Court Opinion

ID: 9338835
Source: CourtListenerOpinion
Date Created: 2022-12-16 15:03:56.343531+00
Date Added: 2024-06-11T17:15:16.387039
License: Public Domain

RENDERED: DECEMBER 9, 2022; 10:00 A.M.
                       NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2022-CA-0028-MR

COMMONWEALTH OF KENTUCKY,
EX REL. ATTORNEY GENERAL
DANIEL CAMERON, IN HIS
OFFICIAL CAPACITY AS
ATTORNEY GENERAL OF KENTUCKY                                        APPELLANT

                APPEAL FROM FAYETTE CIRCUIT COURT
v.             HONORABLE KIMBERLY N. BUNNELL, JUDGE
                       ACTION NO. 20-CI-01252

JONES & PANDA, LLC                                                    APPELLEE

                                OPINION
                        VACATING AND REMANDING

                                  ** ** ** ** **

BEFORE: CALDWELL, CETRULO, AND COMBS, JUDGES.

CETRULO, JUDGE: The Kentucky Attorney General, Daniel Cameron (the

“Attorney General”), appeals a Fayette Circuit Court order granting a petition to

set aside a criminal investigative demand (“CID”). Finding the circuit court failed
to conduct an evidentiary hearing to evaluate the justification for the issuance of

the CID, we vacate and remand.

                 I.      FACTS AND PROCEDURAL BACKGROUND

               In March 2020, Governor Andy Beshear declared a state of

emergency due to the COVID-19 pandemic. This declaration, in part, initiated the

Commonwealth’s price control laws preventing the sale of certain items1 for a

price “grossly in excess of the price prior to the declaration and unrelated to any

increased cost to the seller.” Kentucky Revised Statute (“KRS”) 367.374(1)(b).

               The Attorney General, in his official capacity, received information

from Amazon that third-party sellers were allegedly participating in price gouging

through its website. As a result of this information, the Attorney General issued a

CID instructing Appellee Jones & Panda, LLC (“Jones & Panda”) to “furnish

information relating to hand sanitizers and respirators it sold on Amazon.” Jones

& Panda did not furnish the information, but instead filed a petition in Fayette

Circuit Court to set aside or modify the CID. In their petition, as amended, Jones

& Panda challenged the constitutionality of Kentucky’s price control laws and

argued that the Attorney General had not shown a reasonable justification for the

1
  Items included consumer food items; goods or services used for emergency cleanup;
emergency supplies; medical supplies; home heating oil; building materials; housing,
transportation, freight, and storage services; gasoline and other motor fuels; and direct care staff
services provided by a health care services agency. KRS 367.374(1)(b)1.-10.

                                                 -2-
CID. The Attorney General responded and filed an emergency motion to enforce

the CID. In May 2020, the parties appeared via Zoom in Fayette Circuit Court.

The judge assigned to the matter was unavailable and another judge presided (the

“First Judge”).

                 At that hearing, Jones & Panda argued the CID was “arbitrary and

unreasonable” because the Attorney General did not provide documentation to the

court to support the issuance of the CID. The Attorney General stated that, on its

face, the CID did not have to include details from the Amazon report, but that the

Attorney General would provide the Amazon documentation to the court for an in-

camera review. The Attorney General argued that he did not wish to make the

documentation part of the record at that time because it was “evidence of an on-

going investigation.” The Attorney General argued that “as a general rule,” he did

not “provide information gathered in the investigation when it’s in the investigative

state.”

                 At the hearing, the First Judge stated that the record did not contain

sufficient information to support the CID; therefore, she was denying the Attorney

General’s emergency motion.2 The First Judge did not review the supporting

documentation in-camera nor schedule an evidentiary hearing on the issue. In fact,

the First Judge did not rule on the petition to set aside or modify the CID, nor did

2
    The court also granted the motion for leave to file a first amended complaint.

                                                  -3-
she address the constitutional arguments,3 stating that the original judge assigned to

the matter would address the remaining open matters. When counsel for the

Attorney General asked the court if the written order would address the Attorney

General’s ability to supplement the record on pending issues, the First Judge

stated, “I’m not aware of anything that would give you one shot and you’re out.”

However, the subsequent written order did not address the Attorney General’s

ability to supplement the record, but simply expressed the court’s reasoning for

denying the motion to enforce, as follows:

              On review of the Attorney General’s Emergency Motion,
              this Court must examine the documentation and facts
              underlying the decision to issue the CID. . . . Although
              the Attorney General states he received “detailed
              information” from Amazon, the motion does not detail
              the substance of the information or attach copies of the
              documentation received from Amazon. The motion does
              not even expressly state that Jones & Panda sold hand
              sanitizer and respirators for above-market prices,
              although it is suggested by the motion. . . . The Attorney
              General has failed to meet his burden to establish a
              reasonable justification for issuance of the [CID].

