AUSTIN - Texas Attorney General Ken Paxton will need an appeals court's help to preserve a longstanding law boosting his investigative powers that was recently found unfair to businesses.
Paxton is appealing to the U.S. Court of Appeals for the Fifth Circuit a Dec. 9 order by Austin federal judge Robert Pitman, who adopted the report and recommendation filed earlier this year by Magistrate Judge Mark Lane.
Lane found the state's right-to-examine law unconstitutional, prompted by a challenge to it by Spirit Aerosystems - a company that makes fuselages for Boeing 737s. Despite objections Lane's R&R would "needlessly" put an end to the AG's power to demand corporate records under the RTE law, which has been on the books for more than 100 years, Judge Pitman nevertheless agreed with Lane.
"(I)t is clear that the RTE Statute contains a constitutional defect in its plain language," Lane wrote.
"The RTE Statute provides no opportunity to seek pre-compliance review on the reasonableness of a particular request, and it explicitly prevents such opportunity through its temporal requirements and grant of unlimited power to the Attorney General..."
Spirit, the subject of an RTE request over the failures of Boeing 737s over recent years, complained it didn't have a chance to challenge aspects of it.
"If an entity fails to immediately comply with the Attorney General's demand, the entity's managerial officials can be criminally prosecuted for a misdemeanor offense, and the Attorney General's staff can arrest those officials on the spot," attorneys for the company wrote.
"In other words, a Request to Examine recipient and its managerial officials are, at the moment of receipt, put to the choice of complying with the request or violating the statutory 'immediately permit' requirement."
And exemptions to the pre-compliance review requirement regarding closely regulated industries don't apply, Spirit says, as there is no Texas law that regulates the commercial aircraft manufacturing industry.
Earlier this year, Paxton opened his investigation of Spirit following disasters with Boeing's 737 MAX planes. Two crashes in 2018 and 2019 killed 346 people, then in January of this year the door blew out of one that led the Federal Aviation Administration to ground all MAX planes with similar configurations.
Spirit argues Paxton has no jurisdiction over it. The company's headquarters are out of state and Boeing malfunctions occurred in California and overseas.
Paxton's claim that Texans are regular passengers on Boeing planes "is meritless," Spirit says.
Key to the case is the application of a 2015 U.S. Supreme Court opinion, Los Angeles v. Patel. That case concerned Los Angeles' requirement for hotel operators to record and keep information about their guests for a 90-day period.
Those records were to be made available to police for inspection. SCOTUS and the Ninth Circuit found those inspections are Fourth Amendment searches and were unreasonable because hotels could be punished for failing to turn records over without an opportunity for pre-compliance review.
Paxton issued his RTE to Spirit on March 28, telling Spirit, its board and its officers it "has a continuing duty" to provide records while he investigates.
The RTE mentions a shareholder class action lawsuit against Spirit in New York federal court that followed a drop in the company's value once Boeing announced it would halt deliveries of 737 MAX planes because of a supplier quality problem linked to Spirit.
The company's value fell nearly 21% to $28.2 per share on April 14. The presiding judge is weighing Spirit's motion to dismiss that case.