STANLEY SPORKIN, UNITED STATES DISTRICT JUDGE
On July 22, 1988, applicant Securities and Exchange Commission ("Commission") filed in this court an application requesting this court to direct respondent Pacific Bell to show cause why it should not be ordered to produce the telephone records requested in two subpoenas issued by the Commission on March 10 and 11, 1988, and further requesting that the court order Pacific Bell to obey the subpoenas.
On July 25, 1988, this court entered an order directing respondent Pacific Bell to appear in court and show cause why it should not be ordered to produce the records specified in the subpoena duces tecum. By stipulation filed on September 1, 1988, the parties have agreed to have this matter submitted without a hearing, for adjudication on the merits on the basis of the pleadings and supporting papers filed by the parties.
On February 3, 1988, pursuant to § 20(a) of the Securities Act of 1933, 15 U.S.C. § 77t(a) (1982), and § 21(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u(a) (1982), applicant Securities and Exchange Commission issued an Order Directing Private Investigation and Designating Officers to Take Testimony in the Sealed Matter ("Formal Order"). Through the Formal Order the Commission directed that a private investigation be conducted to determine whether the company, persons associated with the company, or persons trading in the securities of the company, are engaged in or are about to engage in violations of the Securities Act of 1933, the Securities Exchange Act of 1934, or the rules promulgated under those laws.
The investigation authorized by the Formal Order is being conducted from the Commission's Washington, D.C. office. The Formal Order designated certain members of the Commission's staff, including Rudolph Gerlich, Jr., Gene A. Albarado and Wayne A. Wirtz, as officers of the Commission for the purposes of the investigation. 15 U.S.C. § 77s(b); 15 U.S.C. § 78u(b). The Formal Order authorized each person to, among other things, require the production of any papers, correspondence, memoranda and any other records deemed relevant to the investigation. Id.
On March 10 and 11, 1988, Wayne A. Wirtz, acting as an officer of the Commission pursuant to the Formal Order, issued subpoenas duces tecum to Pacific Bell, requiring the production of telephone records of certain persons whom the Commission had reason to believe were involved in or possessed information concerning the matters described in the Formal Order, including the dissemination and use of material, non-public information concerning a particular company by and between individuals who traded in the securities of that company. The subpoenas ordered Pacific Bell to produce the records on or before March 22, 1988, at the Commissions headquarters office in Washington, D.C.
The subpoenas were properly served upon Pacific Bell, a corporation with its principal executive offices located in San Francisco, California. Respondent Pacific Bell is a public utility engaged in providing telephone service to parts of California. It has provided such services to the persons whose telephone records were subpoenaed by the Commission on March 10 and 11 pursuant to the Formal Order.
Pacific Bell refused to produce the records requested in the Commission's subpoenas duces tecum on the grounds that the subpoenas are invalid since they do not contain the customers' consent to release the requested records, as required by the California Customer Right of Privacy Act, set forth in § 2891 of the California Public Utility Code ("CPUC"). California Public Utility Code § 2891(a).
As a result, the Commission filed in this court an order to show cause and an order requiring obedience to subpoenas duces tecum. The Commission claims that it is exempt from the customer consent requirement of § 2891(a) of the CPUC since § 2891(d) of the CPUC exempts from that requirement "information provided to law enforcement agencies in response to lawful process issued under state or federal law". Further, if the court finds that § 2891(a) of the CPUC applies to the Commission, the Commission contends that it conflicts with the power of the Commission to compel the production of documents in connection with its statutorily authorized investigation. Therefore, under the Supremacy Clause of the Constitution, the CPUC is preempted by the federal securities laws and must be deemed unconstitutional. U.S. Constit. art. VI, cl. 2.
For the reasons stated below, the court finds that the term "law enforcement agency" as used in § 2891 of the CPUC includes federal law enforcement agencies such as the Commission, and that the information requested from Pacific Bell pursuant to the subpoenas issued by the Commission is exempt from the customer consent requirements of § 2891 of the CPUC.
Insofar as the Commission is not exempt from the customer consent requirements of § 2891 of the CPUC, that statute conflicts with the Commission's statutory power to compel the production of information under the federal securities laws. As a result the court finds that under the Supremacy Clause of the United States Constitution § 2891 of the CPUC is preempted by federal securities laws and regulations.
Pacific Bell has not claimed, nor has it been shown, that the subpoenas are unreasonable or burdensome or that the documents requested are irrelevant to the Commissions investigation. The only question for this court is whether the California legislature intended to include the Commission in its definition of the term "law enforcement agency" as the term is used in § 2891(d) of the CPUC, and if not, whether § 2891 of the CPUC is preempted by federal securities laws.
It is well established that statutes such as the one at issue here shall be interpreted to avoid constitutional difficulties. Frisby, et al. v. Schultz, 487 U.S. 474, 108 S. Ct. 2495, 2502, 56 U.S.L.W. 4785, 4788, 101 L. Ed. 2d 420 (1988); see also Erznoznik v. City of Jacksonville, 422 U.S. 205, 216, 45 L. Ed. 2d 125, 95 S. Ct. 2268 (1975). In this situation where two interpretations are proposed, one of which raises fundamental constitutional issues and one of which does not, this court is obliged to favor the latter. Yet even if this was not the case, the plain language and the legislative history of § 2891(d) of the CPUC indicate that the Commission is a "law enforcement agency" under that section.
Section 2891 of the CPUC provides in pertinent part that
(a) No telephone or telegraph corporation shall make available to any other person or corporation, without first obtaining the residential customer's or subscriber's consent, in writing, of any of the following information:
(1) The Customer's or subscriber's personal calling patterns, including any listing of the telephone or other access numbers called by the customer or subscriber [or]. . . .