his own investigations relating to these matters and take appropriate action, including referral to a federal or state agency." § 2203(d). With respect to the full range of the Commissioner's powers, § 2203(f) states: "The commissioner, in performance of said functions, shall be authorized to . . . serve subpoenas . . ." The New York City Administrative Code grants subpoena power to the Commissioner in his or her role as head of a licensing body. Section 20-104(c) states: "The commissioner or the commissioner's designee shall be authorized . . . to issue subpoenas . . ." Finally, the Rules of the City of New York, at R.C.N.Y. § 6-36, state that in connection with DCA adjudicative hearings, "a subpoena may be issued [by the Commissioner] to compel the production of any paper, photograph, or other record relevant to the violations alleged for examination or introduction into evidence, or a subpoena to compel the appearance of persons to give testimony."

The seminal decision on the enforceability of DCA subpoenas is the Lentini case cited above. In that case the court held that a subpoena issued by the Commissioner requesting all of Lentini's books and records was overbroad and issued without a sufficient factual justification by the Commissioner. The legal analysis in Lentini is still relevant today. In a DCA subpoena case decided in 2015, Menin v. Webster Hand Car Wash Corp., 2015 N.Y. Misc. LEXIS 3900 (Sup. Ct. N.Y. Co., Oct. 27, 2015), the court held that after demonstrating the authority to issue a subpoena, a nonjudicial body must show: 1) that the subpoena is reasonably related to the matter under investigation; 2) that the documents subpoenaed are material and relevant to the matter being investigated; and 3) that there is a sufficient factual basis for the investigatory action to support enforcement. The subpoena in Webster was quashed because there were virtually no specific facts justifying the investigatory action, just a bare-bones and conclusory assertion that the documents sought were necessary for the investigation. The court also found that the subpoena was overbroad and called for items of questionable relevance.

Another recent case in which a DCA subpoena that was quashed is Abbott Laboratories v. Menin, Index No. 158164-2015 (Sup. Ct. N.Y. Co., 12/13/15). There, the subpoena issued to Abbott Labs requested documents relating to Abbott's incorporation, ownership, advertising practices, labeling practices, and customer lists, as well as to the responsibilities, qualifications, and training of its employees responsible for advertising its Similac brand baby formula. The focus of the investigation was the advertising claims being made for Similac, and the DCA initiated its investigation under its authority to enforce laws prohibiting deceptive trade practices and false advertising. The court quashed the subpoena, finding that it was unacceptably overbroad and that the documents requested would require enormous time and resources on the part of Abbott to produce.

In order to challenge a subpoena on any of the above grounds, however, a party must have standing. Where the would-be challenger does not have some proprietary interest in the documents being sought, the standing requirement is not met. See Echel Gasoline Corp. v. New York City Dep't of Consumer Affairs, 108 A.D.2d 717 (N.Y. 2d Dep't 1985). Even being party to a contract that has been sought by the subpoena is not sufficient to confer standing to challenge it. 38-14 Realty Corp. v. New York City Dep't of Consumer Affairs, 103 A.D. 2d 804 (2d Dep't 1984).

In sum, New York City businesses may be subject to subpoenas from the DCA, but New York courts have granted challenges to these subpoenas where there is not a sufficient factual basis for the investigation, the subpoena is not reasonably related to the investigation, and the subpoena is not limited to documents that are material and relevant.

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