State AG Monitor

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.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, Mortgages/Foreclosures, State AGs in the News

Hot News

Tennessee Appoints New Attorney General

  • The Tennessee Supreme Court appointed Republican Herbert Slatery III as the state’s next Attorney General. Tennessee is the only state where the Supreme Court appoints the Attorney General.
  • For more information, please see our recent blog post on this appointment.

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 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.


New York Attorney General Sues to Block Pharma Manufacturer From Canceling Production of Drug

  • New York AG Eric Schneiderman brought a lawsuit against Actavis plc and subsidiary Forest Laboratories to prevent them from ceasing production of an Alzheimer’s drug, Namenda, allegedly to encourage patients to transition to a newer and potentially more profitable version, Namenda XR.
  • The lawsuit claims that Actavis is violating state and federal antitrust laws by pulling Namenda from the market to force patients to use Namenda XR because the patent on the former will soon expire, allowing for competition from generic drug manufacturers. The lawsuit alleges that once patients switch to Namenda XR, which has many years remaining under patent protection, it will be too burdensome for patients to switch back to generic versions of Namenda once they become available.
  • The lawsuit was filed in the U.S. District Court for the Southern District of New York on September 15.

Consumer Financial Protection Bureau

CFPB Sues For-Profit Colleges Alleging Predatory Lending Practices

  • The Consumer Financial Protection Bureau (CFPB) sued Corinthian Colleges, Inc. for allegedly illegal predatory lending practices. The complaint, filed in U.S. District Court for the Northern District of Illinois, alleges violations of the Consumer Financial Protection Act and the Fair Debt Collection Practices Act. It seeks injunctive and declaratory relief, damages, restitution, disgorgement, rescission, civil penalties, and costs.
  • Corinthian responded in a statement that it strongly disputes the CFPB’s allegations, stating that the complaint “wrongly disparages the career services assistance that we offer our graduates and mischaracterizes both the purpose and practices of the ‘Genesis’ lending program.” Corinthian also indicated that the CFPB’s lawsuit may be disruptive to the implementation of its July 3rd agreement with the U.S. Department of Education, designed to provide an orderly transition for Corinthian students.

Consumer Protection

California Expands Attorney General’s Power to Protect Consumers’ Ability to Leave Online Reviews

  • California recently signed into law a bill that will preserve consumers’ ability to leave negative reviews of vendors on websites like
  • The law is designed to address a growing practice whereby vendors allegedly use contractual provisions in accompanying terms of service to waive customers’ rights to post online reviews or to impose penalties for posting negative reviews of related products or services.
  • Assembly Bill 2365 prohibits a contract or proposed contract for the sale or lease of consumer goods or services from including a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services. The bill also makes it unlawful to threaten or to seek to enforce a provision that it prohibits, or otherwise penalize a consumer for making a protected statement.
  • Under the new law, the AG, the consumer, or a district or city attorney can pursue civil actions for violations, with fines of $2,500 for initial violations; $5,000 for subsequent violations; and an additional $10,000 for willful, intentional, or reckless violations.

Connecticut Attorney General Seeks Answers to Questions About Privacy and Operation of the Apple Watch

  • Connecticut AG George Jepsen sent a letter to Apple Chief Executive Officer Tim Cook requesting answers to questions regarding the design and operation of the new Apple Watch.
  • AG Jepsen’s letter poses several questions for Cook, including whether the watch will collect personal information and consumer data; if so, how will consumer consent to collect and share such information be obtained and how will such data be stored and safeguarded; whether Apple will review the privacy policies of application developers; and how Apple intends to monitor and enforce compliance with its guidelines regarding consumer health information.

Vermont Attorney General Settles Allegations of Consumer Protection Violations With Credit Card Processing Firm

  • Vermont AG William H. Sorrell  settled claims against Merchant Processing Solutions, LLC for allegedly violating the state Consumer Protection Act by using deceptive representations, failing to make required disclosures, and failing to register as a telephone solicitor.
    • Among other things, the AG claims that the company used deceptive language regarding the scope of consumer savings and advertised well-known companies as clients when they were not actual clients.
    • The settlement requires Merchant Processing Solutions to pay more than $169,000 in restitution to affected companies and a $100,000 civil penalty to the state. The settlement also subjects the company to injunctive relief, which includes requiring it to comply with state law and register with the secretary of state.

