NC TikTok Order Holds Lessons on Handling State AG Probes
Published in Law360 on January 29, 2024. © Copyright 2024, Portfolio Media, Inc., publisher of Law360. Reprinted here with permission.
Companies facing state attorney general investigations beware: State attorneys general have broad powers to obtain information through civil investigation demands, and often times resistance to those efforts results in negative consequences.
TikTok Inc. recently learned this lesson after a North Carolina state appeals court on Jan. 5 ordered TikTok to turn over detailed information relating to 98,000 recorded Zoom meetings — leaving the threat of having to produce many of those recordings in the future hanging over the company's head.
This offers several lessons on why successful civil litigation strategies may have the opposite effect in the state or regulatory investigation context.
While the breadth of what TikTok was ordered to produce has some shock value, the investigatory background provides context that makes the ruling less surprising.
Since March 2022, TikTok has faced a 47-state investigation from a bipartisan group of state attorneys general regarding its alleged practice of inducing children to use its social media platform, resulting in harm to minors.
Over a year into that investigation, the North Carolina Attorney General Joshua Stein became aware that TikTok records its internal Zoom meetings and maintains an undisclosed secret archive of those recordings.
According to the state's briefing, some of those recordings showed that TikTok "executives are fully aware of the many harms their product causes to minors, that they have been warned that their publicly touted plans to reduce those harms are ineffective, and that TikTok puts its profits over minors' health."
Over the summer and fall of 2023, Stein had multiple meet-and-confers with TikTok about searching its archive for responsive videos. According to the state's briefing, TikTok was slow to engage on the issue, refused to conduct any meaningful search of the archive, and rejected the state's proposals for making a targeted search of the archive.
Given this alleged lack of cooperation, the attorney general turned to civil investigation demands to get what the state wanted. When TikTok failed to comply with the civil investigation demand — missing both the original and extended deadline to comply — the attorney general went to court to enforce compliance and, unsurprisingly, received a warm reception.
TikTok argued that being forced to surrender detailed information regarding almost 100,000 recorded meetings — regardless of whether such meetings related to the complained of conduct — violates its Fourth Amendment right against an unreasonable search and seizure.
The state countered that the parties have a confidentiality agreement that would protect TikTok's sensitive information and TikTok can produce the requested information with a push of a button.
The attorney general also justified court intervention based upon TikTok's alleged history of spoliation and circumventing discovery with other states' investigations, requiring Tennessee, Utah and Kentucky to also file enforcement actions.
For example, in March 2023, 46 state attorneys general filed an amicus brief in support of Tennessee's motion to compel TikTok's production of internal chat messages.
On Dec. 15, 2023, North Carolina's Wake County court entered an order compelling TikTok to produce detailed information for 98,000 meetings, as requested by the attorney general.
Although this order was briefly stayed pending appeal, the appeals court denied TikTok's writ of supersedeas and dissolved the stay on Jan. 5.
This experience offers a real-life example of how responding to requests for information in state investigations differs from garden-variety discovery in civil litigation.
First, state attorneys general have broad rights to request information from companies operating in their jurisdiction. This is backed up by civil investigation demands, governed by state statute, that often contain more extensive and invasive requests than those served in civil discovery.
While these investigatory powers are limited by the Fourth Amendment's protection against unreasonable searches and seizures, courts generally grant state attorneys general broad discretion in seeking information that falls short of violating the U.S. Constitution. And most states have a dearth of case law limiting civil investigation demands through objections or other civil litigation mechanisms.
These circumstances, combined with the leverage of state attorneys general in driving the investigation, often require companies to make broader productions than those in civil suits.
Second, companies commonly — and mistakenly — believe that they can prevent or limit production of sensitive, confidential or competitive information through objections, as would happen in civil litigation with a competitor.
But state statutes governing civil investigation demands typically grant leeway to seek such information and even specify the protections to be afforded to such information, thus paving the way to its production.
Put another way, many states anticipate these types of confidentiality objections and have codified protections that remove that as a basis for not responding to a civil investigation demand.
Third, aggressive and evasive discovery tactics that may prove successful in civil litigation often backfire in state attorney general investigations. This consequence goes back to the wider lens of civil investigation demands in regulatory and government investigations compared with discovery in civil litigation.
Moreover, unlike in the civil litigation context, companies under investigation have no offensive discovery to push against the state and level the playing field.
Finally, courts tend to see an enforcement action on a civil investigation demand very differently than a typical discovery dispute between two private parties in civil litigation. State attorneys general are representing the citizens of the state in which the court is located, giving them very different standing than typical civil litigants.
As mentioned, civil investigation demands have much broader parameters than civil discovery rules and are limited only by constitutional concerns of unreasonable search and seizure.
Given this combination, courts often afford state attorneys general more leeway in enforcing civil investigation demands, and are less tolerant of companies opposing them than would be expected in typical discovery disputes between private two parties in civil litigation.
This is particularly true if the opposing company declines state attorney general offers for narrower discovery and/or has a history of requiring court intervention, as was alleged against TikTok.
In short, companies subject to investigation by state attorneys general need to adopt a different playbook than typically used in civil litigation — or suffer the consequences.