You’ve Been Served! – Dealing with Subpoenas

Adult business operators are forced to deal with a number of legal hassles. One of them is getting served with a subpoena seeking information about you, your operation, your finances, or your data. Given the increasingly hostile climate in the adult entertainment industry, operators and performers should understand how to react when served with a subpoena. If you run a website that accepts members, you likely acquire a substantial amount of personal and financial information from users which may be of interest to law enforcement, administrative agencies, or private lawyers. Performers also receive significant information and communication from their subscribers or fans which can become the subject of a legal proceeding. This article will help you understand your legal rights and obligations when receiving a subpoena.

First off, don’t panic! If you receive a subpoena, that usually means someone wants information that you have about others, and you are likely not the target of the investigation. There are many exceptions to this rule, but getting a subpoena does not automatically mean you have done something wrong. Subpoenas are commonly used by state and federal authorities to investigate crimes and are routinely issued to individuals or corporations that are not involved in wrongdoing. Civil claimants also use subpoena power in lawsuits to learn about the claims and defenses and investigate their case.

Most often, a subpoena asks for production of records or computer data. This is called a Subpoena Duces Tecum. While the subpoena will usually contain lots of scary language about contempt, appearing in court, or testifying, compliance is usually accomplished by simply emailing the requested documents by the deadline provided in the document (called the “return date”).

While your first inclination when receiving a subpoena may be to cooperate and immediately hand over the requested information, that is not always the right course of action. Some documents may be privileged or outside the scope of the subpoena. Sometimes subpoenas are sent by investigators or attorneys from other jurisdictions where they cannot be enforced. In still other instances, the recipient of a subpoena has an obligation to object and require the requestor to obtain a court order or search warrant before handing over the information. For example, operators of online platforms cannot turn over stored user communications to the government in most circumstances in the absence of a court order, under the Stored Communications Act.

To determine the scope of your subpoena compliance obligations, it is always best to consult with an attorney. You are entitled to legal representation when responding to a subpoena. Often, your lawyer can interface with the sender of the subpoena to narrow the scope of the requested documents and minimize disruption to your business or personal life. If you intend to deal with a subpoena on your own, there are several important points to keep in mind.

The first thing to understand is that you have a legal obligation to preserve all the documents or data requested in the subpoena. For example, if the subpoena asks for text messages and your mobile device automatically deletes messages older than 30 days, you have an obligation to change the auto-delete setting to ensure that you are not responsible for destruction of evidence. Your preservation obligations also extend to any archive or backup programs that are under your control. Therefore, the best thing to do when you receive a subpoena is to identify all of the potentially responsive information and make sure it is preserved. Tampering with, or destruction of, evidence is a crime and can result in significant civil sanctions as well.

Can you be compensated for your time and costs in responding to the subpoena? The short answer is yes. Most court rules allow for some reasonable compensation to be paid to the individual or company that has the burden of responding. However, the amount of compensation varies from jurisdiction to jurisdiction. If you will be seeking financial compensation, it is wise to discuss these issues with the sender of the subpoena before incurring any costs. In many cases, pulling the requested information can be done quickly and will result in little to no expense. But for significant research projects or vast data requests, the respondent is entitled to be paid. If the amount of compensation cannot be agreed between the parties, a court will resolve the issue upon request.

Frequently, subpoenas will ask for information about one of your customers or vendors. Can you notify the affected company or individual that you will be disclosing their information? The answer depends on the type of investigation. In civil cases, you typically have the right to notify third parties that you received a subpoena. Doing so will allow the affected party to assert any privacy rights or other legal challenges to disclosure of the information in a timely manner. The exception is where a court has issued a “gag” order prohibiting disclosure of the existence of the subpoena. This is done in cases where someone is concerned that providing notice of the subpoena will cause the affected party to destroy evidence or disappear. With criminal subpoenas, it is never a good idea to notify the affected party. Doing so can compromise the investigation and may constitute obstruction of justice. Criminal subpoenas are usually accompanied by instructions not to disclose the pending investigation.