North Carolina Attorney General Creates Consumer Education Program for College Students

  • North Carolina AG Roy Cooper initiated a program to help college students increase their consumer savviness.
  • The “College Cash & Credit Tour” will bring AG Cooper and experts from his office to six different college campuses in North Carolina to give presentations that include information on how to manage student loan debt, how to use credit wisely, and how to avoid identity theft.
  • As part of this initiative, the AG also will post videos of the presentations on his website, sponsor online chats to answer questions from students on these topics, and provide a checklist of steps students can take to protect themselves from consumer problems.

Data Privacy

Vermont Attorney General Settles Privacy Case Against Furniture and Electronics Leasing Company

  • Pursuant to a settlement with Vermont AG William H. Sorrell, SEI/Aaron’s Inc., a franchise of Aaron’s, Inc., has agreed to pay $45,000 to the state and $2,000 to each of the three affected consumers for allegedly placing and using remote monitoring software on leased computers in violation of the Vermont Consumer Protection Act.
  • Aaron’s “Detective Mode” software was designed to assist in the recovery of the computers in the event of loss or theft. In at least three cases, the software was allegedly activated—monitoring keystrokes and transmitting screen shots to Aarons—without any evidence of loss or theft.


New Jersey Attorney General is One Step Closer to Settling Passaic River Litigation

  • Acting New Jersey AG John Hoffman and the state Department of Environmental Protection announced a proposed settlement with Occidental Chemical Corp., the successor in interest to Diamond Shamrock Chemicals Company and the last remaining defendant in the almost nine-year-old litigation, over the alleged contamination of the Passaic River.
  • Under the terms of the proposed settlement, Occidental will pay $190 million to the state to resolve any potential liability for cleanup and remediation costs, natural resource damages, and other damages related to the alleged decades-long discharge of hazardous chemicals into the Passaic River.
  • The agreement is subject to a public comment period and approval by a state superior court judge.


Virginia Attorney General Sues Banks for Allegedly Fraudulently Selling Mortgage-Backed Securities to the Virginia Retirement System

  • Virginia AG Mark R. Herring announced that he filed a lawsuit against 13 national banks seeking $1.15 billion for alleged false claims and fraudulent misrepresentations regarding the value of residential mortgage-backed securities sold to the Virginia Retirement System between 2004 and 2010.
  • Because the Virginia Retirement System is funded in part by taxpayers, AG Herring sued under the Virginia Fraud Against Taxpayers Act (the Act). He also alleged actual and constructive fraud. The lawsuit is the largest financial fraud lawsuit ever brought by the state and the largest lawsuit ever brought under the Act.
  • In addition to damages, Virginia will seek civil penalties of $5,500 to $11,000 for each violation, interest, costs, and fees.

BREAKING NEWS: Tennessee Supreme Court Appoints New Attorney General

Posted in State AGs in the News

The Tennessee Supreme Court today appointed Republican Herbert Slatery III as the state’s next Attorney General. Tennessee is the only state where the Supreme Court appoints the Attorney General.

The Court appointed Slatery from a pool of eight candidates, including current Democratic AG Bob Cooper. Slatery has been Chief Legal Counsel to Governor Bill Haslam since 2011. Slatery previously was in private practice in the Knoxville firm of Egerton, McAfee, Armistead & Davis, P.C. for 30 years, and served as Chairman and Director of the Public Building Authority of Knox County and Knoxville. The selection of Tennessee’s AG was a significant issue in the recent Tennessee Supreme Court retention elections, in which three Democratic justices all prevailed in races to retain their seats.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Employment, Environment, Health Care, Intellectual Property, Pharmaceuticals, States v. Federal Government

Hot News

A Tale of Two “Patent Troll” Cases: Contrasting Recent Developments in the Vermont and Nebraska AGs’ Litigations

  • We have been following Vermont AG Bill Sorrell’s groundbreaking consumer protection lawsuit against alleged patent troll MPHJ since it was filed in 2013. At the same time, we have been noting the progress of the reverse-image federal case in which MPHJ and another alleged patent troll, Activision TV, Inc., have sought to enjoin Nebraska AG Jon Bruning from bringing his own enforcement action similar to Vermont’s.
  • The fortunes of these two AG cases diverged further recently. To read about developments in these cases, please see our posted update.