              Before the Fayette Circuit Court ruled on the petition to set aside the

CID, the Attorney General filed a motion for an in-camera review. Jones & Panda

3
  Jones & Panda challenged the constitutionality of Kentucky’s price-control laws on the grounds
they violate the dormant commerce clause, the First Amendment, and the equal protection
clause.

                                              -4-
responded, but a parallel case in Federal Court paused the action.4 The matter

resumed in Fayette Circuit Court in October 2021 in front of the judge originally

assigned to the matter (the “Second Judge”). At this hearing (the “October 2021

Hearing”), the Attorney General again requested an in-camera review of the

Amazon documentation by the court before there was a determination on the

petition.

               At the beginning of the hearing, the Second Judge stated that this

motion appeared to be a “second bite at the apple.” Again, the Attorney General

argued that the court would understand the reasonable justification for the CID

after an in-camera review of the supporting material. Adversely, Jones & Panda

argued that the CID request was too broad and unjustified. During the hearing, the

Second Judge asked questions about the data contained in the Amazon

documentation, but did not review the material in-camera nor schedule an

evidentiary hearing to determine if an in-camera review would be appropriate.

Instead, the Second Judge noted her role was not to be an appellate judge for the

First Judge. At the conclusion of that hearing, the Second Judge denied the motion

for an in-camera review and granted the petition to set aside the CID. The

subsequent written order succinctly reiterated the court’s oral decision.

4
 A federal district court entered a preliminary injunction preventing the Attorney General from
enforcing Kentucky’s price-control laws. Later, the Sixth Circuit lifted that injunction. Online
Merchants Guild v. Cameron, 995 F.3d 540 (6th Cir. 2021).

                                               -5-
              Shortly thereafter, the Attorney General filed a motion pursuant to

Kentucky Rule of Civil Procedure (“CR”) 59.05 to alter, amend, or vacate the

order setting aside the CID, arguing the order should be vacated “because it was

based on a mistake of fact and law, namely an erroneous recollection and

interpretation of an earlier order in the case issued by a different presiding judge.”

After a hearing on the motion, the Second Judge denied the CR 59.05 motion. The

Attorney General then appealed the order granting the petition to set aside the CID.

                                      II.    ANALYSIS

              On appeal, the Attorney General argues that the circuit court erred

when it set aside the CID because 1) the court created an unjustifiable,

unprecedented rule giving the Attorney General only one chance to enforce a CID,

and 2) the Second Judge misunderstood the First Judge’s intention. Jones & Panda

argues that the circuit court properly granted the petition to set aside the CID and

challenges the preservation of the Attorney General’s statutory argument under

KRS 367.250.5 This matter involves questions of law, including statutory

interpretation; therefore, our review is de novo. Wheeler & Clevenger Oil Co., Inc.

v. Washburn, 127 S.W.3d 609, 612 (Ky. 2004).

5
  We find this preservation argument lacks merit. True, the Attorney General did not name KRS
367.250 specifically during the October 2021 hearing, but the Attorney General did refer to
statutes requiring confidentiality, thus preserving the argument sufficiently for this appeal.

                                             -6-
                The Kentucky Consumer Protection Act (“KCPA”)6 protects

Kentuckians from unfair (“unconscionable”), false, misleading, or deceptive acts

or practices in the conduct of any trade or commerce. KRS 367.170. Additionally,

the KCPA protects from unreasonable investigations taken pursuant to the Act.

KRS 367.260. When the Attorney General has reason to believe that a person has

engaged in an unlawful act, or when he believes it to be in the public interest that

he investigate whether a person engaged in an unlawful act, the Attorney General

may execute a CID (or subpoena)7 requiring the production of relevant

documentary material. KRS 367.240(1). If any person fails to obey a CID, the

Attorney General may seek relief in circuit court. KRS 367.290. The Attorney

General is not required to detail the reason or grounds for its issuance on the face

of the CID. Commonwealth ex rel. Hancock v. Pineur, 533 S.W.2d 527, 529-30

(Ky. 1976). However, the CID must be supported by a reasonable justification. Id.

at 530. Further, judicial review protects against mistaken or arbitrary orders. Id. at

529.

