Overview
Given the Federal Energy Regulatory Commission's (FERC) recent commencement of investigations relating to February's cold weather grid emergency,[1] and the potential for many more, it is important for market participants to be mindful of FERC's obligations to provide parties involved in Section 1b investigations with exculpatory "Brady" materials.[2] FERC policy requires that it disclose any evidence or other information that is exculpatory or potentially exculpatory, and material to either the guilt of, or punishment for, the subject. As recent court rulings confirm, this obligation should extend, in certain circumstances, to require FERC to affirmatively search for evidence in the files of other agencies. However, FERC has never clearly stated it will do so. This alert explores that tension.
FERC issued its Policy Statement on Brady materials in 2009.[3] In it, FERC took the position that while the Due Process clause does not require it to disclose exculpatory evidence in its civil administrative proceedings,[4] FERC nevertheless would opt to take on Brady obligations. This is consistent with the approach taken by some other agencies, such as the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC). FERC stated that it would "scrutinize materials it receives from sources other than the investigative subject(s) for material that would be required to be disclosed under Brady. Any such materials or information that are not known to be in the subject's possession shall be provided to the subject."[5] While FERC noted that it would not "require Enforcement staff to conduct any search for exculpatory materials that may be found in the offices of other agencies,"[6] it emphasized that "the principle of Brady should apply to Section 1b investigations and administrative enforcement actions under Part 385 of its regulations."[7]
As a recent district court case reaffirmed,[8] Brady requires prosecutors to search the files of agencies with whom they conduct joint investigations.[9] Importantly, the court treated the question of whether there was a joint investigation as a question of fact to be determined by the evidence of how the separate investigative bodies interfaced with one another, not by how the different bodies chose to denominate their investigations. FERC's Policy Statement does not clearly address the circumstance of a joint investigation with other agencies. Applying "the principle of Brady" would mean that FERC is required to search the files of its investigative partners for exculpatory materials, but FERC has indicated that it might not, or at least might not always do so, through its statement that it was not requiring Enforcement staff to search other agency files. Applying the standards of the Brady precedents would require FERC to search the files of a joint investigator, and doing so would seem consistent with FERC's "goal of open and fair investigations and enforcement proceedings."[10]
FERC's statement concerning search of other agency files, in context, is arguably just reinforcement of the unremarkable principle that an investigative subject cannot simply make FERC's staff search the files of every other agency for potentially exculpatory materials under all circumstances. It would seem, based on Brady's application in courts, that the analysis should change where FERC's investigation is denominated to be a joint one with another agency or overlaps with and relies on coordinating or sharing investigative efforts and information with another agency. In such circumstances, FERC's Brady policy should require that exculpatory information in the files of the other agency be identified and provided to investigative subjects. But FERC did not explicitly state that it does, at least not in its Policy Statement. Information contained in a companion investigator's file may be crucial in evaluating and responding to any claims made by FERC that stem from a joint investigation. Therefore, market participants facing investigations by FERC or another agency should be mindful of FERC's Brady obligations, and should be prepared to respond to any argument by staff concerning the limitations of the affirmative duty Brady imposes in that context.
As noted in prior alerts, Steptoe's Enforcement team has significant experience representing clients in reliability-related inquiries from both the North American Electric Reliability Corporation and FERC, as well as experience in joint investigations of FERC and Regional Entities, and of FERC and the CFTC. We stand ready to assist companies that may be the subject of any joint investigation initiated by FERC or another agency.
[1] See Steptoe's previous client alert.
[2] These materials are so-named because of a US Supreme Court case that first required their disclosure for criminal defendants under the Due Process clause. See Brady v. Maryland, 373 U.S. 82 (1963).
[3] See Policy Statement on Disclosure of Exculpatory Materials, 129 FERC ¶ 61,248 (2009) (Policy Statement).
[4] Id. at P 2.
[5] Id. at P 9.
[6] Id. at P 11.
[7] Id. at P 7.
[8] See United States of America v. Bases et al., Order Granting Motion to Compel, Case No. 1:18-CR-00048 (N.D. Ill.) (Feb. 24, 2021).
[9] See, e.g., United States v. Walker, 746 F.3d 300, 306 (7th Cir. 2014) ("The government's duty to disclose favorable evidence extends beyond evidence in its immediate possession to evidence in the possession of other actors assisting the government in its investigation."); United States v. Martoma, 990 F. Supp. 2d 458 (S.D.N.Y. 2014).
[10] Policy Statement, 129 FERC ¶ 61,248 at P 8.
