Paxton’s Probes in Flux After Texas Court Yanks Powerful Tool

A century-old investigative tool, employed aggressively by Texas Attorney General Ken Paxton (R), was cut by a federal court last week, leaving the state’s top lawyer to rely on a gentler method of compelling information from businesses and organizations.

Texas’s Request to Examine statute is unconstitutional because it requires immediate production of records under the threat of criminal prosecution and forbids the served party from first going to a judge for review, Magistrate Judge Mark Lane of the US District Court for the Western District of Texas ruled. Paxton has used the tool several times in recent years, often in politically-motivated probes.

Although it was an extraordinary decision to cancel Paxton’s sweeping investigative powers, Lane called it “easy” because the lack of pre-compliance review in Texas’s law violates a 2015 Supreme Court decision.

But giving Lane the opportunity to weigh in on the statute at all was the result of Paxton’s decision to push the law’s bounds by forcing it upon a business that operates primarily in another state.

Lane’s ruling came in the case of Spirit AeroSystems Inc., a Kansas-based manufacturer for Boeing 737 jets. The company went to court to fight an examination request Paxton’s office issued in March. Paxton was seeking records to support a private class action in the Southern District of New York by Spirit shareholders who say the company misrepresented the quality of its products.

Gregg Sofer of Husch Blackwell said Paxton may have reached too far in probing Spirit AeroSystems, a non-Texas entity which has a minimal presence in the state with under 100 employees and one small plant.

“When you’re very aggressive in the way you use your powers, you risk this exact kind of thing happening where the court will look at the statute itself over its application,” Sofer said. “That’s generally why people who have these powers don’t use it unreasonably. You risk the entire system they’re under.”

Another Way

Request to Examine is one of two tools Paxton often invokes in his aggressive pursuit of businesses and organizations he suspects may be breaking state laws. The other is Civil Investigative Demand, which remains enforceable after Lane’s ruling because it lets a respondent seek pre-compliance review from a judge before producing the requested documents.

Paxton relied on a Civil Investigative Demand to seek records from PFLAG Inc., a nonprofit that supports LGBTQ+ people and their families. Paxton’s lawyers say they suspect the organization has knowledge of insurance fraud whereby medical professionals purposely mislabel a procedure to skirt Texas’s ban against child gender transition treatments. The organization denies such knowledge.

But the situation with PFLAG shows why Civil Investigative Demand is less advantageous for Paxton. It was challenged in court, and a Texas state court judge blocked the investigation in March. Paxton’s office is appealing.

Bill Mateja of Sheppard Mullin said he closely followed the case in Lane’s courtroom. Mateja said that a Civil Investigative Demand is a sensible approach because it allows for a judge to decide what if any records Paxton should get.

Conversely, the hand-it-over-now edict in a Request to Examine “can be used to beat up on people and businesses that don’t have the sophistication, that don’t have the ability to fight back like Spirit did.”

Mateja, who once defended a company hit with a Request to Examine from Paxton, said he disagrees with what he believes are tactics from Paxton to “browbeat” respondents “into submission.”

“My take is Judge Lane clearly saw through the AG’s leap of faith argument, that if you let us use these draconian requests to examine we pinky promise not to abuse them,” Mateja said.

Mateja, who is friendly with Paxton and represented him against felony state securities fraud charges, added: “Every party that receives a request for documents should have an opportunity to let a judge review whether the request is reasonable. No party should be forced to produce records under penalty of going to jail.”

Pending Requests

Paxton has cited the Request to Examine tool to obtain evidence in a number of politically-driven investigations. Among parties served in recent years are two children’s hospitals he says potentially performed unlawful gender transition procedures.

Paxton also went after three immigration organizations that receive funds from the Texas Bar Foundation Fund. The groups, American Gateways, Tahirih Justice Center, and Equal Justice Center, were targeted over whether they’ve used the funds “to exacerbate the current crisis at the border,” according to a December 2022 press release from Paxton’s office.

But the most notable case involving a Paxton Request to Examine is before the Texas Supreme Court early next year.

Annunciation House Inc., an El Paso nonprofit that operates a migrant shelter, received a request from Paxton’s lawyers in February. The organization was given a day to produce the records. It refused, prompting Paxton to ask a court to strip the nonprofit of its ability to do business in Texas.

Pope Francis called the probe “madness,” in a “60 Minutes” interview. A trial court judge called it “outrageous and intolerable,” and ruled for Annunciation House. Paxton appealed to the Texas Supreme Court, which set oral arguments for January.

“We’re awaiting Judge Lane’s ruling and we will review it to see what it says,” said Annunciation House’s lawyer, Amy Warr of Alexander Dubose Jefferson.

Lane is expected to issue a written ruling in the coming weeks.

The Annunciation House case came up often in Lane’s courtroom last week. Ryan Baasch, a lawyer for Paxton, said the office pushed for the quick production of records over concerns that the nonprofit would destroy evidence.

Baasch conceded that the 100-plus-year-old law being challenged was written for another time. But he said the office has never sought criminal charges against a non-compliant organization and that it didn’t do so here, either. He said Paxton’s lawyers often work with respondents on a reasonable timetable for turning over records and gave Spirit 20 days to comply.

Paxton’s office didn’t respond to a request for comment on whether it will appeal Lane’s ruling or a request for a list of all organizations or businesses it has served with a Request to Examine since 2022.