State AG Monitor

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, False Claims Act, For-Profit Colleges, Mortgages/Foreclosures, State AGs in the News

Hot News

State Attorney General Enforces Federal Statute: Something New or Déjà Vu?

  • In a recent blog post, Dickstein Shapiro partner Maria Colsey Heard discusses the expanding authority of State AGs to enforce federal laws and provides insight and specific examples of federal statutes that “deputize” State AGs.

2014 Election

Live-Tweeting: Attorney General Election Results

  • On Tuesday, November 4, Dickstein Shapiro Associate Chris Allen will be live-tweeting as AG election results are confirmed throughout the evening.
  • Join the discussion at #2014StateAGElection.

ACC Webcast: Expert Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice, will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


Connecticut Regulators Approve Frontier Communication’s Purchase of AT&T’s Wireline Business

  • The Connecticut Public Utilities Regulatory Authority recently approved Frontier Communications Corporation’s purchase of AT&T Inc.’s wireline operations in Connecticut, after months of negotiations with Frontier, Connecticut AG George Jepsen, and Governor Malloy to address consumer protection issues.
  • As part of the approval process, Frontier agreed to a three-year freeze on landline telephony rates, reduced broadband prices for veterans, assurances not to pass on costs to consumers, and an agreement to invest $63 million in capital improvements to bring faster Internet service to Connecticut residents.
  • Frontier’s acquisition was approved by the Federal Communications Commission and the U.S. Department of Justice earlier this year, and the parties can now move forward with finalizing the $2 billion acquisition.

Consumer Financial Protection Bureau

CFPB Publishes Revised List of Rural and Underserved Counties

  • The Consumer Financial Protection Bureau (CFPB) published its 2015 list of counties designated as rural or underserved for purposes of federal consumer financial regulation.
  • The designation of rural or underserved determines how CFPB regulations and the Truth in Lending Act are applied in the designated counties, specifically affecting the types of mortgages available and the terms for lending.

Consumer Protection

Federal Court Approves LCD Flat Screen Settlements Reached by Eight AGs

  • A federal court approved the distribution of the LCD Flat Screen Settlements reached by Missouri AG Chris Koster, as co-liaison counsel, seven other AGs, and class counsel for a nationwide class of consumers. The settlement, which was originally reached in 2012, will resolve claimed violations of state and federal antitrust laws, and state consumer protection laws.
  • In 2010, AG Koster originally filed suit together with the AGs of Arkansas, Michigan, Wisconsin, and West Virginia against leading TFT LCD panel manufacturers, which was consolidated in federal court for the Northern District of California with a similar lawsuit filed by the AGs of Florida and New York, and a nationwide consumer class action.
  • The settlement provides $1.1 billion in restitution nationwide, with $24 million designated for Missouri consumers. In addition, AG Koster secured $2.2 million in civil penalties, to be placed in the Missouri School Fund.

Data Privacy

California Attorney General Issues Report Analyzing 2013 Data Breaches; Shows Malware and Hacking Dominant in Retail Breaches

  • California AG Kamala Harris published her office’s second annual report regarding the 167 data breaches reported in 2013 (as compared to 131 in 2012), affecting potentially 18.5 million California residents.
  • The report, which provides an analysis of the breaches by industry sector and breach type, indicates that approximately 53 percent of the breaches in 2013 were the result of either hacking or malware, with physical theft and loss of data (26 percent) and unintentional errors (18 percent) as the other main sources of data breaches.
  • The report provides a variety of practical recommendations specific to the retail and health care sectors, as well as overall recommendations for business and consumers, including recommendations for the implementation of tokenization solutions to devalue payment card data and chip-enabling point-of-sale terminals.


Attorney General Triad Opposes NRC Rule, Again

  • AGs from Connecticut, New York, and Vermont challenged the Nuclear Regulatory Commission’s (NRC) Final Rule on the Continued Storage of Spent Nuclear Fuel, issued September 19, 2014.
  • In their Petition for Review to the U.S. Court of Appeals for the D.C. Circuit, the AGs argued that the NRC has not conducted a thorough analysis to support the conclusion underlying the revised rule – that spent nuclear fuel can be safely stored on site at decommissioned nuclear reactors. The AGs allege violations of the National Environmental Policy Act, the Administrative Procedures Act, and the Atomic Energy Act.
  • These same three AGs previously collaborated on this issue in 2011, resulting in a finding by the D.C. Circuit that federal law required the NRC to conduct a review of environmental and public health concerns associated with long-term storage of the highly radioactive spent fuel. The AGs allege that instead of conducting a full environmental analysis as ordered by the D.C. Circuit, the NRC simply reissued the old rule.

False Claims Act

Federal Judge Rules Clean Hands Are Not a Prerequisite for FCA Whistleblowing

  • A federal judge in the Southern District of Texas, ruling on a motion for partial summary judgment, stated that a relator’s unclean hands are not a bar to defendant’s liability, but only to the relator’s eventual award.
  • The court reasoned that because the qui tam relator is representing the state’s interests, the relator’s “unclean hands” are not a barrier to litigation. Twenty-two AGs are parties to the case, Susan Ruscher et al. vs. Omnicare, Inc., 4:08-cv-03396 (S.D. Tex.).

For-Profit Colleges

Wisconsin Attorney General Sues For-Profit College Under Claims of Deceptive Marketing

  • Wisconsin AG J.B. Van Hollen filed a lawsuit against Corinthian Colleges, Inc., alleging violations of state consumer protection laws relating to the marketing practices used by the school for its now-closed Everest College campus in Milwaukee.
  • The Complaint, which was filed in Wisconsin State Circuit Court, seeks restitution, civil penalties, investigation costs and fees, and injunctive relief. In 2013, Corinthian closed its Everest College Milwaukee campus, and provided refunds to all students who failed to graduate.


Massachusetts Attorney General’s Lawsuit Against Federal Housing Agencies Dismissed

  • A federal judge dismissed Massachusetts AG Martha Coakley’s lawsuit against the Federal Housing Finance Agency (FHFA) and government-sponsored entities (GSE) Fannie Mae and Freddie Mac, finding that the court did not have oversight over the dispute.
  • The lawsuit alleged that the FHFA and the GSEs violated a 2012 Massachusetts state law by refusing to sell distressed mortgages to certain nonprofit organizations. The law was designed to help communities avoid the negative effects of foreclosures through a program that would allow homeowners to reacquire their houses.

States Probe Mortgage Servicer’s Alleged Backdating of Mortgage Assistance Rejection Letters

  • Ocwen Financial Corporation is drawing scrutiny from state regulators for allegedly failing to comply with the terms of a December of 2013 Consent Order between 49 states and the CFPB.
  • AGs from Florida, Illinois, and Iowa, and New York’s Department of Financial Services, are looking into Ocwen’s practice of allegedly backdating rejection letters to homeowners seeking to modify the terms of their mortgages.
  • The Consent Order brought closure to claims that Ocwen had deceived borrowers and impeded homeowners from taking effective mitigation actions during the financial crisis. It specifically required Ocwen to provide $125 million to people who lost their homes to foreclosure.
  • States are allowed to withdraw from the Consent Order if Ocwen fails to make the required payments.

State Attorney General Enforces Federal Statute: Something New or Déjà Vu?

Posted in Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Financial Industry, Health Care, States v. Federal Government

Washington AG Bob Ferguson recently announced that he had filed a “first of its kind” lawsuit against a private company and its chief executive for violations of the 2010 Restore Online Shoppers’ Confidence Act (ROSCA). AG Ferguson alleges that Internet Order, LLC, violated ROSCA’s limitations on “negative option” product purchase plans. While this action is a significant “first” under ROSCA, the more general idea that a State AG can sue a private entity to enforce a federal statute is something we have seen before.