Receipt of a valid subpoena requires you to conduct a thorough search of all your records, devices, computers, and data to identify responsive information. This is a serious legal obligation which should not be taken lightly. Failing to disclose information subject to a subpoena can result in significant legal sanctions being imposed. Any information that is in your possession, custody, or control should be evaluated for possible disclosure. This includes online databases that you can lawfully access, even if stored by a third party service. The most common error in responding to a subpoena is failure to conduct an exhaustive search. If you determine that you missed information that was subpoenaed, you should immediately inform the party that issued the subpoena and provide the omitted records unless legally privileged.

What if you don’t want to provide the requested records, or believe that the information should not be disclosed? A process exists to deal with those situations. Typically, the subpoenaed party will serve “objections” to the subpoena and identify the legal basis for withholding the information. Any information withheld based on privilege should be listed in a “privilege log” which is sent along with the non-privileged documents. In other instances, you or your attorney might file a motion to quash the subpoena with the issuing court, and make legal arguments as to why the subpoena is not valid or why the information cannot be produced. Such legal proceedings can get expensive, so the parties typically attempt to resolve these issues on their own before involving the courts. But in some circumstances, an agreement cannot be reached, and the court will decide the issues.

In some cases, a subpoena will actually command you to show up in court and provide testimony. If the primary goal of the subpoena is to produce documents, you can often submit a records custodian certification or affidavit to authenticate the documents instead of testifying in court. However, there are instances where the requesting party needs your live testimony on some issue. Again, you have the right to counsel in these proceedings. If your testimony may incriminate you in criminal activity, you also have a right to remain silent and invoke the Fifth Amendment on those issues. In current times, most court hearings occur remotely, so testimony can be provided with a minimal disruption of your business. If you are forced to travel to court for live testimony, you have a right to receive a witness fee and travel expenses which are set by law in the relevant jurisdiction.

Generally, a subpoena can only be issued in connection with an ongoing legal proceeding or investigation. Occasionally, people seeking information will send documents that look official and demand production of sensitive information. You have the right to verify the authenticity and validity of any document request before sending a response. Most court records are online, and the existence of pending litigation can be confirmed by checking the case docket for the relevant court. Criminal investigations are confidential, however the identity of the requesting agent should be confirmed before records are sent. Government emails are often spoofed by scammers seeking information that is otherwise unavailable. Therefore, some due diligence is necessary before transmitting documents in response to an official-looking request.

In the era of ecommerce where people are conducting business globally from their computers or mobile devices, subpoenas or other law enforcement requests can come from any jurisdiction – even foreign countries. Generally, a subpoena must be issued from a court of “competent jurisdiction” to be enforceable. As a result, not all subpoenas are binding on the receiving party. However, there may be reasons to consider cooperation with subpoenas even from foreign jurisdictions. Some countries have established Mutual Legal Assistance Treaties or other international agreements that allow foreign subpoenas to be enforced. Ignoring a subpoena is strongly discouraged.

While you may never receive a subpoena in the operation of your adult business, subpoenas are becoming much more common and can come from just about anywhere. Learning about your rights and obligations when receiving a subpoena in advance can help mitigate stress and confusion when confronted by this legal process.

Lawrence G. Walters heads up Walters Law Group. Nothing in this article constitutes legal advice. Mr. Walters can be reached at www.firstamendment.com or on social media @walterslawgroup.

Censorship by Money: Snuffing Out Adult Entertainment by Denial of Banking Services

Adult film stars are reportedly having their bank accounts systematically closed by JP Morgan Chase bank, for no other reason than their connection with porn. According to industry publications and more directly, tweets from adult film performers, Chase has been busy sending letters to hundreds of performers, arbitrarily closing their accounts with the financial institution. One actress, Teagan Presley, attempted to open another account at Bank of America after her termination at Chase but was immediately denied.   Our law firm has received numerous similar stories of account closures or denial of banking services.

