The Attorney General’s Office has broad investigative tools at its disposal to investigate conduct under the AG’s purview, including alleged false claims under the Massachusetts False Claims Act (G.L.c. 12, 5A-5O), health care fraud (through the Medicaid Fraud Unit), consumer protection, insurance and financial services, and many other areas.
One of the most daunting for clients has been the attorney general’s broad investigatory powers under G.L.c. 93A. Picture defending a civil action in which only your opponent, and not you, has the right to seek documents and testimony, and the claims against your client are typically not spelled out at all, much less in any meaningful detail.
This article summarizes key elements of a civil investigation under Chapter 93A.
Overview of the CID Process
The consumer protection statute’s Section 2 creates liability when a defendant company engages in “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce” in Massachusetts. G.L.c. 93A, 2.
The Consumer Protection Act vests the AG’s Office with parens patriae authority to investigate unfair and deceptive acts or practices “wherever” it believes such method, act, or practice has occurred within the Commonwealth. The Office can then sue under Chapter 93A once its investigation is complete, which can take years.
Companies often discover they are under investigation when they receive a Civil Investigative Demand from the AG’s Office. Notably, the AG does not need to meet any real threshold of proof to initiate an investigation.
Through the lawsuit, the AG’s Office can seek a temporary restraining order or preliminary or permanent injunction, as well as civil penalties, costs of the suit, and attorneys’ fees. G.L.c. 93A, 4.
Companies often discover they are under investigation when they receive a Civil Investigative Demand, or CID, similar to a subpoena, from the AG’s Office, demanding often voluminous documents. Notably, the AG does not need to meet any real threshold of proof to initiate an investigation. See G.L.c. 93A, 6.
The AG can utilize a variety of means to investigate, including taking testimony under oath and requesting documents. The AG can also request complex depositions akin to a Rule 30(b)(6) deposition in a civil case. G.L.c. 93a, 6(1).
What to do When Your Client Receives a CID
Companies must be sure to treat a CID like any other discovery request and implement proper document retention procedures immediately upon receiving the CID.
Counsel should immediately contact the AG’s Office to acknowledge receipt and begin negotiating the scope of the response (i.e., try to narrow it down) and the response’s timing.
Typically, the only insight about the nature of the investigation is through categories of documents requested. For that reason, depending on the circumstances, we often make a request under the public records law ( G.L.c. 66, 10) to whatever public agency or entity, including the AG’s Office, that may have received complaints that prompted the CID.
If your client has jurisdictional or other objections to the CID, it must act quickly.
Chapter 93A permits the recipient of a CID to file a motion to modify or set aside a CID, or for a protective order. G.L.c. 93A,
6(7). The party served with the CID must file a motion prior to the production date specified in the CID, or within 21 days after service of the CID (not receipt of the CID), whichever period is shorter.
Failing to bring a motion to modify or set aside the CID versus simply objecting by way of a letter to the AG will waive many defenses, including the argument that there is no personal jurisdiction over the CID recipient. See, e.g., Attorney General v. Bodimetric Profiles, 404 Mass. 152, 155 (1989).
Thus, clients who believe there is no personal jurisdiction must still appear in some form to challenge jurisdiction. That said, if a CID recipient initially complies with the CID by producing documents without filing an objection, but later reaches an impasse with the AG’s Office for example, when the AG issues yet another CID that the recipient finds objectionable, courts will typically allow the recipient to seek court assistance, even if the impasse arises long after 21 days expires. See, e.g., Attorney General v. Facebook, Inc. 487 Mass. 109 (2021).
Despite the seemingly straightforward mechanism articulated by statute, challenging a CID in practice presents significant obstacles. For one, clients in highly regulated industries are often hesitant to challenge a CID as they wish to maintain a positive relationship with the AG’s Office, particularly in light of annual disclosure requirements or obligations to participate in audits. These clients are often hesitant to appear combative and uncooperative by challenging the CID in court.
Furthermore, challenging the CID in court typically runs the risk of making an otherwise secret and confidential investigation public (unless a confidential method is available, such as filing under seal).
Moreover, CID challenges are rarely successful. Courts give the AG’s Office wide leeway to pursue its investigation, even when that investigation is burdensome to the recipient. See e.g., Exxon Mobil Corp. v. Attorney Gen., 479 Mass. 312, 325 (2018).