During our country’s bicentennial year, the Hart-Scott-Rodino Act created authority for State AGs to bring civil suits to enforce certain provisions of the federal antitrust laws. [Note: As counsel to the Senate Subcommittee on Antitrust and Monopoly from 1971 to 1977, our own StateAGMonitor editor, Bernard Nash, was responsible for drafting the Hart-Scott-Rodino Act and executing the legislative strategy that overcame two filibusters prior to enactment.] Under Hart-Scott-Rodino, State AGs are authorized to seek treble damages as well as costs and attorney’s fees. State AGs are still exercising their authority under Hart-Scott-Rodino. In 2011 and 2012, 33 State AGs filed suits against Apple, Inc. and e-book publishers for alleged price-fixing. The Southern District of New York rejected Apple’s challenge to state standing. See In re Elec. Books Antitrust Litig., 88 Fed. R. Serv. 3d 618 (S.D.N.Y. 2014).

From Congress’ perspective, state enforcement is palatable across political camps as it mixes increased industry oversight with increased federalism. There are other examples of the joint federal-state enforcement model:

  • The Dodd-Frank Act created a new federal regulator, the Consumer Financial Protection Bureau (CFPB), to oversee a wide range of financial activity including auto lending, student loans, mortgage servicing, and other financial services. Dodd-Frank also provided authority for State AGs to investigate and sue consumer finance companies for unfair or deceptive activity, or for violations of rules promulgated by the CFPB. Connecticut, Florida, Illinois, Mississippi, and New York recently initiated lawsuits against a diverse range of defendants.
  • The 2008 Consumer Product Safety Improvement Act permits State AGs to sue companies that sell, manufacture, or distribute unsafe or defective consumer products that “may affect such State or its residents.”
  • The 2009 Health Information Technology for Economic and Clinical Health Act gives State AGs the power to bring civil actions in federal court where they have “reason to believe that an interest of one or more of the residents of that State has been or is threatened or adversely affected” by a violation of federal health privacy requirements contained in the Health Insurance Portability and Accountability Act.
  • The Children’s Online Privacy Protection Act (COPPA) provides for state enforcement where the AG “has reason to believe that an interest of the residents of that State has been or is threatened” by a website operator or online service provider who has violated substantive COPPA provisions. State AGs may seek injunctive relief along with damages and restitution on behalf of state residents.

In addition, there are enforcement agreements between federal agencies and various State AGs. For example, the U.S. Department of Labor and the New York AG’s Labor Bureau formed a partnership agreement to allow cooperation in enforcing federal wage and hour laws. Likewise, the National Association of Attorneys General and the U.S. Equal Employment Opportunity Commission signed a memorandum of understanding outlining their intent to maintain joint enforcement operations under federal and state employment discrimination laws.

The Washington AG’s ROSCA lawsuit serves as an important reminder: Businesses conducting federal compliance planning must recognize and take into account State AG authority under an array of important federal statutes with potent remedies.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, False Claims Act, Marijuana, Medicaid Fraud

Hot News

Join Us for Expert Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice, will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


Pennsylvania Attorney General Plays Referee to Dueling Healthcare Networks

  • Pennsylvania AG Kathleen Kane threatened to sue Highmark Inc. over actions that she alleges are in violation of a recent consent decree between Highmark and the University of Pittsburgh Medical Centers (UPMC).
  • In 2013, Highmark acquired West Penn Allegheny Health System, making Highmark a significant competitor to UPMC in certain markets. In order to ensure that consumers were not harmed by increased competition between the two healthcare networks, AG Kane brokered an agreement to ensure that patients insured by Highmark had access to UPMC’s network of physicians.
  • AG Kane and UPMC object to a new Highmark Medicare Advantage plan that allegedly denies Highmark’s insureds access to UPMC physicians as in-network providers.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau Issues Report on the Private Student Loan Market

  • The Consumer Financial Protection Bureau (CFPB) issued a report highlighting its findings on the state of the market for private student loans.
  • According to the report, which is based on more than 5,300 complaints from October 1, 2013 to September 30, 2014, struggling borrowers are being provided with few option from lenders to avoid default, including a lack of information on how to avoid default, a lack of affordable loan modification programs, and the temporary nature of the programs that do exist.

Consumer Protection

New York Investigation Into Airbnb Implies Recurring Violations of New York Law

  • New York AG Eric Schneiderman recently published a report outlining his office’s investigation into short-term lodging rentals in New York City facilitated through Airbnb, Inc.
  • The report, which is based on private-party rentals during a 54 month period starting in January 2010, alleges that 72 percent of the unique unit rentals violate NYC Administrative Code on building use, zoning, and more. In addition, the report claims that Airbnb hosts generated $304 million in revenue and Airbnb earned over $40 million in fees—numbers that would equate to approximately $33.5 million in unpaid hotel taxes.
  • In addition, the report concludes that 37 percent of all revenue during the investigation period came from only six percent of hosts located in just a few elite Manhattan neighborhoods. AG Schneiderman uses these findings to rebut the idea that Airbnb is mainly a tool for average residents to supplement their income with an occasional guest.
  • Airbnb contested the accuracy of some of the findings, but stated that it was moving forward to “work together on some sensible rules that stop bad actors and protect regular people who simply want to share the home in which they live.”

Michigan Attorney General Secures Settlement With Propane Supplier

  • Michigan AG Bill Schuette announced a settlement with AmeriGas Propane, L.P. to resolve complaints of price-gouging and other customer issues emanating from propane sales last winter.
  • AmeriGas will provide almost $570,000 in value through credits, waived fees, and future discounts to the approximately 5,600 customers affected.

Data Privacy

Nine States Reach $850K Settlement With TD Bank Over 2012 Data Breach

  • A group of nine states, led by Florida AG Pam Bondi, agreed on settlement terms with TD Bank, N.A., regarding a 2012 incident in which TD Bank is alleged to have lost unencrypted backup tapes containing information on approximately 260,000 customers nationwide.
  • The settlement  obligates TD Bank to make reforms to its data protection policies, including requirements that backup tapes be encrypted before they are transported from TD Bank facilities, and that Florida consumers are notified of future breaches in a timely manner.
  • TD Bank reported that it has not seen any unusual incidents of fraud related to the data breach, and that the bank has “continually enhanced” its technologies and processes since the breach was reported in 2012.

False Claims Act

U.S. Court of Appeals Reaffirms the Need for Firsthand Knowledge in Whistleblower Suits

  • The U.S. Court of Appeals for the Third Circuit upheld a district court decision dismissing claims that drug makers AstraZeneca and Bristol-Myers Squibb violated the False Claims Act.
  • The claims at issue were originally brought in 2003 by Karl Schumann, an employee of Medco Health Solutions, Inc., a pharmacy benefits management company acquired by Express Scripts, Inc. in 2012. Schumann originally brought the claims on behalf of 11 states and the federal government, alleging that AstraZeneca and Bristol-Myers had paid $60 million in kickbacks in order to facilitate Medco’s approval of certain drugs. After a long investigation, the states and federal government did not intervene.
  • Medco previously settled with the U.S. government for $155 million in 2006, resolving similar allegations of violations of the False Claims Act.

