959 N.W.2d 99
Iowa2021Background
- In December 2019 officials from a state institution and its overseeing agency met with Iowa Auditor Rob Sand about a proposed $1.165 billion transaction that would create significant taxpayer exposure.
- On December 12 Auditor Sand requested documents and a list of potential investors; the Agency refused, claiming bids and investor information were confidential until financial close.
- Auditor Sand served a subpoena on the Agency on January 8, 2020 seeking 13 categories of documents “relative to an audit” and invoking Chapter 11 confidentiality protections.
- The Agency disputed the subpoena (arguing the auditor was not engaged in an authorized audit, subpoenaed the wrong party, and the request was burdensome); the district court enforced the subpoena but limited it to documents in the Agency’s possession.
- The Iowa Supreme Court affirmed: (1) the arbitration statute (Iowa Code § 679A.19) did not apply to the auditor (a constitutional officer) and (2) the subpoena was issued as part of an authorized audit under Chapter 11, so the auditor had statutory authority and Chapter 11 confidentiality applied.
Issues
| Issue | Plaintiff's Argument (Sand) | Defendant's Argument (Agency) | Held |
|---|---|---|---|
| Applicability of Iowa Code § 679A.19 (mandatory arbitration between state agencies) | §679A.19 does not apply because the Auditor of State is a constitutional officer, not an administrative department or board. | §679A.19 governs disputes between state entities and should bar litigation between state actors. | §679A.19 does not apply to the auditor; the auditor is a constitutional officer and may litigate/enforce subpoenas in court. |
| Was the subpoena issued in connection with an "authorized audit" under Chapter 11 (statutory authority to subpoena)? | The subpoena was issued as part of an authorized audit; Chapter 11 grants broad access and subpoena power to the auditor, including pre-closing review when necessary. | No authorized audit existed when the requests began (transaction not closed); the initial requests were informal and not part of an audit, so subpoena power is inapplicable. | The court held the subpoena was part of an authorized audit by the time it was served; the district court did not abuse its discretion enforcing it under Chapter 11. |
| Confidentiality and timing (may audit occur before financial close?) | Chapter 11 permits access to information required to be confidential during an audit and requires the auditor to maintain confidentiality; audits may include forward-looking or pre-closing review where appropriate. | Releasing confidential materials before financial close could jeopardize the transaction; initial contacts were informal and confidentiality concerns were reasonable. | Confidentiality protections of §§11.41–11.42 apply once the subpoenaed request is part of an audit; the auditor must maintain confidentiality and may include necessary disclosures in post-audit reporting. |
| Scope/wrong party/undue burden | Subpoena was limited to documents in the Agency’s possession and is within the auditor’s authority; relevancy and burdensomeness were not meaningfully challenged item-by-item. | Subpoena targeted the wrong entity (Institution) and was overbroad and unduly burdensome. | Court limited enforcement to documents in the Agency’s possession and found no abuse of discretion; Agency did not mount a specific itemized burden challenge. |
Key Cases Cited
- State ex rel. Miller v. Publishers Clearing House, 633 N.W.2d 732 (Iowa 2001) (standard of review and factors for enforcing an agency subpoena)
- Citizens’ Aide/Ombudsman v. Grossheim, 498 N.W.2d 405 (Iowa 1993) (subpoena enforcement factors: statutory authority, specificity, burden, relevance)
- Eldred v. McGladrey, Hendrickson & Pullen, 468 N.W.2d 218 (Iowa 1991) (describing an audit as a snapshot of financial condition and discussing audit scope)
- Hennessey v. Cedar Rapids Cmty. Sch. Dist., 375 N.W.2d 270 (Iowa 1985) (weight to be given an agency or officer’s longstanding statutory interpretation)
- State ex rel. Turner v. Iowa State Highway Commission, 186 N.W.2d 141 (Iowa 1971) (constitutional officers distinguished from administrative departments for purposes of § 679A.19)