November 25, 2014
Due to rapidly developing technologies and constantly evolving marketing practices, businesses working in the Internet marketing space are frequently the subject of Attorney General inquiries and lawsuits. This is true whether your business provides marketing services or utilizes third party marketers to sell your products or services. You have likely heard horror stories from peers and competitors (or worse yet, their principals) that were subjected to heavy fines, injunctions and/or penalties for deceptive marketing practices. Needless to say, the first steps you take when you hear from an Attorney General are critical.
How Will An Attorney General Contact Me?
You may first hear from the Attorney General by phone, by letter, or by service of a Civil Investigative Demand (“CID”), inquiring about your business practices or those of a third party. In other cases, you may not hear from the Attorney General at all until after a lawsuit is filed. Regardless of the initial communication, how – and through whom – you make your initial response to the Attorney General is critical.
How Should I Respond To The Attorney General?
First, the simple answer is you should not respond to the Attorney General, your attorney should. Experienced counsel will know what to say, what to ask and, and perhaps most importantly, when to say nothing. They will determine what is at the core of the investigation and who the real targets are – which will help limit the investigation and point it in the proper direction. If the investigation does in fact target your business, experienced counsel may help prevent an investigation from turning into a lawsuit. If a lawsuit has been commenced, the goal is to get the quickest, most cost effective and painless resolution. If the resolution involves a written settlement, it is critical that the injunctive provisions therein be narrowly crafted, not only to allow for lawful business to continue, but also to contemplate potential future changes in business practices and technologies.
Second, resist the temptation to create or destroy documents. In our digital age, document tampering or spoliation will generally be uncovered during the discovery portion of the action. Not only will this dramatically increase the Attorney General’s interest in the underlying case, but such activities may create an entirely distinct and additional basis for the Attorney General to pursue the business, as well as the individuals involved.
Third, do not discuss the matter with anyone, including your staff, until you speak to an attorney. Also, no matter how sure you are of the propriety of your business practices, do not speak directly to the Attorney General. I cannot tell you how many times that we have seen situations where companies, or inexperienced counsel, immediately tried to “set the Attorney General straight” and a manageable situation quickly turned into a disaster. Do not issue press releases, which may only bring more unwanted attention – and perhaps the attention of more Attorneys General – to the situation. Moreover, The CID or other document you receive may have a confidentiality notice attached, which you certainly do not want to violate.
Isn’t An Attorney General Action Just Like Any Other Civil Litigation?
Far from it. An Attorney General often has a different motivation than a traditional plaintiff. For example, unlike a civil litigant looking simply for money damages, an Attorney General may select a case in order to send a message to an entire industry, particularly since Attorney General actions tend to be higher profile than typical litigation. The economic incentives for an Attorney General to pursue and continue a case are often different because the Attorney General has the resources of the State behind it and often applies a different cost/benefit analysis, particularly if the goal is to provide guidance to an industry. In addition, Attorneys General have home field advantage and, in certain circumstances, have a lower standard of proof than a typical civil litigant. Attorneys General often have many remedies available to them, including statutory fines, penalties, disgorgement and certain injunctive relief not available to typical plaintiffs. Finally, attorney’s fees are seldom granted in civil litigation, but payment of the Attorney General’s civil investigative costs is often part of the discussion in most Attorney General matters. These are just a few of the many differences.
Unfortunately, there are countless examples of attorneys who, through hubris, erroneous tactics or simple lack of understanding of these differences, turn quickly winnable cases into quagmires.
How Can We Come Out On Top?
The best way to succeed in an Attorney General investigation or action is to never appear on the Attorney General’s radar screen in the first place. If you engage in Internet marketing, or utilize any form of third party marketing (Internet, email, text, telemarketing, etc.) it is critical to retain counsel that is knowledgeable and experienced in Internet practices and online marketing long before you hear from an Attorney General. Counsel should know the ins and outs of marketing law, as well as the red flags Attorneys General look for. This could save you substantial time and money, as well as allow you to avoid the distraction of dealing with a regulatory inquiry or action against your business or you personally.
This topic should be of interest to any company or individual engaging in a commercial venture within the United States, especially those involved in the online marketing, data collection and/or consumer product industries.
If you are interested in ensuring that you are compliant with current regulations or if you are facing an investigation from a state attorney general or other regulatory agency, please e-mail us at firstname.lastname@example.org, or call us at (212) 246-0900.