Antidepressant Maker Settles With States for $31 Million

  • Organon USA Inc. settled a 50-state investigation into allegations that it violated state false claims acts through sales of antidepressant drugs Remeron and Remeron SolTab to Medicaid.
  • The AGs alleged that Organon failed to provide Medicaid the best price on relevant products, as required by law, by omitting information on applicable discounts and rebates, and by otherwise reporting inflated retail prices for Medicaid reimbursement. They also alleged that Organon offered kickbacks in the form of market share discounts, and encouraged the use of its drugs for non FDA-approved or “off-label” uses.
  • The multistate investigation originated from two separate qui tam lawsuits brought by former Organon employees in federal district court in Texas and Massachusetts. Organon is currently a wholly-owned subsidiary of Merck & Co., Inc.


Washington State Judge Confirms Local Government Authority to Regulate Marijuana Shops

  • A second Washington state Superior Court judge has ruled in line with a formal opinion issued by AG Bob Ferguson, instructing that local governments retain authority to regulate and/or ban marijuana businesses in their jurisdiction.
  • AG Ferguson’s opinion, issued earlier this year, stated that Initiative 502 – the 2012 ballot initiative permitting the use of recreational marijuana in Washington State – does not obligate local government to allow marijuana businesses.
  • Plaintiffs from the prior case are currently appealing to the Washington Supreme Court in efforts to overturn the ruling in support of local government regulation.

Medicaid Fraud

Texas Settles Medicaid Fraud Lawsuit With Generics Manufacturer for $37.5 Million

  • Texas AG Greg Abbott reached a settlement agreement with Ranbaxy Pharmaceuticals, Inc., Ranbaxy Laboratories, Inc., Ranbaxy USA, Inc., and Ranbaxy, Inc. (collectively “Ranbaxy”) to bring to a close a 2012 lawsuit claiming violations of the Texas Medicaid Fraud Prevention Act.
  • AG Abbott alleged that, starting in 1997, Ranbaxy reported inflated market prices to the state Medicaid program for its pharmaceuticals. Because Medicaid programs reimbursed pharmacies for their costs based on prices reported by Ranbaxy, pharmacies allegedly were able to maintain higher profit margins – via larger Medicaid rebates – by selling Ranbaxy products. The result, as alleged, was to create an incentive for pharmacies to use Ranbaxy products over similar competing products.
  • Under the terms of the settlement, Ranbaxy will pay approximately $17.9 million to the State of Texas, $17.9 million to the federal government, and $4 million to AG Abbott’s office for attorneys’ fees and costs.
  • Ranbaxy issued the statement that it “believes that it fully complied with all relevant laws…” and that it “settled the matter to avoid any further distraction and uncertainty of continued litigation with the State of Texas.”

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Protection, Environment, False Claims Act, State AGs in the News

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


Texas Attorney General Settles Investigation of Municipal Advising Firm

  • Texas AG Greg Abbott reached an agreement with R. Craig Rathmann and his financial advising firm, Rathmann & Associates, L.P., regarding an investigation into Rathmann’s alleged anticompetitive conduct.
  • According to AG Abbott, Rathmann had an agreement with his former employer, RBC Capital Markets, LLC (RBC), whereby Rathmann and RBC allocated municipal utility clients, and Rathmann agreed to direct his clients to RBC for bond underwriting in exchange for RBC not soliciting Rathmann’s financial advisory clients.
  • The settlement agreement requires Rathmann to pay $450,000 “in lieu of civil penalties,” and to reimburse the AG for investigative costs and attorneys’ fees. It also requires, for a period of three years, that Rathmann notify clients that they can select their own bond underwriter and that the rate of reimbursement for bond underwriting services is negotiable.

Consumer Protection

National Rent-to-Own Chain Settles California Privacy and Consumer Protection Lawsuit

  • Aaron’s, Inc., the second largest national chain of rent-to-own furniture and home electronics stores, has agreed to settle a lawsuit brought by California AG Kamala Harris for $28.4 million.
  • The complaint alleged violations of the Karnette Rental-Purchase Act for charging improper late fees and for overcharging customers who satisfied contracts early. It also alleged violations of California privacy laws for installing spyware on rented computers that allegedly allowed Aaron’s to monitor keystrokes, take screen shots, and geo-locate the compute without customer consent.
  • As per the terms of the settlement, Aaron’s will provide up to $25 million in restitution, in the form of refunds to over 100,000 customers. It will also pay a civil penalty of $3.4 million to the state.
  • Aaron’s settled similar spyware-related allegations with the Federal Trade Commission last year.

New York Attorney General Recovers $16 Million for Citi Customers

  • New York AG Eric Schneiderman reached an agreement with Citigroup Global Markets, Inc. (CGMI), to close an investigation into claims that CGMI charged customers excess advisory fees.
  • Customers with CGMI accounts pay a fee for advisory services – usually ranging from 1% to 1.5%. However, some customers had negotiated a lower fee when they opened their account, yet were unknowingly charged the higher rate.
  • As a result of the agreement, CGMI will provide approximately $16 million in refunds to more than 31,000 customers nationwide.

Vermont Attorney General Seeks Input on New Labeling Law

  • Vermont AG William Sorrell is planning to hold public meetings to obtain feedback from producers, retailers, and consumers regarding how to implement Act 120, the new law requiring food products to list genetically engineered ingredients.
  • Under Vermont law, AG Sorrell is responsible for promulgating rules for the implementation of Act 120, which is scheduled to go into effect on July 1, 2016.  AG Sorrell will later solicit official public comments on the proposed draft rule.
  • Earlier this year the Grocery Manufacturers Association and three other food industry groups filed a lawsuit to enjoin Act 120. This lawsuit remains pending in federal court in the District of Vermont.


Pennsylvania Clamps Down on Fracking Fluid Leaks

  • Pennsylvania AG Kathleen Kane and Department of Environmental Protection (DEP) are investigating EQT Corporation in connection to a discharge of fracking fluids into waterways from a natural gas drill site in 2012.
  • The DEP is seeking a $4.5 million civil penalty from EQT Corporation – the largest fine in Pennsylvania for a fracking-related environmental incident.
  • The state recently entered into a consent order with Range Resources Corporation over environmental damage from leaked fracking fluids, resulting in a $4.15 million civil penalty. Meanwhile AG Kane is also pursuing criminal charges against XTO Energy Inc., in connection to a fracking-related spill in 2010.

Fourteen States Oppose Broader Definition of “Waters” Under the Clean Water Act

  • West Virginia AG Patrick Morrisey, joined by AGs and governors from thirteen other states, submitted a letter commenting on a proposed rule to broaden the definition of “waters of the United States” as used in the U.S. Clean Water Act (CWA) to include smaller streams and wetlands. The proposed rule was put forth earlier this year by the Environmental Protection Agency (EPA) and the Army Corp of Engineers.
  • AG Morrisey’s letter argues against redefining the term “waters” in the manner proffered. The AGs and governors indicate that the proposed rule would expand the jurisdiction of the EPA beyond what was intended by Congress when it passed the CWA. The letter iterates that such a broad definition would infringe on states’ abilities to effectively regulate the use of land.
  • As we have previously reported, there are also AGs who are in favor of the proposed rule, broadening the definition of “waters,” and thus, broadening the jurisdictional scope of the CWA.

False Claims Act

Skilled Nursing Home Chain Settles Multistate Investigation Into Claims of Substandard Care

  • Extendicare Health Services, Inc. (Extendicare) has agreed to pay $32.3 million to the federal government and $5.7 million to eight states in order to resolve claims that it violated the False Claims Act by billing Medicare and Medicaid for substandard nursing services.
  • The AGs alleged that Extendicare and its subsidiary Progressive Step Corporation failed to staff an adequate number of skilled nurses, and did not follow appropriate protocols to protect residents from risks like ulcers and falls. Extendicare denied all allegations.
  • According to the U.S. Department of Justice, this is the largest ever “failure of care” settlement in the skilled nursing industry. In addition to the monetary penalties, Extendicare is required to enter into a five-year corporate integrity agreement and provide for an independent monitor selected by the U.S. Office of the Inspector General.

