United States District Court
Southern District of Texas
HOUSTON INDUSTRIES INCORPORATED,
DANIEL C. KAUFMAN, et al.,
| No. 95-CV-5237
CROSSPETITION FOR ENFORCEMENT OF CIVIL
INVESTIGATIVE DEMAND NO. 13591 AND ANSWER
TO PETITION TO SET ASIDE OR MODIFY
An investigative subpoena, Civil Investigative Demand No. 13591 (the "CID"),
was served on Houston Industries Incorporated ("HII") on October 25,
1995. HII failed to produce any documentary material or interrogatory
answers on the return date set forth in the CID. HII instead filed,
out of time, a petition to set aside or modify the CID. In this pleading,
the United States of America (1) cross-petitions for an order enforcing
the CID and (2) answers the petition filed by HII to set aside or modify
CrossPetition for Enforcement
- In enacting and amending the Antitrust Civil Process Act ("ACPA"),
15 U.S.C. §§1311 et seq. (1994), Congress provided
the Government with broad pre-complaint discovery powers to investigate
possible violations of the federal antitrust laws. More specifically,
ACPA Section 3(a), 15 U.S.C. §1312(a) (1994), empowers the Attorney
General and the Assistant Attorney General in charge of the Antitrust
Division of the United States Department of Justice to issue a civil
investigative demand to any person who they have reason to believe
"may be in possession, custody, or control of any documentary material,
or may have information, relevant to a civil antitrust investigation."
Such a civil investigative demand may require the recipient "to produce
such documentary material for inspection and copying or reproduction,
to answer in writing written interrogatories, to give oral testimony
, or to furnish any combination of such material, answers or testimony."
- The Antitrust Division of the United States Department of Justice
is currently conducting a civil investigation to ascertain whether
electric utility companies in Texas have violated the Sherman Act,
15 U.S.C. §§ 1 & 2 (1994). In the course of that investigation,
a number of civil investigative demands were issued and served.
- As alleged in paragraph 1 of its petition, HII is a corporation
organized and existing under the laws of the State of Texas, with
its principal place of business at 4400 Post Oak Parkway, Houston,
Texas, which is within this judicial district and division. This Court
accordingly has jurisdiction over this crosspetition and venue
is properly laid in this Court under ACPA Section 5(a), 15 U.S.C.
- HII is a publicly-traded holding company involved through its subsidiaries
in the electric utility business within the United States and abroad.
Its principal operating subsidiary is Houston Lighting and Power Company
("HL&P"), a vertically integrated firm engaged in the generation,
transmission and distribution of electric energy in a 5,000 square
mile area in southeastern Texas. HL&P is the second largest electric
utility in Texas with annual revenues of about $4 billion. Another
HII subsidiary, Houston Industries Energy, Inc. ("HEI") participates
in power generation projects, among other activities.
- HL&P and HEI are each wholly-owned subsidiaries of HII, each
with executive officers and directors in common with HII. As parent,
HII has custody and control of documentary material and information
in the possession, custody or control of its wholly-owned subsidiaries
HL&P and HEI.
- On October 24, 1995, Joel I. Klein, Acting Assistant Attorney General
in charge of the Antitrust Division of the United States Department
of Justice, duly issued the CID (reproduced as Exhibit A to HII's
petition). The CID requires HII to provide information and documentary
materials relevant to the antitrust investigation described in paragraph
2 of this crosspetition, at 10:00 a.m. on November 14, 1995.
The CID was served on October 25, 1995, in accordance with 15 U.S.C.
§1312(e)(1)(C) (1994), by depositing it in the United States
mails, by certified mail, return receipt requested, duly addressed
to HII at its principal place of business. By telephone call on the
same day, the Antitrust Division notified Baker & Botts L.L.P.,
the law firm representing HII, that a civil investigative demand had
been issued to the firm's client and a representative from the firm's
District of Columbia office picked up a copy of the CID.
