STATE EX REL. MILLER v. DOTNOW.COM, INC

MAHAN, J.

Edgar Andrews and dotNow.com, Inc. (dotNow) (referred to collectively as defendants) appeal from a district court ruling granting the Attorney General's application for an order enforcing an investigative subpoena issued pursuant to the Iowa Consumer Fraud Act, Iowa Code section 714.16(3) and (4) (2003). We affirm.

Upon submission of this appeal, our supreme court ordered the parties to submit jurisdictional statements related to whether the order from which appellants appeal is a final order, or whether the appropriate means of seeking review is through an application for interlocutory appeal, see Iowa Rs. App. P. 6.1(3) and 6.2, or whether the order is one from which a petition for writ of certiorari is the appropriate means of review. We have reviewed the jurisdictional statements submitted by both parties and we are convinced the procedure for enforcing a consumer fraud subpoena is self-contained and does not require further proceedings in district court. See Iowa Code § 714.16(6). Therefore, the order granting the Attorney General's application to enforce a consumer-fraud subpoena was a final order and appealable as a matter of right.

I. Background Facts and Proceedings

Defendants have appealed from one of several district court rulings involving these parties. Although only certain facts are relevant to the ruling from which defendants have appealed, we find a discussion of earlier proceedings between the parties instructive to understanding the situation as it existed at the time of the district court's ruling.

DotNow, a Colorado corporation with its only known office in Des Moines, Iowa, is an Internet service provider. Edgar Andrews is the president of dotNow and a resident of Iowa. In April 2003, after receiving more than 200 complaints from consumers about dotNow and attempting to work with Andrews to resolve the complaints, the Consumer Protection Division of the Attorney General's office began a formal investigation. On April 16, 2003, the Attorney General served dotNow and Andrews with a "Civil Investigative Demand" (CID). The CID sought specific information and requested a response within twenty days.

After several problems in obtaining the sought-after information, the parties agreed to, and the district court entered a "Consent Order," filed October 24, 2003. The order required defendants to deliver, on or before October 31, 2003, certain information about "at least one hundred (100) randomly selected names of persons who are current customers of dotNow.com, Inc. and were customers of dotNow.com, Inc. as of April 1, 2003." The order noted that a failure to comply would give rise to injunctive relief under the Consumer Fraud Act as well as other sanctions, including contempt.

On December 11, 2003 the Attorney General filed a motion for order of contempt, alleging defendants delivered information and materials which failed to comply with the October 24 "Consent Order." Following a hearing on the matter, the district court found defendants in default of obligations to comply with the October 24 "Consent Order" and ordered defendants to appear for a compliance hearing on February 18, 2004. The district court specifically ordered defendants to provide the Attorney General with "a list of at least one hundred (100) randomly selected names of persons who are current customers of dotNow.com, Inc. and were customers . . . as of April 1, 2003."

At the compliance hearing, the district court heard evidence related to a customer list defendants produced to the Attorney General the previous afternoon. Andrews testified he produced for the Attorney General a list of one hundred randomly selected names from a subpool of 5,661 names fitting the required criteria. Prior to the hearing, Andrews, his counsel, and the Attorney General had agreed Andrews would retain the entire pool of 5,661 names on a disk for the court's inspection, if the Attorney General or the court had concerns about randomness or cherry-picking. After Andrews explained to the court he had left a disk containing the list of 5,661 names at home that morning, the court expressed its "concerns about randomness and cherry-picking that could have been alleviated had the entire pool of 5,661 been produced on a disk for the court's inspection, as agreed by counsel, and I guess I'm a little troubled that you would agree to do that and then not do it." The court continued:

The issue of randomness first came up at the contempt hearing in December 2003, during which Andrews admitted he failed to use a randomization function to produce the list of one hundred customers and selected names of Iowans to include on the list.

THE COURT: I want you [Andrews] to have it [the disk] for your attorney, who is going to give it to [the Assistant Attorney General]. . . .

ANDREWS: Yes, sir.

. . . .

THE COURT: And I'm going to let [the Assistant Attorney General] work with the information that he's got to date to do his investigation. And if he feels that that's not sufficient, I'm going to let him follow up with your attorney to try to provide more specific information. But I'm going to deny the Attorney General's request to shut you down today. And the Court's conclusion is, at least as of today, that the defendant is in substantial compliance with the court order, and if the Attorney General wants more, he can ask for it.

After defendants refused to provide the disk to the Attorney General's Office, the Attorney General issued an investigative subpoena to obtain the disk. When defendants failed to comply with the subpoena, the Attorney General filed the application to enforce the subpoena that is the subject of this appeal. At the hearing on the application, defendants expressed concern about the privacy of customers' information and the potential interference with dotNow's relationship with its customers. In addition, defendants argued the Attorney General's effort to obtain the disk was not reasonably related to the need to investigate dotNow.

