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Enron Mail |
Here is follow-up research on the question of whether we could remove a
criminal case against Enron to federal court. It is not as promising as we first thought. Thanks Gary < -----Original Message----- < From: Smith, Amanda D. < Sent: Thursday, May 24, 2001 5:59 PM < To: Fergus, Gary S. < Cc: Molland, Michael E.; Meringolo, Peter < Subject: Enron: Response to Criminal Charges < < Gary, < < Our earlier preliminary research reflected the fact that, although it will < likely be difficult, it may be possible under the primary jurisdiction < doctrine to refer criminal charges to FERC, given the criminal penalty < provisions of the Federal Power Act. However, as it becomes more clear < that, if criminal charges are to be filed, they will be filed in < California, it is necessary to revisit and expand this earlier research. < < We noted earlier that there is a body of substantive law dealing generally < with the question of whether criminal proceedings are subject to the < primary jurisdiction doctrine, but no case which considered this question < with respect to the Federal Power Act specifically. Based on this, we < concluded that it may be possible, if difficult, to argue that criminal < charges should be referred to FERC under the primary jurisdiction < doctrine. An expansion of this research reveals that this potential for < referral appears to only be applicable to federal criminal charges. < < State criminal charges are not removable under 28 U.S.C. Section 1441, < which provides that: "[e]xcept as otherwise expressly provided by Act of < Congress, any civil action brought in a State court of which the district < courts of the United States have original jurisdiction, may be removed by < the defendant or the defendants, to the district court of the United < States for the district and division embracing the place where such action < is pending." Moreover, our research has revealed no case in which state < criminal charges were referred directly to any federal regulatory agency. < < < However, our research has revealed another alternative to removal or < referral of criminal charges. See generally Sprint Corp. v. Evans (M.D. < Al. 1993) 818 F.Supp. 1447; Sprint Corp. v. Evans (M.D. Al. 1994) 846 < F.Supp. 1497. < < In 1993, the Attorney General of Alabama began an investigation of Sprint < Corporation, an international telecommunications company acting as a < "common carrier" within the meaning of the federal Communications Act. < Sprint, among other things, provided a "1-800" service to subscribers < pursuant to tariffs filed with the FCC. To use these "1-800" numbers, a < caller places a call through a local telephone company, who connects the < call to a long distance carrier such as Sprint, who generally then < connected the call to the "1-800" subscribers local telephone number. < < In February 1993, Sprint received a subpoena from the Montgomery County < Grand Jury commanding it to appear and produce all records relating to the < "1-800" service. Sprint produced the documents and learned that it was < under investigation for violation of Alabama's obscenity laws in < connection with allegedly obscene content distributed over telephone < lines. < < In March 1993, Sprint filed a motion for a temporary restraining order < (TRO) and a preliminary injunction seeking to enjoin the Alabama Attorney < General from pursuing a criminal indictment against Sprint for violation < of the obscenity law. Sprint maintained enforcement of the anti-obscenity < law would interfere with federal statutory rights because regulation of < interstate communications is within the exclusive jurisdiction of the FCC. < At the TRO hearing the Attorney General could not testify that the < prosecution was not imminent and, therefore, the court issued the TRO. < < Later in March, the Court decided Sprint's motion for a preliminary < injunction. Sprint Corp. v. Evans (M.D. Al. 1993) 818 F.Supp. 1447. At < the hearing on this motion, counsel for the Attorney General stated that < the Attorney General's position regarding Sprint's criminal liability < under the obscenity statute related to the its obligations under that law < when a telephone customer complains that a "1-800" subscriber's message is < offensive. According to counsel, if a customer complains, Sprint is < obligated to either report the complaint to a prosecuting attorney or < begin a declaratory judgment action against the subscriber. < < The District Court granted the preliminary injunction. The court held < that, under the relevant Eleventh Circuit test for determining whether a < preliminary injunction should issue, the movant must show: "(1) a < substantial likelihood that she will ultimately prevail on the merits; < (2) that she will suffer irreparable injury unless the injunction issues; < (3) that the threatened injury to the movant outweighs whatever damage the < proposed injunction may cause the opposing party; and (4) that if issued, < the injunction would not be adverse to the public