This is not the first time financial institutions have targeted the adult industry. Last year, adult performer Chanel Preston reported being denied a loan from City National Bank in Los Angeles due to her status in the adult industry. Earlier that month, industry producer Marc L. Greenberg was also denied a loan from Chase on what the bank called “moral” grounds. Years ago, PayPal turned its back on the adult industry, and refused to process payments for most adult-oriented products and services. More recently, blogs have noted that online payment processors such as Paypal, along with WePay, have ramped up their hostility towards erotica, by shutting down accounts of bloggers involved in merely publishing content of a sexually-oriented nature.

In response to these discriminatory banking activities, a popular Change.org petition has been created, demanding that Chase reverse these decisions.  The public pressure on Chase previously caused the bank to reverse its decision on the denial of payment processing services, through its subsidiary, Paymentech, to a condom sales company who challenged the action.  The outrage felt by adult industry performers and publishers is certainly justified, but is the activity illegal?  Certainly, private banks can do business with whomever they choose, right?  That’s partially true, but there’s more to the story.  Initially, there are some restrictions imposed on the banking and financial community when it comes to illegal discrimination.  For example, banks cannot systematically deny loans and other services to disadvantaged minorities, without running afoul of federal law.

However, the stunning truth is that these account closures appear to be motivated by none other than the U.S. Department of Justice (DOJ), which created a leaked program dubbed “Operation Choke Point” designed to pressure banks into denying service to certain disfavored industries including “pornography.”  Vice News notes that megabanks and other financial institutions, like Chase, are responding to this pressure by closing adult performers’ accounts, and denying services to other adult businesses. The banking industry, itself, seems to be uncomfortable with this governmental overarch into the financial sector. American Bankers Association CEO Frank Keating wrote a Wall Street Journal op-ed noting that the banks may have no real say in the issue, since the choices are either to comply or get slammed with a penalty. William Isaac, the former chairman of the FDIC has even called Operation Choke Point “way out of control.”

The government’s efforts in applying thumb screws to federally-regulated banks in order to snuff out erotic businesses engaged in First Amendment-protected entertainment constitutes censorship – pure and simple. Instead of falling into the realm of discretionary private business decisions that would ordinarily be protected from legal liability, denial of banking to adult industry participants at the behest of the DOJ likely violates federal civil rights conspiracy laws, including 42 U.S.C. § 1985.  This infrequently-invoked federal statute prohibits two or more individuals (or government actors) from conspiring to deprive a person’s civil rights or equal protection under the law.  While the statute has primarily been used in the context of racial discrimination, it could well provide a legal vehicle for claims against banks and others who have conspired with the DOJ to discriminate against adult performers based solely on their participation in erotic expression.  This sort of retaliation against citizens for participating in constitutionally-protected activity is intolerable, if not illegal.  The idea that our government would use the full force and intimidation of the Department of Justice to pressure banks (who are now largely indebted to the feds for bailing them out in 2008) into terminating customers it finds politically advantageous, represents a new low in governmental censorship.

Restricting the ability to access fundamental banking services can spell disaster for any business, and the DOJ presumably knows this.  In fact, the author predicted this sort of governmental interference in the financial system as a means to impose censorship of erotica as far back as 2002, in the article entitled “A Chokehold on the Gatekeepers.”  Cut off the ability to move money, and the business dries up.

Far from achieving its perhaps original purpose of curbing money laundering and other illegal activities, Operation Choke Point has become a means for the federal government to use banks to do its own dirty work of censoring adult businesses – something it could not do directly, thanks to the First Amendment.  While affected performers and businesses may suffer in the long term, the continued popularity of digital currencies like Bitcoin and Litecoin may prove to be an important alternative for the adult industry to stay in business.  Already, it has been reported that the affected businesses are flocking to Bitcoin to avoid the banking problems. While accepting Bitcoin as a payment method has inherent risks, and no one alternative currency is the perfect solution, this is another example of the Internet routing around censorship.  So long as creative solutions are considered by the affected industries, the banks will lose some of their ability to control the content of entertainment and free expression.