The burden is on the CID’s recipient to show good cause to modify or set aside the demand, and to show that the AG’s Office acted arbitrarily or capriciously in issuing it. Harmon Law Offices, P.C. v. Attorney Gen., 83 Mass. App. Ct. 830, 834 (2013).
The AG is authorized to file a motion to enforce the CID under G.L.c. 93A, 7, if the recipient does not respond or the AG contends the response is insufficient. At that point, the investigation can become public, as there must be a public filing in the Superior Court for the AG to enforce the CID.
There are civil penalties (currently $5,000) for failing to comply with a CID and the risk of a contempt order thereafter for non-compliance. Thus, parties can be subject to enforcement actions not only when they fail to respond, but when the AG’s Office believes that the document response to the CID is somehow incomplete, which is sometimes a highly subjective decision on the AG’s part.
What Comes Next?
If, at the conclusion of the investigation, the AG determines that a violation of Chapter 93A has occurred, which is more often the case after the AG’s Office invests time and money on the investigation, the putative defendant is entitled to a “five-day notice” letter before the Commonwealth files suit. G.L.c. 93A, 4.
If the matter cannot be resolved, the AG has the right to, and often will, file a Suffolk Superior Court complaint.
The complaint usually is accompanied by a motion for temporary restraining order and/or for preliminary injunction to stop the allegedly illegal conduct during the pendency of the case. In contrast to ordinary civil litigation, the position of the AG’s Office is that it need only prove that the equitable relief will not adversely affect the public in order to obtain a preliminary injunction. Com. v. Mass. CRINC, 392 Mass. 79, 89 (1984).
Summary of Key Defenses
There is a great deal of case law offering defenses and arguments against Chapter 93A liability. The 93A regulations should be consulted. Massachusetts courts will also rely on cases under the federal FTC Act, 5 U.S.C. 41-58. Some of the more common defenses are:
Section 3 exemption. The Consumer Protection Act exempts “transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the Commonwealth or of the United States.” Section 2 can allow for creative defenses/arguments.
Client not engaged in trade or commerce. There may be arguments that there is no “trade or commerce.” For example, in the health care context, providing negligent medical services is not “trade or commerce,” but the business of providing medical services is. Beauchesne v. New England Neurological Assocs., P.C., 98 Mass. App. Ct. 716, 725 (2020).
Lack of trade or commerce in the Commonwealth. The statute reaches only entities conducting trade or commerce within the Commonwealth. Thus, a first line of defense for some companies is that this requirement is not met, i.e., there is no subject matter jurisdiction. A recent Superior Court case looked at this question under the similarly worded Massachusetts False Claims Act in Attorney General v. USiDG LLC, Civil Action 22-2370-BLS1 (Suffolk Superior Ct., April 20, 2023), and is worth consulting.
Lack of personal jurisdiction. As noted above, the personal jurisdiction defense can be waived if the CID recipient does not seek court protection within 21 days. Bodimetric Profiles, 404 Mass. at 155.
Resolving 93A or Other AG Investigations
If the AG’s Office intends to file suit (and possibly seek injunctive relief) against your client, as noted above, it must first issue a “five-day letter” under G.L.c. 93A, 4.
In practice, Chapter 93A’s statutory authority, cost and reputational harm give the AG significant leverage to extract a settlement out of a target company even when there are strong legal or factual defenses. As a result, the majority of CIDs brought by the
AG’s Office seem to culminate in settlement, which typically takes the form of an Assurance of Discontinuance, or AOD, or a consent judgment.
The AOD is a written agreement filed with the court that generally outlines the alleged violations, as well as detailed assurances made by the target company regarding its conduct to “discontinue” the allegedly unlawful method or practice, and providing mechanisms to monitor compliance. G.L.c. 93A, 5.
A resolution by consent judgment is even more onerous. Violating a judgment obviously has more significant consequences. In this scenario, the AG’s Office files a Suffolk Superior Court civil complaint (generally alleging wrongdoing but typically without specific details) and also, at the same time, a motion for consent judgment, which effectively resolves the complaint.
Under either resolution pathway, attorneys must give careful consideration to negotiating terms that the company can comply with operationally, as failure to do so is very serious.
Many terms to consider are case or client/industry-specific, but the following are issues and terms to consider in drafting a settlement: sunset provisions, notice of breach by the AG’s Office, your client’s own version of the facts, and no admissions of liability, among others.
Originally published in Massachusetts Lawyers Weekly (subscription required).