The district court filed an order enforcing the subpoena on April 14, 2004. The court ordered defendants to comply with the subpoena by delivering the disk to the Attorney General's office "for the Attorney General's subsequent copying, review, and use no later than noon on April 23, 2004." Andrews was ordered to file a sworn affidavit no later than April 30, 2004, attesting to defendants' compliance with the subpoena and the court's order. If defendants failed to comply with the subpoena and the court's order, an injunction would take effect automatically at 4:30 p.m. on April 30.

Defendants did not deliver the disk as ordered. Rather, defendants filed a notice of appeal on April 30, 2004, the day the injunction was to take effect. On appeal, defendants argue (1) the district court lacked jurisdiction to enter the order enforcing the subpoena and (2) the district court's order unlawfully enjoined defendants from operating their business.

The same day, defendants filed a motion to stay the injunction which was later denied by the district court. Neither the propriety nor the merits of that ruling are before us on appeal.

II. Standard of Review

Our review of a proceeding pursuant to Iowa Code section 716.16(6) is for abuse of discretion. State ex rel. Miller v. Publishers Clearing House, Inc., 633 N.W.2d 732, 736 (Iowa 2001). "In exercising such discretion, a court should keep in mind the broad scope of the attorney general's subpoena power under the consumer fraud statute." Id.

III. Jurisdiction

Defendants' jurisdictional argument concerns both personal jurisdiction and subject matter jurisdiction. The State argues defendants failed to preserve error on these issues. We agree that defendants failed to preserve error on the personal jurisdiction issue; therefore, we will not consider it on appeal. Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002); State v. Webb, 516 N.W.2d 824, 828 (Iowa 1994).

Subject matter jurisdiction, however, may be raised at any time. In re Estate of Falck, 672 N.W.2d 785, 789 (Iowa 2003). Subject matter jurisdiction refers to the court's power "to deal with a class of cases to which a particular case belongs." Id. A constitution or legislative enactment confers subject matter jurisdiction on the courts. Id.

The Iowa Consumer Fraud Act directs an application to enforce a subpoena to be filed in district court. See Iowa Code § 716.16(6). Therefore, subject matter jurisdiction clearly resided in the district court. See State ex rel. Miller v. Baxter Chrysler Plymouth, Inc., 456 N.W.2d 371, 378 (Iowa 1990) ("The Iowa District Court being a court of general jurisdiction is clearly empowered to hear cases brought by the attorney general to vindicate the alleged violation [of the Iowa Consumer Fraud Act] which gave rise to the claims in the present case."). DotNow's arguments to the contrary are without merit.

IV. Merits

Defendants initially question the district court's "reasoning for the imposition of the injunction." The Iowa Consumer Fraud Act permits the district court to grant injunctive relief if "a person fails or refuses to . . . obey any subpoena issued by the attorney general. . . ." See Iowa Code § 714.16(6). The district court's order clearly states the court was issuing the injunction pursuant to section 714.16(6). Therefore, to the extent defendants argue the district court was without authority to issue an injunction, such arguments are without merit.

"Agency subpoenas are enforced if they are `(1) within the statutory authority of the agency, (2) reasonably specific, (3) not unduly burdensome and (4) reasonably relevant to the matters under investigation.'" Publishers Clearing House, 633 N.W.2d at 736 (quoting Iowa City Human Rights Comm'n v. Roadway Express, Inc., 397 N.W.2d 508, 510 (Iowa 1986)). Defendants argue on appeal compliance with the subpoena would be unduly burdensome and not reasonably relevant to the matters under investigation. In addition, defendants assert "trade secrets are at issue."

As a preliminary matter, we note that defendants raised only the relevance issue in district court. Therefore, the issues of an undue burden and trade secrets are not preserved for appeal. Meier, 641 N.W.2d at 537.

Defendants argue the State sought the disk in order to "go fishing among the dotNow customers . . . to check randomness." They contend "turning dotNow upside down is unreasonable in any circumstances." The State contends identifying customers who have had contact with an investigated business is a "key feature of a consumer fraud inquiry," and that the randomness of a sampling of customers was an important consideration that could be assured by permitting the Attorney General's office to obtain the disk and run its own randomization program.

Given the broad scope of the attorney general's subpoena power under the consumer fraud statute, we conclude the district court did not abuse its discretion by enforcing the subpoena at issue in this case. The randomness of a sampling of dotNow customers was relevant to the Attorney General's investigation of dotNow. Permitting the Attorney General access to the disk in order to run its own randomization program was a reasonable solution to the impasse between the parties. Moreover, the district court's order requires the Attorney General to maintain the confidentiality of credit card numbers and bank account numbers contained on the disk, thereby addressing defendants' concerns with consumer privacy. We affirm the district court.

AFFIRMED.