Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—E.D. Tex.: FTC entitled to limits on document production in office supply scam case, (Aug 17, 2016)

By Jeffrey May, J.D.

In an FTC enforcement action targeting an alleged office supply scam, the agency was not required to provide the defendants with irrelevant or privileged documents or otherwise meet overly broad document requests. The federal district court in Sherman, Texas, granted in part the agency’s motion for a protective order to quash certain portions of the defendants’ first request for production (FTC v. Liberty Supply Co., August 15, 2016, Mazzant, A.).

In December 2015, the FTC filed a complaint against Liberty Supply Company and related individuals for violating the FTC Act, the Telemarketing Sales Rule, and the Unordered Merchandise Statute. The agency contended that the defendants bilked millions of dollars from nonprofit organizations and small businesses while selling pens, paper clips and other office supplies. The federal district court issued a preliminary injunction and an asset freeze, which remains in effect during the pendency of the matter.

At the outset, the court ruled that the FTC satisfied the "meet and confer" requirements under the local rules before it filed its motion. The court rejected the defendants’ argument that the FTC made no serious effort to seek common ground on narrowing any of the disputed requests.

Relevance. The court next took up the FTC’s contentions that the requests were for irrelevant information and were overly burdensome. The court found that information requested by the defendants relating to FTC policies, as well as exceptions to those policies, was irrelevant to the claims in the present case. In addition, the defendants’ request for "[a]ll documents showing the anticipated size of the Defendants’ operations prior to filing the Application for a Temporary Restraining Order, and the number of agents or persons assisting the FTC" was quashed on relevancy grounds. The court also deemed irrelevant the number of agents assisting in the FTC investigation. The defendants had sought "[a]ll documents evidencing the basis, by policy or experience, for requesting that many agents or persons assisting the FTC." Requests for documents concerning what triggered the FTC’s investigation and the witnesses in the investigation were found to constitute an overly broad fishing expedition and were quashed.

Privilege. The FTC asserted that certain requested documents were shielded from production under: (1) the law enforcement privilege; (2) the government deliberative process privilege; (3) the attorney-client privilege; and (4) the attorney work product doctrine. The court found that "communications among counsel and the FTC’s Investigators regarding the investigation" was privileged under the deliberative process privilege, as well as, the attorney-client privilege. Further, "legal and attorney-client memorandum from attorneys to FTC Commissioners and staff seeking authority to proceed within the investigation" was protected under the deliberative process privilege, as well as, the work product doctrine, and "attorney research and notes discussing the various opinions and recommendations regarding the case, and draft pleadings" were protected under the attorney work product doctrine. However, Consumer Sentinel complaints received by the FTC from consumers or from other law enforcement agencies, as well as Civil Investigative Demands, were not protected by the privilege doctrines, in the court’s view. To the extent that the FTC was concerned about divulging personal or private information, the agency could redact any information that should remain private, the court explained.

This is Case No. 4:15-cv-00829-ALM.

Attorneys: Eric Nelson Roberson for the Federal Trade Commission. Roger D. Sanders (Sanders, O'Hanlon, & Motley PLLC) and Deanya Kueckelhan Cocanougher (Cantey Hanger LLP) for Liberty Supply Co.

Companies: Liberty Supply Co.

Cases: ConsumerProtection FederalTradeCommissionNews TexasNews