New York Attorney General Settles with Specialty Pharmacy

  • New York AG Eric Schneiderman settled allegations that Sorkin’s Rx Ltd d/b/a CareMed Pharmaceutical Services (Sorkin’s) made false claims to the New York State Medicaid program.
  • According to AG Schneiderman, Sorkin’s contacted insurance companies claiming to be from a prescribing physician’s office in order to obtain expeditious authorizations for certain specialty drugs. In addition, Sorkin’s allegedly restocked and resold unused dosages of specialty drugs Rituxan and Procrit without crediting back Medicaid and Medicare Part D plans for the initial purchase.
  • The AG’s investigation resulted from a qui tam lawsuit filed by a Sorkin’s employee. The settlement requires Sorkin’s to pay $846,224 in restitution to Medicaid, with New York receiving $465,423 of the restitution funds.

State AGs in the News

Posted in 2014 Election, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, Financial Industry, For-Profit Colleges, Mortgages/Foreclosures, State AGs in the News

Hot News

California Requires Identity Theft Protection for Data-Breached Customers

  • California governor Jerry Brown recently signed into law AB 1710, requiring businesses that handle customer data to provide identity theft prevention services at no charge for 12 months following a data breach.
  • In light of the increasing scope and frequency of data breaches, other states may follow with revisions to their laws on post-breach mitigation requirements.
  • For more information, please see our recent blog post by Dickstein Shapiro Counsel Aaron Lancaster.

State AGs and the High Court: 2014 Term Preview

  • The October 2014 term of the U.S. Supreme Court is underway, and similar to previous years, there are more than a few disputes with significant interest from state AGs.
  • Dickstein Shapiro Partner Milton Marquis and Counsel Ann-Marie Luciano discuss a few of these cases in a recent blog post, covering topics ranging from the state action exemption, to antitrust liability, to consumers’ rights under the Truth in Lending Act.

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 2:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Consumer Financial Protection Bureau

CFPB Takes Action to Shutter Mortgage Services Referral Schemes

  • The CFPB entered into a Consent Order with Lighthouse Title, Inc. resolving allegations that the company violated Section 8(a) (the anti-kickback provisions) of the Real Estate Settlement Procedures Act and accompanying regulations.
  • The CFPB alleged that the kick-back came from “marketing service agreements” (MSAs) through which Lighthouse would agree to pay for marketing services from real estate brokers and other companies, but where the payment amount was based, in part, on the number of referrals it had received from that vendor.
  • Under the terms of the Consent Order, Lighthouse must pay a $200,000 civil penalty, terminate all existing MSAs, and is prohibited from entering into new MSAs.

Consumer Protection

Iowa Enters Consent Order With Online Lender Despite Claims of Tribal Jurisdiction

  • Iowa AG Tom Miller entered a Consent Order with CashCall, Inc. over claims that it charged consumers exorbitant interest rates – in excess of 169% APR – along with illegal fees associated with online loans, in violation of Iowa’s consumer laws.
  • CashCall had alleged that it was outside Iowa’s regulatory jurisdiction because it was a California entity and only extended its loans through an agreement with Western Sky Financial, LLC, an entity located on the Cheyenne River Sioux Reservation in South Dakota. AG Miller disputed CashCall’s jurisdictional argument.
  • The Consent Order admits no fault, but requires CashCall to pay $1.5 million in restitution and to cease offering future loans to consumers in Iowa. It also forbids CashCall from reporting Iowans to credit reporting agencies, and requires CashCall to request that credit reporting agencies remove its past reports on Iowa borrowers.
  • CashCall is currently involved in multiple lawsuits based on similar allegations, including a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) for violating the Consumer Financial Protection Act’s prohibitions on unfair, deceptive, and abusive acts and practices.

Attorneys General From All 50 States and the Federal Trade Commission Reach Nationwide Settlement on Cramming

  • AT&T Mobility LLC has agreed to pay $80 million to the Federal Trade Commission (FTC) for consumer refunds, $20 million in penalties and fees to the AGs, and a $5 million penalty to the Federal Communications Commission to resolve allegations that unauthorized third-party charges were placed on customer bills for subscriptions and services, a practice commonly referred to as “cramming.”
  • AT&T Mobility issued the following statement:

In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills. Other wireless carriers did the same.

While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.

Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.

Data Privacy

Attorneys General Probe Customer Notification Following JPMorgan Data Breach

  • Connecticut AG George Jepsen and Illinois AG Lisa Madigan are investigating circumstances surrounding JPMorgan Chase & Co.’s (JPMorgan) recent data breach.
  • The AGs appear to be particularly interested in when JPMorgan was aware that its customer data had been breached, and what efforts it took to timely notify customers.
  • As we have noted, data breach notification is largely an issue of state law. In many cases, state laws do not require notification unless customer names were stolen in connection to credit card or bank account access information, or social security numbers. In addition, state laws vary as to how long a company has to notify data-breached customers: some states require a specific period (e.g., one month), whereas others use more ambiguous terms (e.g., a reasonable period). For more on the role of state AGs in this area see our previous blog post.


Gas Developers Agree to Disclose the Financial Risks of Fracking

  • New York AG Eric Schneiderman reached agreements with natural gas developers Anadarko Petroleum Corporation (Anadarko) and EOG Resources, Inc. (EOG) to end a three-year investigation into their use of hydraulic fracturing processes (fracking).
  • Anadarko and EOG agreed to make disclosures in their federal securities filings about the financial risks to investors stemming from the use of fracking. These risks would include potential environmental impacts, such as damage to natural aquifers, as well as the future regulatory action, including bans and moratoriums.
  • The investigation was conducted under the authority of New York’s Martin Act, a 1921 state securities law that provides the AG broad authority to access the financial records of New York businesses.

Financial Industry

New York Attorney General Investigates Securities Ratings Firm

  • New York AG Eric Schneiderman is investigating Standard & Poor’s Financial Services LLC (S&P) in response to allegations that it altered mortgage bond ratings in order to win future business from the issuing banks.
  • S&P has been named as a defendant in multiple lawsuits related to its role in rating mortgage-backed securities and the financial crisis, including separate lawsuits brought by 20 AGs and by the U.S. Department of Justice. Seventeen of the state lawsuits had been joined and removed to federal court as one multidistrict lawsuit. However, as previously blogged, in June a federal judge separated the lawsuits and remanded them back to state courts.

For-Profit Colleges

Fourteen Attorneys General Seek Better Federal Regulation of For-Profit Colleges

  • As announced by Kentucky AG Jack Conway, a bipartisan group of 14 AGs wrote a letter in support of legislation to increase federal oversight of the for-profit college industry.
  • The letter, addressed to U.S. Senator Richard Durbin and U.S. Representative Elijah Cummings, voices the group’s support for S. 2204, the “Proprietary Education Oversight Coordination Improvement Act,” a bill under consideration in Congress that would improve coordination among federal regulators.
  • AGs are employing different methods to deal with recent complaints surrounding for-profit colleges. As we have blogged earlier this year on July 3, July 24, and July 31, these methods include investigations and lawsuits, but also a push for greater state regulations to increase disclosures and provide better information to students.


