A recent decision by a California court of appeal clarified the breadth of the California Water Resources Control Board’s (Board) subpoena power, which could have implications for other state agencies in California and elsewhere.  Moreover, private entities which are the subject of an administrative investigation may have a difficult time withholding financial records even if those records are not related to the alleged violations, and even if the subpoenaed entity is not directly responsible for any of the alleged violations.

In State Water Resources Control Board v. Baldwin & Sons, Inc. (filed January 16, 2020), the Fourth District Court of Appeal, relying on state and federal supreme court precedent, decided that the Board’s administrative investigation was similar to “a grand jury proceeding” and it could “investigate merely on suspicion that the law is violated, or even just because it wants assurance that it is not.”  (45 Cal. App. 5th 40.)  The court affirmed the trial court’s decision that Baldwin & Sons, Inc. (Baldwin) had to comply with the Board’s subpoena and turn over, among other things, income tax filings, loan agreements, bank and financial statements, and economic reports and sales projections.  Baldwin was not the developer of the project under investigation for alleged violations of state and federal water regulations.  Rather, it was suspected of paying for project-related expenses.

While the court affirmed this broad subpoena power and found that a company’s privacy rights did not negate that power, it also affirmed the right of the subpoenaed party to have a protective order in place that would prevent public disclosure of its sensitive documents.

The Baldwin decision could have implications for administrative agencies in other jurisdictions.  The court relied heavily on a number of U.S. Supreme Court cases.

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