Chief Deputy Attorneys General Provide Valuable Perspectives at 2014 SCG Legal Annual Meeting

  • This week Dickstein Shapiro partner JB Kelly moderated a panel at the 2014 Annual Meeting of the State Capital Group (SCG Legal), a global network of over 145 preeminent independent law firms, of which Dickstein Shapiro is a member firm.
  • The panel, “Cooperation & Collaboration Among State Attorneys General: A Perspective from Chief Deputy Attorneys General,” offered a behind-the-scenes look at the anatomy of an AG’s office and insight on the collaboration that often occurs between offices regarding investigations and enforcement actions.  For more information, please see our summary of this event.

2014 Election

Delaware Primary Election Results

  • Lieutenant Governor Matt Denn (D) and Ted Kittila (R) received their respective parties’ nominations for AG after both ran unopposed in the primary. Incumbent AG Beau Biden (D) chose not to run for reelection to focus on the 2016 race for governor.

Massachusetts Primary Election Results

  • Maura Healey defeated Warren Tolman in the Democratic primary by a margin of 62% to 38%. In November’s general election, Healey will face John Miller, who ran unopposed in the Republican primary.

New York Primary Election Results

  • Incumbent AG Eric Schneiderman (D) and John Cahill (R) received their respective parties’ nominations after both ran unopposed in the primary.

Rhode Island Primary Election Results

  • Incumbent AG Peter Kilmartin (D) and Dawson Hodgson (R) received their respective parties’ nominations after both ran unopposed in the primary.


Coalition of 13 Attorneys General File Amicus Brief in Antitrust Case

  • A coalition of 13 AGs, led by New York AG Eric Schneiderman, filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit requesting that the court affirm a ruling by the Federal Trade Commission that a pipe fitting company violated antitrust laws. The AGs assert that such a ruling is necessary to maintain rules that prevent market dominant companies from improperly excluding rivals.
  • The AGs caution that the petitioner’s amici urge the court to impose a new and unduly restrictive standard on government enforcers to meet their prima facie burden of showing harm to competition. The restrictive standard would require direct evidence that an exclusionary practice actually affected prices or quantities, or proof that a competitor would actually have gained a much larger share of the market absent the monopolist’s exclusivity agreements.
  • The AGs argue in their brief that the government is not required to provide direct evidence of actual harm to competition caused by the exclusive dealing and that it is enough for an antitrust enforcer to raise a reasonable inference of competitive harm by proving that a monopolist’s exclusive dealing substantially foreclosed its rivals from the market.

Massachusetts Attorney General to Renegotiate With Partners HealthCare Regarding Planned Acquisition of Two Hospitals

  • Massachusetts AG Martha Coakley will renegotiate agreements with Partners HealthCare regarding its acquisition of two hospitals after the state health policy commission, which was reviewing the deals, stated that the transactions could raise costs and potentially stifle competition.
  • According to a spokesperson for the AG, the AG’s office “specifically retained the ability to reengage with Partners.”
  • The agreements will require approval from a state superior court. A hearing is scheduled for September 29.

Climate Change

New York Attorney General Issues Extreme Rainfall Report

  • New York AG Eric Schneiderman issued a report detailing the increased frequency and intensity of extreme rainfall events in the state, a recommended response, and the measures his office has taken in this area.
  • According to the report, there has been a dramatic increase in the frequency and intensity of extreme rainstorms in the state. The AG acknowledges that no individual storm can be tied to climate change, but states that extreme rainfall trends are consistent with scientists’ predictions of weather patterns attributable to climate change.
  • The report outlines the efforts the AG’s office has taken in recent years relating to clean air, water, and climate change issues. In addition, the report recommends reducing emissions of greenhouse gases, increasing community resiliency by considering extreme rainfall and climate change trends in construction projects and building codes, and expanding the state’s involvement in national and international antipollution efforts.