New York Attorney General Sues Mortgage Rescuers for Fraud

  • New York AG Eric Schneiderman brought a lawsuit against an allegedly fraudulent mortgage rescue operation for violations of New York law. The lawsuit seeks an injunction against the defendants’ actions, restitution, and penalties and costs.
  • The lawsuit alleges that Litvin Law Firm and other defendants induced consumers in 31 states to purchase non-existent “forensic loan audits” and other foreclosure prevention services and would automatically charge consumers a monthly fee ranging from $595 to $750.
  • We have previously blogged on similar fraudulent mortgage relief lawsuits brought by the AGs of Arizona, Indiana, and Massachusetts, among others. In addition, the FTC has initiated many similar lawsuits based on alleged violations of the FTC Act and the Mortgage Assistance Relief Services rule.

State AGs and the High Court: 2014 Term Preview

Posted in Antitrust, Consumer Protection, States v. Federal Government

In recent years, State Attorneys General (AGs) have frequently played the role of both active litigant and friend-of-the-court in cases before the U.S. Supreme Court, and the upcoming 2014 term is proving to be no different. The following is a preview of the major cases with significant AG amicus participation for which certiorari has been granted thus far. In addition to the cases highlighted below, AGs are active this term in representing their states before the court on a diverse array of issues relating to state taxation,[1] habeas petitioner appeal rights,[2] and gerrymandering.[3] AGs are also likely to submit amicus briefs in two major First Amendment cases before the Court this term, Elonis v. United States (whether proof of the defendant’s subjective intent to threaten is necessary for a conviction under 18 U.S.C. § 875(c)),[4] and Reed. v. Town of Gilbert, Arizona (whether the town’s mere assertion of a lack of discriminatory motive renders its facially content-based sign code content-neutral and justifies the code’s differential treatment of petitioners’ religious signs).[5]

  • North Carolina Board of Dental Examiners v. Federal Trade Commission[6]

In this antitrust case involving the application of the state action doctrine as an exemption to federal antitrust liability, the North Carolina Board of Dental Examiners (Board) had issued cease-and-desist letters to non-dentist providers of teeth whitening services, claiming that the provision of teeth whitening services by non-dentists was unlawful. The Federal Trade Commission (FTC) filed an administrative complaint charging the Board with violating Section 5 of the FTC Act by anticompetitively excluding non-dentist providers from the market. The FTC rejected the Board’s contention that the state action doctrine applied, reasoning that the Board’s actions were not actively supervised by state officials and were made by a Board comprised mostly of private, actively-practicing dentists (who were selected by other private actors), who the FTC did not deem to be disinterested.

Twenty-three states filed an amicus brief in support of the Board, arguing that the state action antitrust exemption was adopted by the court because the federal antitrust laws were never intended to interfere with states’ actions as sovereign regulators. The states’ brief cautioned that the potential for antitrust liability on professional-staffed state agencies would undermine the states’ sovereign authority to staff their own agencies as they see fit. The states also argued that the imposition of an active supervision requirement on professional-staffed state agencies would intrude on state supervision of such agencies.

In response, the FTC argued in its brief that the state action doctrine does not shield unsupervised anticompetitive conduct from antitrust scrutiny. The FTC stated that the active supervision requirement of the state action doctrine only protects conduct approved by disinterested public officials, and state boards controlled by market participants are subject to the active supervision requirement because they have strong incentives to restrict competition for the benefit of their members. If the FTC ultimately prevails, look for state legislative proposals designed to modify how members of state boards are selected and supervised to ensure protection under a narrower future state action doctrine.

  • Jesinoski v. Countrywide Home Loans[7]

This case presents the issue as to whether consumers’ right to rescind a transaction under the Truth In Lending Act (TILA) – a right that expires three years after consummation of the transaction – requires the consumer to both notify creditors of the intention to rescind and file an action. Twenty-six states and the District of Columbia said no, arguing in their amicus brief in support of petitioners that TILA does not require consumers to file an action to timely exercise rescission rights. Based on their stated interest in ensuring effective enforcement of TILA, the states expressed concern that imposing a lawsuit requirement would dilute the deterrent function of rescission and may bar many consumers from exercising their rescission rights, as many consumers often do not discover TILA violations until several years after a transaction. A ruling in favor of the respondent could dramatically limit the number of actions brought under TILA.

  • Heien v. North Carolina[8]

This case presents the question of whether a police officer’s mistake of law can nevertheless provide the individualized suspicion necessary under the Fourth Amendment to justify a traffic stop. The petitioner was pulled over by a police officer because one of the rear brake lights on the vehicle was not working. After asking some questions and searching the vehicle, the police officer discovered cocaine. North Carolina law requires all vehicles to have “a stop lamp,” and no court had specified that this meant two working brake lights. Petitioner argued that “reasonable suspicion” must be measured against the correct interpretation of the law, and to allow otherwise would violate various canons of statutory construction, including the maxim that ignorance of the law is no excuse and the rule of lenity.

Nineteen states and the District of Columbia filed an amicus brief in support of North Carolina, arguing that a reasonable mistake of law should not invalidate an otherwise lawful traffic stop. Expressing their concerns about the legal uncertainties that may exist in jurisdictions where an officer’s mistake of law can render a stop illegal, the states asked the court to clarify that only reasonable suspicion is required to justify a traffic stop.

  • Holt v. Hobbs[9]

This case involves the question of whether the Arkansas Department of Corrections grooming policy violates the Religious Land Use and Institutionalized Persons Act of 2000 to the extent that it prohibits the petitioner from growing a one-half-inch beard in accordance with his religious beliefs. Eighteen states filed an amicus brief in support of the Arkansas Department of Corrections, arguing that the Court should defer to Arkansas prison officials as to how to meet their institutional objectives. The states also argued that prison grooming policies serve compelling state interests in security, order, hygiene, and discipline. States will be closely following this case to determine whether their correctional facility grooming policies are at risk.


As the term progresses, the Court is likely to grant certiorari in more cases presenting state issues, and states are likely to continue to submit amicus briefs to advocate for their state’s interests.

[1] See Comptroller of the Treasury of Maryland v. Wynne, No. 13-485 (Argument Date: Nov. 12, 2014); Alabama Dep’t of Revenue v. CSX Transportation, Inc., No. 13-553 (Argument Date: Dec. 9, 2014); Direct Marketing Ass’n v. Brohl, No. 13-1032 (Argument Date: Dec. 8, 2014).

[2] See Jennings v. Stephens, No. 13-7211. Argument Date: Oct. 15, 2014.

[3] Alabama Legislative Black Caucus v. Alabama, No. 13-895. Argument Date: Nov. 12, 2014.

[4] Elonis v. U.S., No. 13-983. Argument Date: Dec. 1, 2014.

[5] Reed v. Town of Gilbert, Arizona, No. 13-502. Argument Date: TBD.

[6] North Carolina Board of Dental Examiners v. FTC, No. 13-534. Argument Date: Oct. 14, 2014.

[7] Jesinoski v. Countrywide Home Loans, No. 13-684. Argument Date:  TBD.

[8] Heien v. North Carolina, No. 13-604. Argument Date: Oct. 6, 2014.

[9] Holt v. Hobbs, No. 13-6827. Argument Date: Oct. 7, 2014.

California Continues to Lead the Nation in Consumer Data Protection

Posted in Consumer Protection, Data Privacy

California governor Jerry Brown recently signed into law AB 1710, requiring businesses that handle customer data to provide identity theft prevention services at no charge for 12 months following a data breach. This first-of-its-kind law goes into effect on January 1, 2015, and demonstrates California’s attention to data privacy issues. In 2002, California became the first state to require customer notification in the event of a data breach. Since then it has created a Privacy Enforcement Unit in the AG’s office, pushed for greater data privacy in mobile commerce, and honed its policies to better address online trends in data security.

