Opinion
No. 04-MC-74.
May 11, 2004
MEMORANDUM AND ORDER
This action was brought by the petitioner to compel John Koresko, V., Regional Employers' Assurance Leagues, Delaware Valley League, Penn-Mont Benefit Services, Inc., and Koresko Associates (collectively "the respondents") to comply with the subpoenas duces tecum issued and directed to them on January 28, 2004, by the Regional Director of the Philadelphia Region of the Employee Benefits Security Administration ("EBSA"), United States Department of Labor ("DOL"), in an investigation being conducted pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA").
On April 19, 2004, the Secretary of Labor filed the petition to enforce the administrative subpoenas. On April 20, 2004, the Court issued an Order requiring the respondents to show cause why they should not be required to produce the requested records and scheduled a hearing for May 10, 2004. On April 28, 2004, the respondents subpoenaed EBSA Investigator Bindu George to appear and testify at the hearing to show cause and to produce documents relating to EBSA's investigation of the respondents.
The first question before the Court is whether the respondents must comply with the subpoenas. The respondents object to the subpoenas on the grounds that they are not generally enforceable and on the grounds that they request privileged information. The Court will address the general challenge to the subpoenas in this Order, not the specific objections related to privilege. The second question before the Court is whether the subpoena requiring Investigator George to produce documents relating to the investigation of the respondents should be quashed.
The Court will address the issues related to privilege in a later Order if the parties are unable to resolve these issues themselves.
The requirements for the enforcement of an administrative subpoena duces tecum are as follows: "(1) the inquiry must be within the authority of the agency, (2) the demand for production must not be too indefinite, and (3) the information sought must be reasonably relevant to the authorized inquiry." U.S. v. Westinghouse Electric Corp., 638 F.2d 570, 574 (3d Cir. 1980).
The above standards for enforcing subpoenas have been met in the instant matter. First, the inquiry is within the authority of the DOL. Section 504 of ERISA gives the Secretary of Labor broad authority to conduct investigations to determine whether any person has violated or is about to violate Title I of ERISA. 29 U.S.C. § 1134. Investigator Bindu A. George states in her declaration that the investigation was initiated to determine if any person has or is about to violate Title I of ERISA. George Decl. ¶ 2. Second, the request for production is definite. The documents, and the date and location that the documents were to be produced, are stated in the subpoenas. Finally, the documents are relevant to EBSA's investigation. The subpoenas requested documents pertaining to the establishment, contractual relationships, operation and finances of the Regional Employers' Assurance Leagues Voluntary Employees' Beneficiary Association Health and Welfare Benefit Plan and the Voluntary Employees' Beneficiary Association Trusts. George Decl. ¶ 3, 9.
The respondents argue that the plans involved are not covered by ERISA. In a subpoena enforcement action, however, an administrative agency is not required to demonstrate that the matter or entity it seeks to investigate "is covered by the enabling statute since the `(authority) to investigate the existence of violations . . . include(s) the authority to investigate coverage.'" Donovan v. Shaw, 668 F.2d 985, 989 (8th Cir. 1982) (citations omitted).
The respondents argue that two federal courts have reviewed the relevant records in this case and have determined that the plans and trusts involved are not employer controlled. The Court finds that the DOL is not estopped from challenging that conclusion, both because the DOL was not a party in the previous cases and because the courts in those cases were deciding motions to dismiss. See Schroeder v. Acceleration Life Ins. Co. of Pennsylvania, 972 F.2d 41, 45 (3d Cir. 1992).
The petitioner has made a prima facie showing of the statutory authority, legitimate purpose, and relevance. The burden shifts to the respondents to provide compelling reasons why the subpoena should not be enforced. Marshall v. Amalgamated Ins. Agency Services, Inc., 523 F. Supp. 231, 233 (N.D. Ill. 1981). See also United States v. Powell, 379 U.S. 48, 57-58 (1964). In a subpoena enforcement matter, a hearing on the merits of an investigation is not proper unless the respondents convince the Court that the agency is acting in bad faith or for an improper purpose. See United States v. Aero Mayflower Transit Co., 831 F.3d 1142, 1145-47.
The respondents have argued that the agency is acting in bad faith and for an improper purpose because the investigation is being driven by Sidney Charles Markets, Inc. ("SCM"), the respondents' adversary in ongoing litigation. The only evidence proffered by the respondents in support of this allegation is that SCM's counsel told respondents' counsel that he would "use the DOL" to get funds for his client. SCM's motivation is not relevant to the propriety of the DOL's investigation. Even assuming that the investigation was prompted by a complaint by SCM, that fact does not rise to the level of bad faith or improper purpose by the agency. See Securities and Exchange Commission v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118, 127 (3d Cir. 1981). The Court, therefore, will quash the subpoena for the testimony and documents of Investigator Bindu George.
For the above reasons, the Court finds that the subpoenas are generally enforceable. The respondents argue that some of the requested information is protected by the attorneyclient privilege or is privileged private and/or sensitive health information. The Court will not resolve these issues until the parties have had a chance to negotiate the respondents' specific objections.
An appropriate Order follows.