2257 Abuse

Title 18, U.S.C. Section 2257 (“2257”) has long been a thorn in the side of content producers and webmasters in the adult industry, but now, the controversial statute is being utilized in ways never intended by the drafters of the legislation.  Purportedly created as an effort designed to prevent the proliferation of child pornography, 2257 has historically been used by the federal government as a tool to enforce producer compliance with its onerous record-keeping and labeling obligations designed to verify the age of models appearing in sexually-explicit imagery. Some records inspections have occurred by the Attorney General’s office, although actual prosecutions under the law have been essentially non-existent.  Recently, however, the statute is being adopted by litigants, industry participants, and governmental agencies as a sword wielded against adult businesses, instead of the protective shield it was meant to be.

A little over two years ago, the industry witnessed the first use of 2257 in a copyright battle between two adult businesses in federal court. In a lawsuit filed by Ventura Content, Ltd. (a.k.a. Pink Visual) against the tube site Motherless.com, the former alleged, among other claims, that Motherless failed to maintain performer records as dictated by 2257 and failed to post the mandated disclosure statement on its website. The requested relief? Ventura asked the court to shut down the tube site based, in part, on its failure to comply with 2257.

Although the ability to protect against copyright infringement is an essential goal in the adult industry, insiders using 2257 as a weapon to battle each other in court sets a dangerous and unsettling precedent. The DOJ’s enforcement of 2257 is intimidating enough, but the thought of a litigation strategy designed to shut down adult media for violations of the statute would add a layer of credibility to 2257 that threatens the industry’s challenges to the statute, and is ultimately self-defeating.

Much more recently, in November of 2013, a John Doe defendant asked a court to examine Malibu Media’s 2257 records in order to, essentially, invalidate their copyright infringement claims against him. Doe was accused of illegally torrenting 19 of Malibu Media’s copyright films and in turn, made the claim that if a film is not accompanied by adequate 2257 records, then it may not be validly protected under copyright. The case is currently still pending.

Although Doe’s attorney’s strategy may have been a bit of a long shot (as it would be impossible to know the status of plaintiff’s 2257 records short of inspecting them himself), the point is not necessarily whether these 2257 abuse tactics are working, the concern is that they are being employed at all. While these instances of using 2257 to buttress industry infighting are the most prominent, there have been others and the trend is disturbing.

The abuse of 2257 unfortunately doesn’t stop with adult industry participants and John Doe defendants, however. Recently, unconfirmed reports indicated that Cal/OSHA has been subpoenaing 2257 records for various adult content producers with an insidious and ulterior motive: busting the companies for violating the LA County ordinance colloquially known as Measure B, requiring condom usage in adults scenes shot within the county limits. According to these reports, Cal/OSHA obtained the 2257 records in order to ascertain dates and times of shoots – information that would necessarily be contained in the 2257 records.  Thus, the County would be able to confirm whether the producers are complying with Measure B and pulling the required permits. If it finds out they are not, Cal/OSHA can impose heavy fines. CAL/OSHA records do confirm that the companies are being investigated.   

It seems as though instead of simply maintaining records to ensure age verification, adult industry producers now need to worry about a slew of ancillary legal concerns relating to their 2257 compliance.  Any problems with a producer’s compliance regime could prevent them from enforcing their copyrights or result in an unfair competition claim by a ‘holier than thou’ company who claims perfect compliance.  The problem is: there is no perfect compliance.  The byzantine regulatory scheme created by Congress and the DOJ poses risks of technical violations for even the most diligent producer.  Any effort to give credence to an ill-conceived law like 2257 is, at a minimum, bad karma, and at most a tacit admission of the validity of the law.  My humble recommendation; leave 2257 out of the industry infighting, and adopt a cohesive position regarding the unconstitutionality of the burdensome federal statutory abortion we know as 2257.