Consumer Financial Protection Bureau

CFPB Issues Bulletin Informing Credit Issuers of Risks of Promoting Low or No Interest Offers Without Proper Disclosures

  • The Consumer Financial Protection Bureau (CFPB) issued a bulletin to warn credit issuers that low or no interest offers without proper disclosures may violate Regulation Z, which requires disclosure of certain information, or the Dodd-Frank Act, which prohibits certain deceptive or abusive acts or practices.
  • Many credit cards offer interest-free grace periods for new purchases if the purchaser pays the total statement balance by the statement due date. According to the bulletin, offering promotional low or no annual percentage rates (APRs) on certain transactions, such as balance transfers, over a defined period of time, without disclosing that purchasers may lose grace periods on new purchases may violate Regulation Z and/or the Dodd-Frank Act.
  • To avoid violations, the CFPB recommends that all solicitations, applications, account materials, and convenience checks comply with Regulation Z and that all marketing materials clearly, prominently, and accurately describe the costs, conditions, and limitations of the offer and the effect of promotional APRs on grace periods.

Consumer Protection

NAAG Sends Letter to FCC Requesting Formal Opinion on Use of Call-Blocking Technology

  • The National Association of Attorneys General (NAAG) sent a letter, signed by 39 AGs, to the Federal Communications Commission (FCC) formally requesting an opinion regarding telephone carriers’ legal ability to implement call-blocking technology.
  • According to the letter, state law enforcement officials are making efforts to identify and prosecute those that engage in illegal telemarketing, but that call-blocking technology, such as NoMoRobo, Call Control, and Telemarketing Guard, present a major advancement towards a solution. According to the AGs, phone carriers are not currently using this technology because they believe that federal law prevents them from doing so on their customers’ behalf.
  • The letter specifically requests a formal opinion on these issues, including the FCC’s position on whether carriers can legally block certain types of incoming calls; what legal prohibitions, if any, prevent carriers from implementing call-blocking technology; and whether an affirmative customer opt-in to use of such technology is required.

Michigan Attorney General Acknowledges Role on Executive Committee Investigating General Motors

  • Michigan AG Bill Schuette acknowledged that he is among a group of AGs that serve on an executive committee overseeing the investigation of General Motors Co.’s (GM) recall and safety procedures following its recall of vehicles with allegedly faulty ignition switches.
  • We previously blogged about a multistate investigation confirmed by Florida AG Pam Bondi. According to a news report, in July GM stated that 45 states, the U.S. Attorney’s Office, the Federal Bureau of Investigation, a federal grand jury, and the U.S. Securities and Exchange Commission were investigating its conduct.
  • AG Schuette noted that consumer protection was a fundamental concern to him in this investigation. He also stated that the coordinated federal and state investigation would be “exhaustive and fair” and would require a “give and take between and among the states and the federal government.”

Data Privacy

Attorneys General Issue Warnings and Recommendations to Consumers Following Alleged Home Depot Data Breach

  • According to a news report, South Dakota AG Marty Jackley has confirmed that he and other AGs have formed a working group to directly coordinate with Home Depot to address an alleged data breach of customer information. A spokesperson for Connecticut AG George Jepsen stated that California, Connecticut, and Illinois would lead a multistate effort, in which New York and Iowa would also participate.
  • AG Jackley stated that authorities are investigating the alleged breach and that the full scope is still being determined, but that it is possible that as early as this past spring unauthorized individuals may have accessed Home Depot customer data. The affected data may include customer names and credit and debit card numbers, expiration dates, and security codes. It is unclear at this point whether the alleged breach affected point-of-sale retail customers, in-store customers, online shoppers, or some combination of those customers.
  • In addition, multiple AGs have posted information and consumer recommendations on their websites related to the alleged breach. Specifically, AG Jackley recommends that Home Depot customers monitor their accounts for unauthorized charges and report any such charges immediately. AG Jackley also recommends that all consumers, regardless of whether they think they have been affected by this alleged breach, proactively monitor their credit reports.