                If a CID recipient challenges the CID, that entity may file a petition to

modify or set aside the demand in circuit court. KRS 367.240(2). It is the circuit

6
    KRS 367.110 to 367.360.
7
 For purposes of this analysis, CIDs and subpoenas are treated consistently. See KRS 367.250,
367.280, and 367.290.

                                             -7-
court’s duty “to examine the documentation and facts upon which the Attorney

General based his decision to issue the demand.” Ward v. Commonwealth ex rel.

Stephens, 566 S.W.2d 426, 429 (Ky. App. 1978). Here, that examination never

took place. Both parties made arguments as to the validity of the CID itself at the

October 2021 Hearing, but that is where the conversation stopped. While it

appears there may have been a misunderstanding between the two presiding

judges, the end result was the same: neither the First Judge nor the Second Judge

examined the documentation upon which the Attorney General based the CID nor

held an evidentiary hearing dedicated to whether an in-camera review would be

appropriate.

               While the issuance of the CID is an element of the investigative phase

(not the discovery phase), legal checks and balances must still be respected. The

Attorney General is required to keep subpoenas confidential and may make them

public only to “the extent necessary for law enforcement purposes in the public

interest.” KRS 367.250. Kentuckians are protected from arbitrary action at the

hands of a governmental agency because “once [a CID recipient] makes a prima

facie showing of facts entitling him to relief[,] the [governmental] agency has the

onus of coming forward with a showing of reasonable justification, else it runs the

risk of an adverse judgment.” Pineur, 533 S.W.2d at 530. However, “[n]owhere

in the statute is there a standard for determining what facts satisfy the conditions

                                          -8-
precedent to the issuance of an investigative demand.” Ward, 566 S.W.2d at 428.

To determine this, the trial court must “look behind the demand.” Id. In fact, “it is

the duty of the court to examine the documentation and facts upon which the

Attorney General based his decision to issue the demand.” Id. at 429 (emphasis

added).

             Kentucky caselaw on CIDs is limited, but consistent. In every case, a

determination of the CID’s validity has been the result of a review of the

information supporting its issuance. In Pineur, the circuit court reviewed the

information supporting the investigative demand – 38 customer complaint letters,

affidavits of numerous dissatisfied customers, and the affidavit of one former

salesman – to determine if it was sufficient to warrant a very broad request for

information. Pineur, 533 S.W.2d at 527. In Ward, the circuit court reviewed the

supporting documentation, which included an attorney’s affidavit explaining the

basis for the issuance. Ward, 566 S.W.2d at 426. In this case, there was no such

review conducted. In Pineur, the Court specifically held that there was no

statutory or constitutional requirement that the CID recite on its face the reason for

its issuance. Pineur, 533 S.W.2d at 528.

             Additionally, although Lassiter v. Landrum, 610 S.W.3d 242 (Ky.

2020), discussed the Secretary of the Finance and Administration Cabinet’s ability

to issue subpoenas, we find the holding persuasive and relevant. “[T]he judiciary

                                         -9-
provides a solid backstop for any potential overreaches by . . . [an] agent of the

government in issuing [subpoenas.]” Id. at 252. In Lassiter, the Kentucky

Supreme Court reiterated that the circuit court should assess the validity of a

subpoena. Id. (“After review of the subpoena issued in this case, it appears to have

satisfied the foregoing standard. However, we leave that determination to the

sound discretion of the trial court on remand.”). And, it should be left to the sound

discretion of the trial court to assess whether “the inquiry is within the authority of

the agency, the demand is not too indefinite and the information sought is

reasonably relevant.” Id.

             Therefore, whether the Amazon documentation should be reviewed

in-camera is a question for the trial court. Whether or not the scope of the CID is

reasonable (or too broad) is a question for the trial court. Pineur, 533 S.W.2d

at 530. Whether additional evidence beyond the Amazon documentation is

required to support the CID is a question for the trial court. Ward, 566 S.W.2d

at 428. The trial court simply failed to answer these questions; therefore, we

remand.

                                 III.   CONCLUSION

             Accordingly, we VACATE the order granting the motion to set aside

the CID. We REMAND with instructions for the Fayette Circuit Court to hold an

                                         -10-
evidentiary hearing to determine if the CID was properly supported and to conduct

an in-camera review, if necessary, to accomplish this task.

            ALL CONCUR.

BRIEFS AND ORAL ARGUMENT                  BRIEF AND ORAL ARGUMENT
FOR APPELLANT:                            FOR APPELLEE:

Matthew F. Kuhn                           Mason Moore Kessinger
Michael R. Wajda                          Lexington, Kentucky
Philip R. Heleringer
Matthew Cocanougher
Assistant Attorneys General
Frankfort, Kentucky

                                       -11-