At the same time, data breaches are increasing in size and scope. Reports indicate that the recent JPMorgan data breach is the largest ever, affecting up to 76 million households and 7 million small businesses. In some ways, the JPMorgan breach is all the more alarming because it suggests vulnerability even for companies known to have strong security protocols associated with their web presence. Thus, even as data protection laws grow more robust, hackers seem to be growing more capable of mega-scale data breaches.

Large companies like Target and Home Depot, each a victim of recent mega breaches, have voluntarily offered enhanced loss mitigation, such as identity theft prevention services, in connection to data breaches. For these companies, the California law simply codifies what they have already adopted as best practices nationwide. For other companies doing business in California, particularly small and medium sized entities, the new law will create additional costs and uncertain liabilities associated with a data breach. Whether this alone creates the necessary incentives to improve a company’s nationwide data protection efforts will depend on the number of California residents it serves – like other elements of California’s data protection laws, AB 1710 only applies to data from California residents. However, if other states follow California’s lead, it may become harder for companies to simply continue with their current levels of data protection.

One issue still to be resolved is the role of encryption. California’s legislative framework provides a safe harbor from liability for data that is encrypted. But it is not clear what level/standard of encryption is required, or whether that requirement will change over time as hackers develop the means to bypass more basic levels of encryption.

As we have previously blogged, (see, for example, here, here and here), state AGs are becoming more active in the sphere of data protection. The new California law presents a novel approach for post-breach mitigation. Yet companies handling customer information should be aware that AGs are increasingly interested in the procedures companies adopt, even before a breach occurs. (see, here, here and here).

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Employment, False Claims Act, For-Profit Colleges, Health Care, Mortgages/Foreclosures, State AGs in the News

Hot News

More Arrows and Bigger Targets: What Corporate Counsel Need to Know About False Claims Acts

  • Dickstein Shapiro State AG Practice Partner Milton Marquis and Associate Christopher Allen recently published an article on the Association of Corporate Counsel’s website regarding False Claims Act (FCA) litigation.
  • The article explores the historical underpinnings and current trends in FCA litigation and highlights strategies for managing potential FCA liability.
  • To read more, please see the full article.

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 2:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice, will lead an interactive discussion regarding the new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


State Attorneys General Review Competing Bids for Family Dollar

  • According to recent reports, a group of state AGs is reviewing two separate offers by rival stores to acquire Family Dollar Stores, Inc., based on antitrust concerns.
  • On two prior occasions, Family Dollar’s board rejected bids by Dollar General, citing the failure of Dollar General to address antitrust concerns.  Family Dollar decided to accept a lower offer from Dollar Tree, Inc.
  • Dollar General has presented a third, hostile offer directly to Family Dollar’s shareholders and has offered to divest as many as 1,500 stores to alleviate antitrust concerns.
  • The proposed merger between Family Dollar and Dollar Tree is currently under review by the Federal Trade Commission (FTC).

Massachusetts Attorney General Secures Price Cap Concessions as Part of Health Center Merger Settlement

  • As part of its amended consent judgment, Partners HealthCare System, Inc. has agreed to cap prices at Hallmark Health Centers for six and a half years in connection with its planned acquisition of Hallmark Health Corp.
  • The concessions by Partners come after a lengthy antitrust investigation of the acquisition. The consent judgment also includes time-limited agreements by Partners to maintain premerger levels of psychiatric and behavioral health services, to cease from offering all-or-nothing network coverage, to avoid contracts with affiliate physician groups, to limit growth of physicians, and to block further expansion into eastern Massachusetts.
  • The consent judgment must be approved by a Massachusetts Superior Court judge.

Consumer Financial Protection Bureau

Connecticut and Florida Sue Alleged Mortgage Relief Scammer Under New Dodd-Frank Authority

  • Connecticut AG George Jepsen and Florida AG Pam Bondi initiated a lawsuit in federal court against the Resolution Law Group, P.C., the Berger Law Group, P.A., and six other defendants alleged to be operating a fraudulent mortgage assistance program.
  • The AGs brought the lawsuit according to their expanded authority under Section 1042 of the Dodd-Frank Act, which allows state AGs to sue in federal court for violations of the federal Mortgage Assistance Relief Services Rule and other federal consumer financial protection laws.
  • The complaint alleges that the defendants charged consumers large enrollment fees to participate in fake mass-joinder lawsuits against their mortgage lenders or servicers. In some instances, defendants are alleged to have offered low refinancing rates and foreclosure avoidance.
  • The court granted the AGs’ request for temporary restraining orders, freezing defendants’ assets related to the alleged scam during the course of the litigation.

The Consumer Financial Protection Bureau Issues First Order for Violation of Mortgage Servicing Rules

  • The CFPB entered a consent order against Flagstar Bank, F.S.B. for allegedly impeding mortgage borrowers’ attempts to save their houses from foreclosure through federally-mandated loss mitigation and loan modification procedures.
  • This action against Flagstar was the first to be completed under the mortgage servicer rules, which are authorized by the Dodd-Frank Act and went into effect in January 2014.
  • Under the terms of the consent order, Flagstar will pay $27.5 million in redress to affected customers and a $10 million fine. Flagstar must also contact current borrowers and offer loss mitigation options, and will be prohibited from acquiring the servicing rights for default loan portfolios until it can demonstrate that it has proper loss mitigation procedures in place.

Consumer Protection

Illinois Attorney General Obtains $46.2 Million in Refunds From ComEd 

  • Illinois AG Lisa Madigan settled two lawsuits with electricity provider Commonwealth Edison (ComEd) for $46.2 million in customer refunds.
  • The lawsuits, which were filed in 2008 and 2010, alleged that ComEd violated the Illinois Public Utilities Act by improperly charging consumers surcharges connected to the construction of smart grid infrastructure and capital investments, and that the method used to calculate increased rates charged to customers to cover ComEd’s capital investments was improper.
  • The settlement was approved by the Illinois Commerce Commission and will be implemented through credits to customer accounts during the November billing cycle.

Maryland Attorney General Reprimands Company for Charging Veterans to File Benefit Claims

  • Maryland AG Douglas Gansler issued a final order against James Mack and his company Benefits U Earned, LLC, for soliciting money from veterans in exchange for assistance in filing benefit claims with the Department of Veterans Affairs (VA).
  • Federal law requires persons assisting veterans with the benefit claims process to be accredited by the VA. It also prohibits charging fees in connection to assistance filing claims.
  • Under the terms of the Order, Mack and Benefits U Earned must cease offering veterans services, return any fees collected from veterans, and pay a civil penalty of $325,800.


New York Attorney General Reaches Settlement Regarding Airport Workers

  • New York AG Eric Schneiderman reached a settlement with contractor Alstate Maintenance LLC over allegations that it underpaid employees performing skycap services at JFK International Airport. The AG’s investigation found that some workers were paid a wage as low as $3.90 per hour.
  • The investigation was initiated upon a tip from a local chapter of Service Employees International Union and comes amid a push for greater unionization of airport workers.
  • The settlement calls for $625,000 in restitution and another $300,000 in damages, to be distributed to the nearly 40 workers involved.

False Claims Act

Multiple States and the Federal Government Settle With Drug Maker Over Adderall Claims

  • The U.S. Department of Justice (DOJ) and numerous state AGs have announced a multistate settlement with Shire Pharmaceuticals LLC for $56.5 million in connection to allegations that it violated the False Claims Act. Shire also agreed to pay $2.9 million to resolve a separate civil complaint brought by Louisiana for violations of state law.
  • Shire was alleged to have marketed and promoted Adderall XR and other drugs as clinically superior at treating attention deficit hyperactivity disorder (ADHD), even when it had no scientific data to support such claims. Shire is also alleged to have made unsupported claims that Adderall would prevent poor academic performance, loss of employment, criminal behavior, traffic accidents, and sexually transmitted diseases.
  • Under the terms of the settlement, state Medicaid programs will receive $20.7 million, with the rest going to the federal government. In addition, Shire entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services and will be monitored thereunder.