interest." Sprint, 818 < F.Supp. at 1452. < < Before the Court considered the first element of this test, the Court < addressed the contention that the District Court had no jurisdiction. The < Court held that: "[t]he Supreme Court, however, has held that federal < courts have federal-question jurisdiction under 28 U.S.C.A. S 1331 to < entertain suits to enjoin state officials from interfering with federal < statutory rights." < < The Court then held that there was a substantial likelihood that Sprint < would prevail on the merits because "to the extent that the Alabama < anti-obscenity statute attempts to impose reporting requirements on < communications by common carriers, it is interstate in nature and < preempted by federal law.... The statute is being used as a mechanism to < impose new reporting requirements on common carriers with regard to their < 800 service. Currently, under federal law, common carriers do not have < an affirmative obligation to investigate whether their facilities are < being used by customers for a lawful purpose." (Importantly, the Court < did not reach the question whether the Communications Act preempts all < Alabama laws imposing liability for conduct of common carriers in the area < of obscenity. The Court also rejected the Attorney General's argument < that a Younger abstention was necessary.) < < The Court disposed of the last three parts of the preliminary injunction < test easily. First, the Court held that irreparable harm would result < because "an indictment against Sprint would cause great harm to its < business reputation and would jeopardize its status as a government < contractor." Second, the Court held that the potential harm to Sprint < outweighed the potential harm to the Attorney General because "although < the Attorney General relies on a state statute directed at the prosecution < of the distribution of obscene matter, the Attorney General really seeks < to impose interstate reporting requirements on common carriers--in other < words, the generic proceeding at issue is the regulation of interstate < telecommunications by common carriers outside the context of the < distribution of obscene matter. The Attorney General clearly has no < interest in such interstate regulation." Third, the Court held that the < "preliminary injunction serves the public interest by ensuring that the < national interest in fulfilling the goals of the Federal Communications < Act." Sprint, 818 F.Supp. at 1460-61. < < In a separate decision, almost a year later, the District Court granted, < in part, Sprint's motion to refer certain issues to the FCC under the < doctrine of primary jurisdiction. Sprint 2, 846 F.Supp. at 1501. Prior < to this motion, the Alabama Attorney General changed its allegations < regarding the illegality of Sprint's conduct under the obscenity law -- < now alleging that Sprint was not criminally liable because of a failure to < report, but because of a aiding and abetting theory. < < The District Court held, in brief, that "(1) referral to FCC under < primary jurisdiction doctrine was warranted with regard to question of < whether common carriers, consistent with Communications Act, may refuse to < carry information provider's program transmitted as "1-800" service if < program contains sexually explicit information that has not been < adjudicated obscene, and (2) referral to FCC was not warranted with < respect to question of whether attempted criminal prosecution of < interstate common carrier under state's antiobscenity laws for knowingly < transmitting potentially obscene or obscene telephone communications < through its interstate "1-800" facilities is preempted by Communications < Act." Sprint 2, 846 F.Supp. at 1497. The Court then ordered that the < record of the case be transmitted to the FCC, that the preliminary < injunction remain in effect and that all motions would be denied without < prejudice until after the FCC rendered its decision. < < Obviously, no analysis of the criminal charges against Enron can yet be < made, but there is a significant chance that Enron may be able to cast any < criminal charges filed by the California Attorney General as "regulatory" < in nature. Moreover, given relative lack of effect the Alabama Attorney < General's change in position in the middle of the Sprint case, the < "regulatory" aspect of the charges may not be as important as it may seem < in the first Sprint holding on the preliminary injunction. < < Please let me know if you would like me to pursue this further. My < research has not yet revealed any case that is factually similar to the < Sprint case. < < < < < < < < ======================================================= This email message is for the sole use of the intended recipient(s) and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply email and destroy all copies of the original message. To reply to our email administrator directly, send an email to postmaster@brobeck.com BROBECK PHLEGER & HARRISON LLP http://www.brobeck.com
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