## Facts

- The Securities and Exchange Commission (SEC) obtained information suggesting possible federal securities-law violations involving securities connected to specialized mobile radio and similar telecommunications technologies subject to Federal Communications Commission licensing.
- In July 1994, the SEC issued a Formal Order of Private Investigation opening an investigation into possible unregistered offerings, materially misleading statements or omissions, and broker-dealer violations in the telecommunications sector.
- The Formal Order authorized an investigation to determine whether “any persons” had engaged, were engaging, or were about to engage in the described conduct, and authorized SEC staff to issue investigative subpoenas.
- The Formal Order did not specifically name RNR Enterprises, Inc. (RNR), a telecommunications company, or Richard K. Wells, RNR’s chairman and CEO.
- Acting under the Formal Order, the SEC served administrative subpoenas, including a subpoena compelling Wells to appear and testify and subpoenas seeking documents from RNR (and another recipient, Robert J. Carlo).
- Wells did not comply with the subpoena and raised objections to the SEC’s authority and purpose, and sought access to SEC materials through Freedom of Information Act (FOIA) requests; after the SEC denied the FOIA request, he did not complete the agency’s administrative appeal process.
- The SEC applied in the United States District Court for the Southern District of New York to enforce the subpoenas and submitted a supporting declaration stating the requests were relevant to the investigation and that the information sought was not already in the SEC’s possession.
- The district court enforced the subpoenas and denied Wells’s requests for discovery and FOIA-related relief in the subpoena-enforcement proceeding.
- Wells appealed to the Second Circuit.

## Issues

1. Whether an SEC investigative subpoena is enforceable when issued under a Formal Order that does not name the subpoena recipient, so long as the subpoena seeks information related to the investigation described in the order.
2. Whether the SEC satisfied the requirements for judicial enforcement of an administrative subpoena (legitimate purpose, statutory authority, reasonable relevance, information not already possessed, and procedural regularity).
3. Whether allegations of improper purpose, due process violations, or Administrative Procedure Act defects justified denying enforcement on this record.
4. Whether a subpoena recipient may resist enforcement or obtain discovery based on FOIA requests without exhausting FOIA’s administrative remedies.

## Decision

- The Second Circuit affirmed the district court’s order enforcing the SEC’s investigative subpoenas.
- The court held the SEC’s investigation was authorized by the Formal Order, served a legitimate purpose within the SEC’s statutory authority, and sought information reasonably related to that investigation.
- The court rejected the argument that the subpoenas were invalid because the Formal Order did not specifically name Wells or RNR.
- The court found Wells failed to make a sufficient factual showing of bad faith, improper purpose, or unreasonable burden that would justify denying enforcement.
- The court held the district court did not abuse its discretion by denying discovery and FOIA-based requests in the enforcement proceeding, particularly because Wells did not exhaust FOIA administrative remedies.

## Legal Principles

- An administrative subpoena will be enforced when the agency shows: (1) a lawful investigative purpose, (2) statutory authority to investigate, (3) requested information that may be relevant to the inquiry, (4) the information is not already in the agency’s possession, and (5) required administrative steps were followed.
- A formal investigative order that authorizes investigation of possible violations by “any persons” can support subpoenas to individuals or entities not named in the order, if the subpoenaed material relates to the subject of the investigation.
- Courts give substantial deference to the agency’s assessment of relevance in an investigative subpoena; enforcement is appropriate unless the relevance showing is plainly deficient.
- Subpoena-enforcement proceedings are summary; a recipient is not entitled to discovery into the agency’s files absent a substantial factual showing of bad faith or similar misconduct.
- FOIA provides its own review process; failure to exhaust FOIA administrative appeals bars using FOIA denials as a basis to block subpoena enforcement or to obtain FOIA-based discovery in the enforcement case.

## Conclusion

The Second Circuit affirmed enforcement of SEC investigative subpoenas issued under a broadly worded Formal Order targeting possible telecommunications-related securities violations, holding that the SEC met the minimal showing required for enforcement, the fact that the Formal Order did not name Wells or RNR did not defeat the subpoenas, Wells failed to substantiate claims of improper purpose or undue burden, and FOIA nonexhaustion and discovery demands could not be used to resist compliance in a summary subpoena-enforcement proceeding.


RNR Enterprises, Inc. v. Securities and Exchange Commission, 122 F.3d 93 (1997)