Opinion
Civil Action No. 21-cv-01077-RM
2021-10-28
UNITED STATES of America, Petitioner, v. David ZOOK, Respondent.
Lila Marie Bateman, U.S. Attorney's Office, Denver, CO, for Petitioner. David Zook, Colorado Springs, CO, Pro Se.
Lila Marie Bateman, U.S. Attorney's Office, Denver, CO, for Petitioner.
David Zook, Colorado Springs, CO, Pro Se.
ORDER ON PETITION
RAYMOND P. MOORE, United States District Judge
This matter is before the Court on the Petition for Order Enforcing Toxic Substances Control Act Subpoena ("Petition") (ECF No. 1) of Petitioner United States, acting on behalf of the Regional Administrator for the United States Environmental Protection Agency ("the EPA") and Respondent David Zook's Motion to Quash (ECF No. 11). The Petition is fully briefed by the EPA and Respondent Zook. Upon consideration of the Petition and the applicable rules and case law, and being otherwise fully advised, the Court finds and orders as follows.
I. BACKGROUND
At issue here is the EPA's petition for this Court to issue an order directing Respondent Zook to comply with the EPA's administrative subpoena seeking information regarding his compliance with the Disclosure of Known Lead-Based Paint and/or Lead-Based Hazards Upon Sale or Lease of Residential Property, (the "Lead Disclosure Rule"), a provision of the Toxic Substances Control Act, 15 U.S.C. §§ 2601 - 2697 ; 42 U.S.C. § 4852d.
In December of 2019 the EPA received a complaint from a former tenant of a multi-unit rental property, built in 1891, and located at 806 E. Boulder Street in Colorado Springs, Colorado, (the "Boulder Street Property"), indicating that the property was in disrepair and specifically that the exterior paint was chipping off the building and falling to the ground. According to property and business records obtained by the EPA, Respondent Zook had formed an LLC to which he had transferred ownership of the Boulder Street Property. The EPA therefore mailed an Information Request Letter to Respondent Zook in his capacity as the Landlord and owner of the Boulder Street Property. Respondent Zook did not respond to the EPA's letter. In February of 2020, the EPA corresponded with Respondent Zook by email, at which time he questioned the EPA's authority to make such a request for information.
The name of Respondent Zook's original LLC was Boulder Mansion LLC. However, after repeated attempts to serve Boulder Mansion LLC with this Court's Order to Show Cause, the EPA discovered that "Articles of Dissolution of Limited Liability Company" had been filed with the Colorado Secretary of State, dissolving Boulder Mansion LLC. The day after Boulder Mansion LLC was dissolved, ownership of the Boulder Street Property was transferred by quitclaim deed to a newly formed entity, 806 Building LLC. The EPA therefore voluntarily dismissed Boulder Mansion LLC from this case. Respondent Zook filed his Response to this Court's Order to Show Cause after Boulder Mansion LLC had been dismissed from the case but has never asserted that he is not still the Lessor of the Boulder Street Property. The Court also takes judicial notice of the fact that Colorado Secretary of State's record reflects that 806 Building LLC has the same principal office mailing address as that used by Respondent Zook in his filing in this Court. See Tal v. Hogan , 453 F.3d 1244, 1264 n.24 (10th Cir. 2006) (noting that a court may take judicial notice of facts which are a matter of public record).
The EPA responded to Respondent Zook with citations to its statutory and regulatory authority to request such information and granted him an extension of time to respond to the request for information until late March 2020. Respondent Zook responded again by questioning the EPA's authority to make such a request. The EPA again responded with citations to authority and provided Respondent Zook with an additional extension of time to respond until mid-April. Respondent Zook failed to respond to the communications from the EPA or to provide the requested information.
At that point, on May 27, 2020, the EPA issued a subpoena pursuant to the Toxic Substances Control Act, served by certified mail, requiring Respondent Zook to submit the requested documents within 30 days of receipt of the subpoena. On July 8, 2020, the EPA sent a copy of the subpoena to Respondent Zook via email. Respondent Zook again declined to provide the requested information, responding only that the EPA should provide the "proper predicate for [this] use of government resources." The EPA again sent Respondent Zook information regarding the Lead Disclosure Rule and its regulatory requirements. Having again received no response from Respondent Zook, the Department of Justice made an attempt to contact him in September of 2020 to inquire about the status of his subpoena response.
Having received no response from Respondent Zook to its repeated requests, the EPA filed this petition for an order enforcing the subpoena in April of 2021. This Court issued an Order to Show Cause why Respondent Zook should not be compelled to comply with the EPA's subpoena. (ECF No. 6.) Respondent Zook filed a Response to Order to Show Cause and Motion to Quash Subpoena pro se. (ECF No. 11.)
