NEW ORLEANS - Action from the Texas Supreme Court has given Attorney General Ken Paxton a second chance to investigate a company that makes fuselages for Boeing 737s.
A lower court was right to strip the AG's power under the state's right-to-examine law, the U.S. Court of Appeals for the Fifth Circuit ruled last month. But a decision from the state's highest court while he appealed changed everything, despite Paxton's "troubling" interpretation of the RTE law, it added.
At issue is whether companies can seek review of investigation demands before being subjected to penalties. The Texas Supreme Court in May ruled for Paxton in his probe of a Catholic charity he claims is facilitating illegal border crossings and concealing migrants from law enforcement.
In that ruling, the court found the recipient of an administrative subpoena can "move for a protective order... before the time specified for compliance." That satisfies targets' wishes for pre-compliance review of subpoenas, the Fifth Circuit said.
"Although the district court correctly identified constitutional deficiencies in the RTE statute at the time of its decision, the Texas Supreme Court harmonized the RTE statute with other provisions of Texas law to create the opportunity for pre-compliance review," Fifth Circuit judge Steven Higginson wrote.
Austin federal judge Robert Pitman in December adopted the report and recommendation of Magistrate Judge Mark Lane, who found the RTE law unconstitutional thanks to a challenge by Spirit Aerosystems.
Paxton opened his investigation of Spirit in 2024 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.
Paxton issued his RTE to Spirit on March 28, 2024, 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.
"(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..."
Though the Texas Supreme Court ruling ultimately saved the day, all of Paxton's arguments - like arguments on what penalties a non-compliant business faces constituting precompliance review - failed.
"From a logical standpoint, the Attorney General's position that penalty proceedings constitute pre-compliance proceedings is troubling, because a recipient who loses their challenge to an RTE is then immediately subjected to penalties, without having the opportunity to comply after a court determination," Higginson wrote.
Spirit can continue to fight the records request, though the RTE is now deemed constitutional.