Attorneys General Issue Warnings and Recommendations to Patients Following Alleged Health System Data Breach

  • Several AGs, including Illinois AG Lisa Madigan, have posted alerts and consumer recommendations for an alleged data breach of Community Health Systems’ patient information.
  • Community Health Systems announced that it believes that it experienced data breaches in April and June 2014, during which unauthorized individuals may have gained access to nonmedical patient information, including names, addresses, birthdates, telephone and social security numbers, and employer names. The company recently sent letters to potentially affected individuals.


Federal Appellate Court Rules in Favor of Indiana Attorney General in Case Challenging State Right to Work Law

  • Indiana AG Greg Zoeller announced a victory in an appeal to the U.S. Court of Appeals for the Seventh Circuit challenging the state’s right to work law, which prohibits the charging of union dues to nonmembers as a condition of employment. In its opinion, the Seventh Circuit affirmed the federal district court and held that the state law, which AG Zoeller was defending, is not preempted by federal law and does not violate the U.S. Constitution.
  • “Now that the federal courts have concluded the statute the people’s elected representatives in the Legislature passed does not violate federal law, we will argue that the statute also complies with the Indiana Constitution and ought to be upheld,” stated AG Zoeller.
  • Two days after the Seventh Circuit’s decision, in a separate legal challenge to the law by the same plaintiffs, the Indiana Supreme Court heard oral arguments. During the arguments, the AG’s office argued in defense of the law. “The State contends that the elected legislators were within their authority to craft a policy prohibiting involuntary union dues and that this statute does not violate the Indiana Constitution,” stated the AG.


Twelve Attorneys General File Motion to Expedite Briefing in Lawsuit Against EPA

  • Twelve AGs, led by West Virginia AG Patrick Morrisey, filed a motion to expedite briefing in a lawsuit that they filed against the U.S. Environmental Protection Agency (EPA). The lawsuit challenges a prior settlement agreement in which the EPA committed to proposing and finalizing a rule that will require states to regulate the emissions of certain power plants under the Clean Air Act.
  • The motion requests that the court merge dispositive motion and merits briefing, and schedule oral argument as soon as practicable upon the completion of briefing. The AGs assert that a consolidated briefing schedule will reduce the irreparable harm to the states and the public that will occur if they have to wait for a decision following a nonexpedited briefing schedule, which the AGs claim could take more than a year.
  • “The regulations EPA seeks to impose on the States are illegal and need to be dismissed as quickly as possible,” states AG Morrisey. “In order to comply with the levels of emissions reduction required by the EPA, States will have to completely re-evaluate and possibly restructure their energy sector, implement new ways to reduce consumer demand for energy and overhaul how utilities are regulated. This is a considerable undertaking for States, and should not be done until a court can determine whether the regulations are even legal.”

Health Care

Illinois Attorney General Proposes Legislation to Allow Use of Video and Audio Monitoring in Rooms of Nursing Home Residents

  • Illinois AG Lisa Madigan proposed legislation that will allow residents of nursing homes and rehabilitation facilities and their families to purchase and install video or audio monitoring devices in the residents’ rooms.
  • According to the AG, this proposal is part of an ongoing initiative to increase protections for nursing home residents and comes in response to recent complaints from residents and their families regarding the residents’ care and security.
  • The proposed legislation would, among other things, require resident and roommate consent; prohibit facility retaliation for use of the devices; provide for recordings to be admissible into evidence in administrative, civil, and criminal proceedings; and provide for misdemeanor and felony penalties.