II. DISCUSSION
A. The Petition
In its Petition, the EPA argues the subpoenas should be judicially enforced under the standards set forth in United States v. Morton Salt Co. , 338 U.S. 632, 70 S.Ct. 357, 94 L.Ed. 401 (1950) and McLane v. EEOC , ––– U.S. ––––, 137 S.Ct. 1159, 197 L.Ed.2d 500 (2017). Under Morton Salt an administrative subpoena "is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant." 338 U.S. at 652, 70 S.Ct. 357 ; see also Donovan v. Lone Steer, Inc. , 464 U.S. 408, 415, 104 S.Ct. 769, 78 L.Ed.2d 567 (1984), (noting that the "constitutional requirements for administrative subpoenas" are " ‘that the subpoena be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome’ ") (quoting See v. City of Seattle , 387 U.S. 541, 544, 87 S.Ct. 1737, 18 L.Ed.2d 943 (1967) ); Becker v. Kroll , 494 F.3d 904, 916 (10th Cir. 2007) (stating that "[t]he Fourth Amendment requires only that an [administrative] subpoena" meets these standards, citing City of Seattle ).
In response, Respondent Zook asserts that the EPA "has here embarked upon a colossal, wasteful and misguided abuse of power." Specifically, Respondent Zook argues that (1) the EPA lacks reasonable suspicion that he violated the Lead Disclosure rule because it began its inquiry as a result of false information provided by an angry former tenant who, he claims, made an unreliable complaint; (2) the EPA lacks the power to issue a subpoena specifically pursuant to the Toxic Substances Control Act; (3) the subpoena fails to meet the Morton Salt requirements because it is not reasonably relevant, too indefinite, and unduly burdensome; and (4) that the subpoena violates his rights under the Fifth Amendment because the EPA is threatening to impose civil penalties for failure to comply. Respondent Zook also requests an award of his attorney fees.
B. Reasonable Basis
Respondent Zook's first argument is that the anonymous complaint filed with the EPA could not give rise to "even a reasonable suspicion that any requirement of [the Toxic Substances Control Act], Lead Disclosure Rule, was being violated." He contends that the unit occupied by the person he believes to have filed the complaint was an efficiency, and thus a 0-bedroom dwelling which is not subject to the Lead Disclosure Rule. See 15 U.S.C. § 2681 (defining "Target housing" that is subject to the Lead Disclosure Rule); 40 C.F.R. § 745.103 (same). He also asserts that chipped paint is not addressed by the Lead Disclosure Rule.
Although Respondent Zook asserts that he knows the identity of the person who filed the complaint, there is no evidence in the record before the Court to support his conclusion and the EPA has not confirmed or denied his belief. Ultimately, however, the Court concludes that the identity of the person who filed the complaint is irrelevant because the inquiry was authorized for the reasons set forth in this order.
As an initial matter, the Court notes that Respondent Zook is incorrect that the Lead Disclosure Rule does not address chipped paint. In fact, the Toxic Substances Control Act specifically defines "Lead-based paint hazard" to include "lead contaminated paint that is deteriorated," and "Deteriorated paint" to include "any interior or exterior paint that is peeling, chipping, chalking or cracking or any paint located on an interior or exterior surface or fixture that is damaged or deteriorated." 15 U.S.C. §§ 2681(3), (10).
In any event, Respondent Zook misapprehends what is required to support the issuance of an administrative subpoena. The Supreme Court long ago concluded that, if Congress so authorizes, an administrative agency can use its subpoena power in order to determine the extent to which a regulation applies in a given case. Oklahoma Press Pub. Co. v. Walling , 327 U.S. 186, 214, 66 S.Ct. 494, 90 L.Ed. 614 (1946) ; see also E.E.O.C. v. Peat, Marwick, Mitchell and Co. , 775 F.2d 928, 930 (8th Cir. 1985) (noting that "[t]he authority to investigate violations includes the authority to investigate coverage under the statute"). "It is enough that the investigation be for a lawfully authorized purpose, within the power of Congress to command.... [A]nd the documents sought are relevant to the inquiry." Oklahoma Press Pub. , 327 U.S. at 209, 66 S.Ct. 494. Congress can authorize an agency, such as the EPA, to investigate "merely on suspicion that the law is being violated, or even just because it wants assurance that it is not." Morton Salt Co. , 338 U.S. at 642-43, 70 S.Ct. 357.