For-Profit Colleges

Organization of For-Profit Colleges Sues Massachusetts Attorney General

  • The Massachusetts Association of Private Career Schools filed a lawsuit against Massachusetts AG Martha Coakley in federal court challenging regulations recently issued by the AG on for-profit educational institutions.
  • The complaint alleges that the regulations are outside the rulemaking authority granted to the AG under Massachusetts General Statutes, Chapter 93A – which does not permit rules that conflict with the FTC Act – and are in violation of the First Amendment and Due Process Clause.

Health Care

New Connecticut Legislation Requires Attorney General Notification for Health Care Mergers

  • Legislation first proposed by Connecticut AG George Jepsen will go into effect on October 1, creating notification requirements for certain acquisitions and mergers in the health care field.
  • The law applies to not-for-profit and for-profit health care providers, and obligates hospitals, health systems and affiliates to give notice to the AG’s office of proposed transactions involving practices comprised of two or more physicians, or when the proposed transactions will result in a group practice comprised of eight or more physicians.
  • AG Jepsen has provided instructions and forms to assist in the notification process.


New York Attorney General Initiates Mortgage “Redlining” Lawsuit

  • New York AG Eric Schneiderman sued Buffalo-area lender Evans Bank, N.A. and Evans Bancorp, Inc. for allegedly denying mortgages to purchasers seeking homes in predominately African-American neighborhoods.
  • The complaint was filed in the U.S. District Court for the Western District of New York and seeks declaratory and injunctive relief, as well as damages and civil penalties for violations of the U.S. Fair Housing Act, New York State Human Rights Law, and Buffalo City Code.

New York Adds $40 Million to Program Helping Homeowners Avoid Foreclosure

  • New York AG Eric Schneiderman announced that his office is committing $40 million in additional funding to extend the operation of the Homeowner Protection Program (HOPP).
  • HOPP serves as a funding conduit for small agencies to provide free counseling and legal advice to homeowners trying to avoid losing their homes to foreclosure.
  • HOPP was established in 2012 with a 3-year, $60 million commitment and, according to the AG’s office, has already helped more than 30,000 families across New York state.

State AGs in the News

Posted in 2014 Election, Antitrust, Charities, Consumer Financial Protection Bureau, Consumer Protection, Environment, False Claims Act, Mortgages/Foreclosures, State AGs in the News, Unclaimed Property

Hot News

Firm Fights Back Against Alleged Unconstitutional Unclaimed Property Audit

  • Temple-Inland, Inc., a subsidiary of International Paper, and three Delaware state officials will present oral arguments on cross motions for summary judgment on October 1 in a lawsuit brought by Temple-Inland over the methods the state can employ to determine unclaimed property obligations.
  • For more information on this case, please see our recent blog post about this issue.

Insights From FTC Commissioner Brill and Nevada Attorney General Masto at Women, Influence & Power In Law Conference

  • Last Friday, Dickstein Shapiro partner Lori Kalani moderated a panel at the 2014 Women, Influence & Power in Law conference, a national forum facilitating women-to-women exchanges on current legal issues.
  • The panel, “Coordinated State and Federal Enforcement Trends: An Up-Close Perspective from the Regulators,” featured insights from FTC Commissioner Julie Brill and Nevada Attorney General Catherine Cortez Masto on how the FTC and states work together on a wide range of issues, including data privacy and data security, antitrust, and consumer protection.
  • When asked how the FTC evaluates a data breach, Commissioner Brill explained that the FTC is not looking for “perfect security,” but instead evaluates whether the affected business took reasonable security measures, including whether the business had an ongoing process to analyze what happens to its data, data policies, encryption, and training of employees.
  • AG Masto emphasized to the audience that data privacy is a priority for state AGs. In light of the many different state requirements on data privacy protection, AG Masto called for legislative action to establish a national, consistent standard.

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 2:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


State Attorneys General Review Proposed Merger Between AT&T and DirecTV

  • According to a press report, California, Florida, and New York have confirmed that they are a part of a multistate group reviewing the proposed merger of AT&T Inc. and DirecTV.  Indiana also reportedly acknowledged that it is reviewing the deal, but did not confirm whether it was part of the multistate group.
  • Their press report stated that the review will focus on whether the merger will reduce competition in service markets where both companies are active; adversely impact the creation, distribution, and cost of programming; or adversely affect development of high-speed broadband.
  • The DOJ and the Federal Communications Commission must approve the proposed deal before it can be finalized.


Indiana Attorney General Files Lawsuit to Halt the Fraudulent Collection of Donations for War Veterans

  • Indiana AG Greg Zoeller filed a lawsuit to stop certain nonprofit organizations from allegedly soliciting donations in support of war veterans without donating the contributions as represented.
  • The AG’s lawsuit alleges that the defendants, operating as Sandbox Veterans of America Incorporated and Catholic Veterans of Indiana Limited, violated the state Deceptive Consumer Sales Act. It also claims that the defendants solicited donations in the name of Iraq and Afghanistan Veterans of America Incorporated, which implicates a legitimate nonprofit organization by the same name based in Washington, D.C., without actually providing proceeds to that organization.
  • The AG seeks a permanent injunction, consumer restitution, civil penalties and investigative costs.

Consumer Protection

State Attorneys General Sue Foreign Language Course Provider for Deceptive Internet Sales Practices

  • Washington AG Bob Ferguson initiated a first of its kind lawsuit against Internet Order LLC and its CEO alleging violations of the federal Restore Online Shoppers’ Confidence Act (ROSCA), state Consumer Protection Act, and state Unsolicited Goods Act. According to AG Ferguson’s office, Washington is the first state to bring claims under ROSCA.
  • According to the complaint, the company provides audio-based foreign language instruction products over the internet, commonly under the brand name “Pimsleur Approach.” The lawsuit alleges that the defendants engaged in deceptive marketing practices by providing introductory lessons for $9.95, but then automatically enrolling consumers, without their consent, in a purchase plan that included up to four follow-on installments costing $256 each.
  • In addition, the lawsuit alleges that consumers faced burdensome cancellation and return processes, “restocking” fees, and threats of collection agency action if they refused to pay. The complaint seeks declaratory and injunctive relief, fees, and costs.
  • Pennsylvania AG Kathleen Kane also filed a lawsuit against Internet Order, making similar allegations and seeking declaratory and injunctive relief, restitution, disgorgement, civil penalties, and costs under the Pennsylvania Unfair Trade Practices and Consumer Protection Law and the state Fictitious Names Act.

Michigan Attorney General Resolves Price Gouging Allegations With One Propane Company and Brings Lawsuit Against Another Propane Company

  • As part of a larger and ongoing investigation, Michigan AG Bill Schuette filed a class action lawsuit against propane retailer AmeriGas alleging that it violated various provisions of the Michigan Consumer Protection Act by charging grossly excessive prices during the colder than normal winter of 2013-2014.
  • The complaint, filed in Berrien County Circuit Court, alleges price gouging, denial of established advance contract pricing, and failure to honor prices quoted for orders.
  • On the same day that he filed the lawsuit, AG Schuette announced that he had reached an agreement with another propane retailer, Ferrellgas, to resolve improper pricing claims. Under the terms of that agreement, Ferrellgas will provide consumer credits totaling more than $100,000.