- HII failed to produce any of the documentary materials and interrogatory
answers in response to the CID or to provide the United States with
specific information showing that CID compliance would impose an undue
burden. Instead, HII filed and served its petition for an order modifying
or setting aside the CID, but not within the time allowed by ACPA
Section 5(b)(1), 15 U.S.C. §1314(b)(1) (1994), which provides
that any such petition must be filed and served "before the return
date specified in the demand." Because HII's petition was not filed
and served before the return date specified in the CID, the automatic
suspension of the time allowed for compliance provided by ACPA Section
5(b)(2), 15 U.S.C. §1314(b)(2) (1994), upon the timely filing
of a petition is inapplicable.
- HII's petition asserts no valid grounds excusing its failure to
comply with the CID. The lack of substantive merit in the grounds
asserted by HII is pleaded more fully below, in the answer to HII's
- HII's continuing failure to comply with the CID has impaired the
Government's ability to obtain documentary material and information
needed to complete in a timely manner the investigation described
in paragraph 2 of this crosspetition. An expeditious resolution
of this crosspetition will allow the United States to determine
whether electric utility companies in Texas are violating federal
antitrust laws to the detriment of consumers, and to remedy those
violations by taking appropriate enforcement actions.
- The Fifth Circuit "has consistently recognized the summary nature
of administrative subpoena enforcement proceedings" Burlington
Northern R.R. v. Office of Inspector General, 983 F.2d 631, 637
(5th Cir. 1993), citing In re Office of Inspector General,
933 F.2d 276, 277 (5th Cir. 1993) ("subpoena enforcement actions are
designed to be summary and are designed to secure quick judicial review
of administrative activities") and In re EEOC, 709 F.2d 392,
397-400 (5th Cir. 1983) ("beyond challenge that 'the very backbone
of an administrative agency's effectiveness in carrying out its Congressionally
mandated duties is the rapid exercise of the power to investigate'"
(ellipses in original)).
Answer to HII's Petition
In accordance with Fed. R. Civ. P. 8(b), the defendants answer HII's petition
HII's petition is untimely because HII did not petition the court for
relief from the CID "before the return date specified in the demand,"
as required by 15 U.S.C. §1314(b)(1) (1994).
Since the activities under investigation do not enjoy a clear exemption
from the Sherman Act under the state action and Noerr-Pennington
doctrines, the investigation is within the federal antitrust law enforcement
authority of the Department of Justice.
The documentary material and information required by the CID are not protected
from disclosure under the standards applicable to subpoenas issued in
aid of grand jury investigations or the standards applicable to discovery
requests under the Federal Rules of Civil Procedure that are appropriate
and consistent with the purposes and provisions of ACPA.
To the extent that HII has legitimate interests in preserving the confidentiality
of documentary material and information required by the CID, those interests
are adequately protected by the express restrictions against disclosure
embodied in ACPA Sections 4(c)(3) and 5(g), 15 U.S.C. §§1313(c)(3)
& 1314(g) (1994).
Responding to the numbered paragraphs set forth in HII's petition:
- Defendants admit the allegations stated in paragraphs 1-4.
- Paragraph 5 primarily consists of legal conclusions not calling
for specific response; to the extent that they are intended as allegations
of fact, they are denied, except that defendants admit that the Public
Utility Commission of Texas regulates electric utilities in Texas
and is currently engaged in rulemaking that involves transmission
- Defendants admit that the CID requires HII to furnish documentary
material and information in HII's possession, custody, or control
and requires HII to produce "'all' documents of a particular type
and description," as alleged in subparagraph a. Paragraph 6 otherwise
recites legal conclusions not calling for specific response; to the
extent that they are intended as allegations of fact, they are denied.
- Defendants are without knowledge or information sufficient to form
a belief as to the truth of the factual averments of paragraph 7.WHEREFORE,
the United States of America asks that the Court grant this crosspetition
and enter an order enforcing the CID by directing HII to promptly
furnish the documentary material and interrogatory answers specified
in the CID and that the Court enter an order dismissing HII's petition
to modify or set aside the CID
| Daniel C. Kaufman
D.C. Bar No. 118422
U.S. Department of Justice, Antitrust Division
Transportation, Energy & Agriculture Section
555 Fourth Street, N.W. Room 9104
Washington, D.C. 20001
(202) 307-2784 fax