Thus, as long as it is lawfully authorized by Congress, and the information sought is relevant to that legitimate investigation, the EPA is authorized to issue a subpoena even without meeting a particular threshold of suspicion. The fact, therefore, that the person Respondent Zook believes to have complained might have lived in a unit not covered by the Lead Disclosure Rule is not dispositive here. The Toxic Substances Control Act specifically defines "Target housing," for the purposes of the Lead Disclosure Rule, as "any housing constructed prior to 1978, except housing for the elderly or persons with disabilities or any 0-bedroom dwelling (unless any child who is less than 6 years of age resides or is expected to reside in such housing)." 15 U.S.C. § 2681. Respondent Zook does not dispute that his multi-unit building was constructed in 1891 and, thus, falls within the definition of "target housing." Nor does he assert that every unit in that building is a 0-bedroom dwelling. Thus, as long as its subpoena's inquiry "is within the authority of the agency, the demand is not to indefinite and the information sought is reasonably relevant," Morton Salt Co. , 338 U.S. at 652, 70 S.Ct. 357, the EPA is entitled to investigate whether the Lead Disclosure Rule applies to Respondent Zook's property or properties.
C. Subpoena Power under the Toxic Substances Control Act
As noted above, in order to issue an investigative subpoena, a federal agency must do so pursuant to the authority granted to it by Congress. Id. Respondent Zook asserts that the Toxic Substances Control Act does not authorize the EPA to issue any sort of subpoena. Respondent Zook is simply mistaken. Under the Toxic Substances Control Act, Congress has specifically stated that,
In carrying out this chapter [the Toxic Substances Control Act], the Administrator may by subpoena require the attendance and testimony of witnesses and the production of reports, papers, documents, answers to questions, and other information that the Administrator deems necessary.... In the event of contumacy, failure, or refusal of any person to obey any such subpoena, any district court of the United States in which venue is proper shall have jurisdiction to order any such person to comply with such subpoena.
15 U.S.C. § 2610. Thus, under the Toxic Substances Control Act, Congress has expressly granted the power to the EPA to issue subpoenas in order to carry out its mandate "to regulate chemical substances and mixtures which present an unreasonable risk of injury to health or the environment and to take action with respect to chemical substances and mixtures which are imminent hazards." 15 U.S.C. § 2601 ; see also 15 U.S.C. § 2602(1) (defining the term "Administrator" as "the Administrator of the Environmental Protection Agency").
D. Morton Salt Co. Requirements
Respondent Zook argues that the EPA subpoena in this case does not meet any of the Morton Salt Co. requirements and is "manifestly unreasonable." The Court will look at each of the Morton Salt Co. requirements in turn.
1. Reasonably Relevant
In Morton Salt Co. , the Supreme Court concluded that, in order to be proper, an administrative subpoena must be reasonably relevant to a legitimate area of inquiry. 338 U.S. at 652, 70 S.Ct. 357 ; see also In re Gimbel , 77 F.3d 593, 599 (2d Cir. 1996) (noting that agencies, "when authorized by Congress, may utilize their subpoena power to obtain information that is relevant to a legitimate area of inquiry").
In this case, the Court has already concluded that the EPA could legitimately inquire into Respondent Zook's compliance with the Lead Disclosure Rule pursuant to authority granted to it by Congress in the Toxic Substances Control Act. The question, then, is whether the information requested in the subpoena is sufficiently relevant to that area of legitimate inquiry. Courts have held that they must generally defer to an agency's own appraisal of relevance, so long as it is not "obviously wrong." F.T.C. v. Carter , 636 F.2d 781, 788 (D.C. Cir. 1980) ; Resol. Tr. Corp. v. Greif , 906 F. Supp. 1457, 1464 (D. Kan. 1995) ; see also Phillips Petroleum Co. v. Lujan , 951 F.2d 257, 259 (10th Cir. 1991) (noting "the substantial deference [courts] afford to the actions of administrative agencies in compliance with their statutory enforcement obligations. Indeed, unless the agency's order can be considered ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,’ [courts] cannot set it aside" (quoting 5 U.S.C. § 706(2)(A) ).