Consumer Financial Protection Bureau

The CFPB Files Lawsuit Against Payday Lender With Many Heads

  • The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in federal court against a group of U.S. and foreign companies, referred to summarily as Hydra Group, and three individuals who allegedly control Hydra Group, for violations of the Consumer Financial Protection Act, the Truth in Lending Act, and the Electronic Fund Transfer Act.
  • The complaint, filed in the Western District of Missouri on September 8, alleges that the defendants used consumer information purchased from third party lead generators to originate payday loans without consumers’ direct consent. It further alleges that the defendants initiated unauthorized withdrawals from consumers’ bank accounts, while charging thousands of dollars in finance charges on what were initially $200 to $300 loans.
  • The CFPB lawsuit describes a situation similar to one contained in a complaint filed on September 5 by the Federal Trade Commission, also in the Western District of Missouri, charging a web of U.S. and foreign subsidiary companies with similar practices.

CFPB Issues Final Rule to Oversee Large Nonbank Providers of International Money Transfers

  • The CFPB finalized a rule that will subject to the CFPB’s supervisory authority any nonbank company providing more than one million international money transfers per year.
  • The Dodd-Frank Act gives the CFPB the express authority to supervise “larger participants” in consumer financial markets as defined by rule. This is the CFPB’s fourth larger participant rule. The other larger participant rules involved student loan servicing, debt collection, and consumer reporting markets.
  • The final rule is planned to go into effect on December 1, 2014, and will apply to approximately 25 of the largest nonbank international money transfer companies in a $50 billion market space.

CFPB Defines Authority Over Nonbank Auto Finance Companies Through Proposed Rule

  • The CFPB proposed a new rule that would give it authority to supervise nonbank auto finance companies that are “larger participants” in the market and “make, acquire, or refinance 10,000 or more [auto] loans or leases in a year.”
  • According to the CFPB, the proposed rule would provide express authority for the CFPB to ensure that larger nonbank auto finance companies are fairly marketing and disclosing the terms of the loans, providing accurate information to credit bureaus, and engaging in fair debt collection practices.
  • The proposed rule, if finalized, would apply to approximately 38 nonbank auto finance companies, covering about 90 percent of the nonbank auto loan and lease market.


Eight Attorneys General Seek Clarity in Clean Water Act Enforcement

  • A coalition of AGs from seven states and the District of Columbia, led by New York AG Eric Schneiderman, issued comments in a letter to the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers in support of a proposed rule that would expressly include tributaries and adjacent waters (such as wetlands) as “water of the United States” under the federal Clean Water Act (CWA).
  • The need for a clarifying rule stems from two recent U.S. Supreme Court decisions, which allegedly created uncertainty as to whether the CWA applies to some waters, including smaller, seasonal, or rain-dependent streams and wetlands. According to the coalition of AGs, as a result of the uncertainty, roughly 20 million wetland acres and 2 million miles of streams have lost or could lose protection under the CWA.
  • In addition, the coalition highlights that a majority of states have laws in place that could prevent state agencies or municipalities from regulating waters that are not included in the definition of water under the CWA.
  • In contrast, West Virginia AG Patrick Morrissey, argues that including waters such as smaller streams and wetlands as water under CWA jurisdiction will make it harder for small farmers and other local businesses to operate efficiently.

Maryland Attorney General Reaches Settlement for Remediation of Former Steelmaking Site

  • Maryland AG Douglas Gansler announced a $48 million settlement with the new owner of the Sparrows Point steelmaking facility.
  • Under the terms of the settlement, Sparrows Point Terminal, LLC will assume responsibility for environmental remediation by providing an initial $48 million in financial assurances to the Maryland Department of the Environment (MDE), coupled with a budgetary review process every six months and coverage of the MDE’s oversight costs up to $100,000 per year.
  • The settlement is part of a larger effort to redevelop the 3100-acre Sparrows Point site into a hub for shipping, energy, and advanced manufacturing uses.

False Claims Act

Forty-Six States and the District of Columbia Settle With Medicaid Supplier

  • New York AG Eric Schneiderman announced that 46 states and the District of Columbia settled claims that Medtronic violated the False Claims Act by improperly inducing physicians to recommend its devices. AG Schneiderman led a national team in negotiating the settlement.
  • Under the terms of the settlement, Medtronic will pay in excess of $362,000 to the settling states’ Medicaid programs. In May, the U.S. Department of Justice settled related claims against Medtronic for $9.9 million.
  • The lawsuit was initiated by a whisteblower in the U.S. District Court for the Eastern District of California under the qui tam provisions of the False Claims Act.


Virginia Attorney General Drops Two Banks From Lawsuit After Learning About Confidential Settlement

  • Last week we blogged about Virginia AG Mark Herring’s $1.15 billion lawsuit against 13 national banks for alleged false claims and fraudulent misrepresentations regarding the value of mortgage-backed securities sold to the Virginia Retirement System.
  • This week, according to a news report, the AG’s office has dropped J.P. Morgan Securities LLC, as current owner of Bear, Stearns & Co., as well as its subsidiary WAMU Capital Corp., from that lawsuit after learning that AG Herring’s predecessor had reached a confidential settlement with JPMorgan Chase in 2013 that precludes this action. According to the news report and the AG’s website, the lawsuit will proceed against the remaining 11 banks.

Firm Fights Back Against Alleged Unconstitutional Unclaimed Property Audit

Posted in Unclaimed Property

As we’ve noted previously, state unclaimed property administrators are getting creative in their efforts to restore their states’ battered finances. Now companies are getting equally creative in their efforts to fight back.

Earlier this summer, Temple-Inland, Inc. (“Temple-Inland”), a subsidiary of International Paper, filed a lawsuit against three Delaware state unclaimed property officials and the state’s outside audit firm, Kelmar Associates, LLC (“Kelmar”) (Kelmar was voluntarily dismissed from the suit in July). The lawsuit alleges that the methodology Kelmar employed to audit Temple-Inland, including the extrapolation methodology used to estimate Temple-Inland’s unclaimed property obligations, was unconstitutional.

According to the suit, Delaware estimated that Temple-Inland had more than $2 million in total unclaimed property obligations, despite that Kelmar identified only $147.30 in property that should have been escheated to Delaware during the period covered by the audit (1981-2008). Although the audit showed that Temple-Inland was in substantial compliance with Delaware unclaimed property law for the years for which Temple-Inland had records (2003 and beyond), Kelmar nevertheless estimated Temple-Inland’s liability for years that records no longer existed (pre-2003), applying a recordkeeping requirement enacted in 2010 that Temple-Inland claims cannot be applied retroactively.

In July, Temple-Inland moved for summary judgment, arguing, among other things, that estimations of escheat liability are improper because a state’s right to escheat is derivative of the property rights of the actual owner. If the actual owners’ property rights cannot be conclusively established, according to Temple-Inland, then the state has no rights to the property either.

Concurrently with Temple-Inland’s filing of its motion for summary judgment, Delaware moved to dismiss the complaint, arguing that estimates of escheat liability always have occurred and the amendments to its statute allowing reasonable estimates where records are unavailable was simply to codify existing practice.

Oral arguments will be held on the motions for summary judgment and to dismiss on October 1.

Coming hard on the heels of the U.S. Chamber of Commerce’s (the “Chamber”) recently issued unclaimed property best practices, Temple-Inland’s lawsuit could be a harbinger of things to come, with corporate America showing a newfound desire to fight back against what the Chamber and Temple-Inland lawsuit allege are abusive practices by private audit firms.