U.S. Attorney General Announces New Regulation Regarding Collection of Unused Prescription Drugs

  • U.S. AG Eric Holder announced a new Drug Enforcement Administration regulation that will allow pharmacies, hospitals, clinics, and other authorized collectors to serve as authorized drop-off sites for unused prescription drugs. The regulation also will allow long-term care facilities to collect unused prescription drugs from residents and prescription drug users to mail unused medications to authorized collectors.
  • The regulation stems from the Secure and Responsible Drug Disposal Act, signed by President Obama in 2010, and builds on a national program that allows disposal at police stations and other secure areas.
  • State AGs also have focused on prescription drug abuse problems. For example, see our recent blog post about the National Association of Attorneys General Summer Meeting in Mackinac Island, Michigan, where AGs continued their discussions of prescription drug abuse and possible tools to combat the problem, including prescription drug monitoring programs and public education campaigns.

States v. Federal Government

Washington Attorney General and Governor Refuse to Extend Dispute Resolution Process With Federal Government Relating to Cleanup of Hazardous Waste Site

  • Washington AG Bob Ferguson and Washington Governor Jay Inslee announced that they would not extend the dispute resolution process with the U.S. Department of Energy (DOE) regarding the cleanup of a radioactive and chemical hazardous waste site in Hanford, Washington.
  • As we previously blogged, the state had triggered a 40-day dispute resolution process after the state and the DOE were unable to agree on proposed amendments to a consent decree that governs the cleanup. Since that process began, the deadline for the conclusion of the process has been extended twice. According to the AG, the parties met several times during that period, but did not reach an agreement.
  • The state has 30 days from the expiration of the deadline to file a motion in federal district court asking the court to issue an order directing the DOE to implement the state’s plan. In the meantime, the parties will continue to try to reach an agreement.

Chief Deputy Attorneys General Provide Valuable Perspectives at 2014 SCG Legal Annual Meeting

Posted in State AGs in the News

On Monday, September 8, Dickstein Shapiro partner JB Kelly moderated a panel at the 2014 Annual Meeting of the State Capital Group (SCG Legal), a global network of over 145 preeminent independent law firms, of which Dickstein Shapiro is a member firm. The panel, “Cooperation & Collaboration Among State Attorneys General: A Perspective from Chief Deputy Attorneys General,” offered a behind–the-scenes look at the anatomy of an AG’s office and insight on the collaboration that often occurs between offices regarding investigations and enforcement actions. Kevin St. John, Wisconsin Deputy Attorney General, and Katherine Winfree, chief of staff of the Federal Communications Commission Enforcement Bureau and former chief deputy of the State of Maryland, spoke on the panel. Some highlights include:

  • National Association of Attorneys General (NAAG) meetings, as well as the current NAAG President, often set the tone for what issues AG offices will pursue.
  • AG offices use meetings such as NAAG to develop collaborative relationships and those relationships can result in working together as a multistate group to expand their reach and maximize resources.
  • States involved in a multistate investigation often have varying degrees of participation and may or may not participate in a multistate resolution. Ms. Winfree noted that State AG offices place value on preventing future harm to consumers as well as collecting civil penalties to fund consumer education and future investigations.
  • AG offices collaborate in other ways such as jointly filing amicus briefs, or sending joint letters to Congress or federal regulators. State AGs often join together, especially on matters where they are in opposition to the Federal Government, to increase their impact on issues that are important to their state.

As Deputy AG St. John aptly pointed out, topics at meetings such as NAAG should be of interest to businesses, as they may become the subject of an investigation, even a multistate one. For example, as we have previously reported, after Maryland AG and NAAG President-Elect Douglas Gansler announced that his 2012-2013 Presidential Initiative would relate to privacy and the internet, there was a surge of investigations related to this issue. Businesses faced with an investigation should be prepared for the possibility that multiple AG offices will get involved because these offices can and do collaborate.

A Tale of Two “Patent Troll” Cases: Contrasting Recent Developments in the Vermont and Nebraska AGs’ Litigations

Posted in Consumer Protection, Intellectual Property, States v. Federal Government

We have been following Vermont AG Bill Sorrell’s groundbreaking consumer protection lawsuit against alleged patent troll MPHJ since it was filed in 2013. At the same time, we have been noting the progress of the reverse-image federal case in which MPHJ and another alleged patent troll, Activision TV, Inc.,[1] have sought to enjoin Nebraska AG Jon Bruning from bringing his own enforcement action similar to Vermont’s (see, e.g., here, here, and here).

