Opinion ID: 220152
Heading Depth: 3
Heading Rank: 1

Heading: The NYAG Investigation of AHERF

Text: We agree with the district court that the NYAG's subpoena on the AHERF transaction was a Securities Claim. Under New York law, the NYAG may commence an investigation when, in his discretion, he believes it to be in the public interest that an investigation be made. N.Y. Gen. Bus. Law § 352(1). The outward-facing form that investigation takes is the service of a subpoena, which, on its face, commands the production of documents and threatens criminal penalties for noncompliance. See, e.g., People v. Thain, 24 Misc.3d 377, 874 N.Y.S.2d 896, 899 (N.Y.Sup.Ct.2009) (stating that the NYAG may require information pursuant to the investigation and [t]o that end, he is empowered to subpoena witnesses and documents (internal quotation marks omitted)); Sanborn v. Goldstein, 118 N.Y.S.2d 63, 64 (N.Y.Sup.Ct.1952) (stating that the NYAG commenced an investigation pursuant to [the Martin Act] ... by service of a subpoena upon plaintiff); see also N.Y. Gen. Bus. Law § 352(4). Backed by the enforcement authority of the state, the NYAG subpoena is at least a similar document to a formal or informal investigative order that commenced a regulatory proceeding, as stated in the policies. Moreover, we agree with the district court's sensible intuition that a businessperson would view a subpoena as a `formal or informal investigative order' based on the common understanding of these words. MBIA, Inc., 2009 WL 6635307, at  (internal quotation marks omitted). In any event, the subpoena is, at absolute minimum, a similar document to those listed the definition of a Securities Claim because it is similar to other forms of investigative demands made by regulators. See, e.g., ACE Am. Ins. Co. v. Ascend One Corp., 570 F.Supp.2d 789, 796 (D.Md.2008) (subpoenas may constitute insurance claims when issued by a governmental investigative agency). We reject the insurers' crabbed view of the nature of a subpoena as a mere discovery device that is not even similar to an investigative order. The New York case law makes it crystalline that a subpoena is the primary investigative implement in the NYAG's toolshed. We also reject the insurers' argument that because the definition does not include a proceeding commenced by the service of a subpoena, a subpoena is not included. This reading puts form over substance; the fact that the definition does not say service of a subpoena is not dispositive. Because the plain-language understanding of a Securities Claim includes this subpoena, Securities Loss arising from this investigation is covered.