Respondent Zook does not articulate any support for his contention that the requests in the subpoena are not reasonably relevant to the EPA's inquiry regarding his compliance with the Lead Disclosure Rule. Nevertheless, as ordered by the Court, the EPA filed a copy of the subpoena (ECF No. 8) in response to the Order to Show Cause and the Court has reviewed it. The Court now concludes that the information requested is reasonably relevant to the legitimate inquiry of the EPA. Among other things, the subpoena requests (1) a list of all residential real properties owned, sold, or leased by Respondent Zook since May 1, 2017; (2) copies of any leases or rental agreements as well as any lead disclosures for all transactions involving the Boulder Street Property since May 1, 2017; (3) the same information for 10% of the transactions involving other target housing to which Respondent Zook has been a party since May 1, 2017; (4) information regarding the occupants of any of the above-mentioned properties; and (5) any information pertaining to the presence or absence of lead-based paint or lead-based paint hazards in the above-mentioned properties. All of this information is clearly relevant to the EPA's inquiry as to whether or not Respondent Zook's properties are subject to the Lead Disclosure Rule, and, if they are, whether he has complied with the Rule's requirements. Therefore, the Court concludes that the information requested in the subpoena meets the requirement of reasonable relevancy.
2. Sufficiently Definite
Morton Salt Co. cautions that an administrative subpoena cannot be "too indefinite" if it is to fall within the legitimate authority of the issuing agency. Respondent Zook does not offer much to support his contention that the subpoena fails to meet this requirement, other than to object that it requests information about not only the Boulder Street Property, but also any other properties he owns. He concludes that this is inappropriate because it reflects an investigation not directed at a particular property, but rather at him personally, as an individual. The Court disagrees.
The Supreme Court has upheld administrative subpoenas directed against individuals, just as it has those directed against corporate entities. See, e.g. , Fisher v. United States , 425 U.S. 391, 414, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976) (upholding IRS subpoenas for certain tax preparation documents related to personal returns); Shapiro v. United States , 335 U.S. 1, 4, 33-36, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948) (upholding subpoena from the Price Administrator seeking the sales and inventory records belonging to an individual wholesaler of produce). Thus, Respondent Zook's argument on that account is unsuccessful. Furthermore, the Court notes that it is his compliance with the Lead Disclosure Rule that the EPA seeks to verify—if Respondent Zook owns more than one property that may be covered by the rule, the EPA does not overreach by inquiring about all such properties.
The Court also notes that other courts have previously enforced virtually identical subpoenas in other cases. See United States v. Andersen , 109 F.Supp.3d 1049, 1053 (N.D. Ind. 2014) ; United States v. Silverwood Realtors , No. 99 C 6625, 2000 WL 631373, at *5 (N.D. Ill. May 15, 2000). As the Court noted in Andersen , lessors are required, pursuant to the Lead Disclosure Rule, to keep for three years the precise records requested by the subpoena. Andersen , 109 F.Supp.3d at 1052-53 ; see also 40 C.F.R. § 745.113. The Court agrees with those jurisdictions that for all of these reasons, the request is sufficiently definite.
3. Not Unduly Burdensome
The Court notes, "The burden of showing that the request is unreasonable is on the subpoenaed party ... (and) is not easily met where ... the agency inquiry is pursuant to a lawful purpose and the requested documents are relevant to that purpose." Dow Chemical Co. v. Allen , 672 F.2d 1262, 1267 (7th Cir. 1982) (quoting F.T.C. v. Texaco , 555 F.2d 862, 882 (D.C. Cir. 1977), alterations original). Respondent Zook has failed to carry that burden here.
"Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest." Texaco , 555 F.2d at 882. "Broadness alone is not sufficient justification to refuse enforcement of a subpoena. Thus courts have refused to modify investigative subpoenas unless compliance threatens to unduly disrupt or seriously hinder normal operations of business." Id. ; see also E.E.O.C. v. Sears, Roebuck & Co. , No. 10-cv-00288-WDM-KMT, 2010 WL 2692169, at *5 (D. Colo. June 8, 2010) (noting that compliance with a subpoena may be excused if such compliance will threaten to unduly disrupt or seriously hinder normal operations of the business or if the cost of gathering the requested information would be unduly burdensome in light of the company's normal operating costs).
Respondent Zook has made no showing that responding to this subpoena would unduly disrupt or hinder his business. He simply states, without evidentiary support, that a subpoena like this one can cause "untold inconvenience, anxiety and expense." Such a conclusory statement does not meet his burden. Therefore, the Court cannot conclude that the EPA's subpoena was unduly burdensome in this case.