The fortunes of these two AG cases diverged further over the last several days. In Vermont, a state court on Thursday rejected MPHJ’s attempt to dismiss the Vermont AG’s case for lack of jurisdiction. In stark contrast, a Nebraska federal court on Tuesday granted the companies’ motions for injunctions against the Nebraska AG and awarded them attorney fees and costs. See Memorandum Order, Activision TV, Inc. v. Bruning, No. 8:13-cv-00215 (D. Neb. Sept. 2, 2014). That these relatively similar cases have almost simultaneously resulted in such different outcomes demonstrates in a nutshell the complexity of the myriad issues involved, as well as the role AGs have carved for themselves at the center of the ongoing debate over the current state of the patent system.

Following Vermont’s victory earlier this summer on its motion to remand, the Vermont AG’s office chalked up another win when Vermont Superior Court Judge Helen M. Toor rejected MPHJ’s argument that state courts lack jurisdiction over its conduct. Judge Toor’s decision concluded that, because the Vermont AG alleged that the letters sent by the company to individuals, businesses, and organizations in the state contained allegedly false and deceptive statements and thus were themselves violations of Vermont law, the very act of MPHJ sending those letters was sufficient minimum contact to vest jurisdiction in Vermont state courts. She further held that Vermont has a powerful interest in enforcing its own consumer protection laws to protect its own citizens against fraudulent and deceptive conduct. Because courts in other states likely would not conclude that they had jurisdiction over Vermont consumer protection claims, Vermont courts likely provide the only forum for resolving the state’s allegations. As a result of this decision, the Vermont AG’s case will move forward, with discovery currently scheduled to conclude by May 28, 2015.

In contrast, a few days later and 1,500 miles away, U.S. District Court Judge Joseph F. Bataillon handed a setback to Nebraska AG Jon Bruning by granting summary judgment in favor of MPHJ and another alleged patent troll, and issuing injunctions against the AG’s office’s attempt to enforce consumer protection laws against the companies. Judge Bataillon reiterated his earlier finding that federal patent law preempts Nebraska consumer protection law. He then held that the Nebraska AG’s office had failed to overcome this finding by demonstrating that the alleged trolls or their counsel had made claims that were objectively or subjectively baseless and made in bad faith. The court further held that the First Amendment also provided grounds for relief, noting that each company “has a right to both enforce its patents and the right to counsel of its choosing,” including when a patent owner is merely “threaten[ing] suit for infringement.” On these grounds, the court granted injunctions preventing the AG’s office from:

[P]ursuing any action against the plaintiff[s] as to these patents and to plaintiff[s’] patent enforcement activity in relation thereto, including plaintiff[s’] counsel, unless the Attorney General can make a showing of bad faith, based on actions of plaintiff[s] that show both an objective and subjective baselessness, as to past or future activities.

The court also granted both companies’ motions for attorney fees and costs in an amount to be determined.

It should be kept in mind that the developments in these cases, while important, are just one aspect of the wider, ongoing debate over the issues raised by alleged patent trolls and the patent system more broadly. As the Vermont litigation continues and the Nebraska decision is possibly appealed, even these rulings are far from definitive guidance on where the debate will lead. Meanwhile, AGs remain engaged on this issue in a number of other ways. For example, 44 AGs submitted formal comments on the Federal Trade Commission’s (FTC) recent proposal to investigate the role and impact of patent assertion entities on competition, in which those AGs urged the FTC to share its findings with AGs to facilitate their collaborative consumer protection role.

We will continue to monitor these and other developments as they occur. For now, the only thing that remains clear in the wake of these developments is that AGs will remain deeply involved in representing the interests of their states and citizens on this subject.

[1] Activision TV, Inc., is not related to the NASDAQ-listed entertainment software company Activision Blizzard, Inc.