Smith & Wesson Fails to Block a Subpoena Issued by the Attorney General Under the Consumer Fraud Act

Platkin v. Smith & Wesson Sales Co., Inc., 474 N.J. Super. 476 (App. Div. 2023). In 2020, the Attorney General’s office issued to Smith & Wesson an administrative action subpoena duces tecum pursuant to the New Jersey Consumer Fraud Act (“CFA”), N.J.S.A. 56:8-1 to -226, and the Hazardous Products Regulations, N.J.A.C. 13:45A-4.1 to -4.3. The subpoena sought certain documents from Smith & Wesson.

Smith & Wesson obtained an extension of time to respond to the subpoena. But when that time expired, Smith & Wesson did not produce any documents. Instead, the company filed a federal action asserting that the subpoena infringed Smith & Wesson’s constitutional rights.

About two months later, the Attorney General filed a Verified Complaint in the Chancery Division seeking to enforce the subpoena. The Attorney General filed a motion to enforce, and defendant cross-moved to dismiss or to stay or quash the subpoena. The Chancery Division, Judge Alper, granted the Attorney General’s motion and denied defendant’s cross-motion. Defendant appealed, but today the Appellate Division affirmed, applying the abuse of discretion standard of review. Judge Smith wrote the panel’s opinion.

Defendant argued that under the “first-filed” doctrine, the subpoena should have been stayed because Smith & Wesson had filed its federal case sixty days earlier. Quoting Sensient Colors Inc. v. Allstate Ins. Co., 193 N.J. 373, 386 (2008), Judge Smith noted that “New Jersey has long adhered to the general rule that the court which first acquires jurisdiction has precedence in the absence of special equities.” As Sensient Colors also stated, special equities have been found “under a variety of circumstances, including when: [1] one party has engaged in jurisdiction shopping to deny the other party the benefit of its natural forum . . . . [2] a party acting in bad faith has filed-first ‘in anticipation of the opposing party’s imminent suit in another, less favorable, forum’ . . . [3] significant state interests . . . are implicated, and when deferring to a proceeding in another jurisdiction ‘would contravene the public or judicial policy’ of the forum state. . . [4] it would cause ‘great hardship and inconvenience’ to one party by proceeding in the first-filed action and no unfairness to the opposing party by proceeding in the second-filed action” (citations omitted).

Judge Smith found that Judge Alper had rightly found special equities here that justified deviation from the first-filed principle. These included the Attorney General’s “investigation into defendant’s potential CFA violations; defendant’s race to the federal courthouse to file its action; and the strong potential for prejudicial delay to the fraud investigation. The court concluded defendant’s actions and corresponding forum selection were part of a strategy designed to ‘create confusion and unnecessary lawsuits.'”

As Judge Smith correctly noted, in a section of his opinion studded with citations, the Attorney General has broad power to investigate potential CFA violations. Defendant’s procedural maneuvering could not be permitted to frustrate that power. Citing cases from two different federal Circuit Courts of Appeals, Judge Smith observed that “[t]o accept defendant’s position, any time the Attorney General’s office issued a civil subpoena, the target of the investigation could sprint to the federal courthouse to quash it, effectively stopping a valid investigation in its tracks.”

Defendant’s other major argument was that NAACP v. Alabama, 357 U.S. 449 (1958), rendered the subpoena unconstitutional. Citing cases from the Supreme Court of New Jersey and a decision by Chief Justice John Marshall, sitting at circuit in 1833, Judge Smith observed that courts will not decide constitutional issues unless it is “strictly necessary” to do so.

Judge Alper had found that NAACP, which involved infringement on the right of persons to freely associate with each other, was limited to that context, and that no freedom of association issue was present here. She also noted that the subpoena “did not seek information regarding [defendant’s] association with other individuals or corporations, only information [about] representations [defendant] made about [its] products to the public.” After analyzing in detail the NAACP decision and other Supreme Court of the United States opinions in this area, Judge Smith rightly held that “Judge Alper did not err in her narrow reading of NAACP, and our analysis leads us to same outcome.”

Defendant had asserted the following constitutional objections in its NAACP argument: “its commercial speech is protected under the First Amendment; the Attorney General’s public statements and actions prior to issuance of the subpoena constitute viewpoint discrimination and have a chilling effect on defendant’s speech; defendant’s rights under the Second Amendment bars production because its commercial speech is protected; defendant’s rights under the Equal Protection Clause and the Due Process Clause of the Fourteenth Amendment were violated by plaintiffs’ actions; and finally, plaintiffs violated defendant’s Fourth Amendment rights by employing an unconstitutional regulation and failing to identify any offending commercial speech that justifies a subpoena.” The panel’s rejection of the NAACP argument on its merits resolved these issues.

But Judge Smith prudently identified an additional reason why defendant’s argument failed: it was premature and unripe. “In determining whether an issue is fit for judicial review, we consider whether additional factual development is required. We find that to do so on this record would be improper, where there are few actual facts. Defendant has offered nothing in support of its motion but selected quotes from the Attorney General’s public statements, outside the context of a fulsome discovery process.” Defendant had preserved its claims, and any legitimate issues could be addressed during discovery when they would be more concrete.

Finally, Judge Smith concisely rejected defendant’s challenges to the subpoena itself. “The subpoena, a primary investigative tool identified by the Legislature to assist the Attorney General with investigations into potential CFA violations, is valid. See N.J.S.A. 56:8-4. Its subject matter is clear, and the information sought by plaintiffs is spelled out in a manner that is sufficiently well-defined. Contrary to defendant’s position, the investigation does not need to be limited by ‘forecasts of the probable result of the investigation . . . ‘ Okla. Press Pub. Co. v. Walling, 327 U.S. 186, 216 (1946) (quoting Blair v. United States, 250 U.S. 273, 282 (1919)).” The panel thus upheld the subpoena.