E. Fifth Amendment Privilege
Respondent Zook asserts that the subpoena violates his right under the Fifth Amendment not to be compelled to incriminate himself. The Supreme Court, however, adopted the "required records" doctrine as an exception to the Fifth Amendment in cases just like this one. See Grosso v. United States , 390 U.S. 62, 67-68, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968) ; Shapiro v. United States , 335 U.S. 1, 32-35, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948). Pursuant to the required records doctrine, "the privilege which exists as to private papers cannot be maintained in relation to ‘records required by law to be kept in order that there may be suitable information of transactions which are appropriate subjects of governmental regulation, and the enforcement of restrictions validly established.’ " Shapiro , 335 U.S. at 33, 68 S.Ct. 1375 (quoting Davis v. United States , 328 U.S. 582, 589, 66 S.Ct. 1256, 90 L.Ed. 1453 (1946) ). Phrased another way, the required records doctrine applies when three conditions are satisfied:
First, the purposes of the United States’ inquiry must be essentially regulatory; second, information is to be obtained by requiring the preservation of records of
a kind which the regulated party has customarily kept; and third, the records themselves must have assumed ‘public aspects’ which render them at least analogous to public documents.
Grosso , 390 U.S. at 67-68, 88 S.Ct. 709. In this case, the documents requested meet all three of these prongs.
First, the EPA, in seeking the information from Respondent Zook, is attempting to enforce the regulatory scheme created by Congress in the Toxic Substances Control Act and, more specifically, the Lead Disclosure Rule. If an individual could refuse to comply with a request for information by invoking the privilege, the regulatory purpose of the statute would be frustrated. See In re Grand Jury Subpoena , 21 F.3d 226, 230 (8th Cir. 1994) (concluding that a proprietor of a car dealership could be compelled to disclose certain records relating to odometer readings as part of an investigation of a possible criminal violation of federal odometer tampering laws because, in part, to permit him to invoke the Fifth Amendment would frustrate the regulatory scheme involved).
Second, the lease agreements and other documentation requested in the subpoena is also the sort of information regularly kept by lessors for business purposes, even independent of this regulatory scheme.
And third, with regard to the "public aspect" prong, the Court notes that "records required to be created under an otherwise valid regulatory regime necessarily have ‘public aspects’ for purposes of the required records exception to the Fifth Amendment production privilege." In re Grand Jury Subpoena Dated Feb. 2, 2012 , 741 F.3d 339, 351 (2d Cir. 2013) (alterations original); see also United States v. Matkari , No. CV-18-MC-00051-MSK-KLM, 2019 WL 1253684, at *9 (D. Colo. Mar. 19, 2019) (same). In essence, by engaging in the regulated activity of leasing apartments, Respondent Zook "is deemed to have waived his privilege as to the production of those records which are required to be kept." In re Grand Jury Subpoena , 21 F.3d at 230.
Finally, "[t]he possibility that a production order will compel testimonial assertions that may prove incriminating does not, in all contexts, justify invoking the privilege to resist production." Baltimore City Dept. of Soc. Servs. v. Bouknight , 493 U.S. 549, 555, 110 S.Ct. 900, 107 L.Ed.2d 992 (1990). "[T]he Fifth Amendment privilege may not be invoked to resist compliance with a regulatory regime constructed to effect the State's public purposes unrelated to the enforcement of its criminal laws." Id. at 556, 110 S.Ct. 900. Thus, where a civil regulatory requirement is generally applicable to the public at large, and where it does not require the disclosure of "inherently illegal activity," a person can be compelled to make a disclosure even though, in some cases such a disclosure would "compel incriminating testimony." Id. at 557-58, 110 S.Ct. 900.
For all of these reasons, the Court concludes that Respondent Zook cannot invoke his Fifth Amendment privilege in order to refuse to produce the documents requested in the EPA's subpoena.
F. Attorney Fees
Respondent Zook asserts that he is entitled to attorney fees pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412. The Court agrees with the EPA, that Respondent Zook is not the prevailing party in this action, id. at (a)(1), and, in any event, he is not entitled to fees because he is a pro se party, Demarest v. Manspeaker , 948 F.2d 655, 655 (10th Cir. 1991). Therefore, his request for attorney fees is denied.
III. CONCLUSION
In summary, the subpoena was issued pursuant to a reasonable basis, it was within the EPA's authority under the Toxic Substances Control Act, it met the requirements for enforceability under Morton Salt Co. , and Respondent Zook cannot invoke his Fifth Amendment privilege in order to avoid complying with the subpoena. Accordingly, based on the foregoing, it is ORDERED
(1) That Petition for Order Enforcing Toxic Substances Control Act Subpoena (ECF No. 1) is GRANTED and Respondent Zook, shall produce all requested information on or before November 29, 2021;
(2) That Respondent Zook's Motion to Quash Subpoena and accompanying request for attorney fees (ECF No. 11) is DENIED; and
(3) That the Clerk shall close this case.