Congratulations to Ann-Marie Luciano!
- State AG Monitor wishes to congratulate blog contributor Ann-Marie Luciano, who was elected to partner in the State Attorneys General Practice in Dickstein Shapiro’s Washington, DC, office as of January 1, 2015. Ann-Marie represents clients facing litigation and investigations brought by the Federal Trade Commission, Department of Justice, State AGs, and other regulators in a wide array of industries, including telecommunications, consumer technology, financial services, and education. Ann-Marie also advises clients on antitrust and consumer protection compliance issues, and counsels on potential acquisitions from an antitrust perspective. Ann-Marie earned a B.A., magna cum laude, from Allegheny College and a J.D. from Cornell University Law School.
Indiana Seeks to Regulate E-Cigarettes as Regular Cigarettes
- Indiana AG Greg Zoeller is working with the Indiana legislature to create and modify the state regulatory framework to better address the growing use of e-cigarettes among teenagers.
- The proposed legislation would require “vape shops” to be licensed and would give more oversight authority to the Indiana Alcohol and Tobacco Commission. It would also tax e-cigarettes in similar fashion to that of regular cigarettes, include them in the statewide ban on cigarettes sales to persons under age 18, and require child-resistant packaging to protect against accidental exposure.
- AG Zoeller currently sits as vice chair of the National Association of Attorneys General (NAAG) Tobacco Committee, where he promotes federal regulation of e-cigarettes similar to traditional tobacco products.
Massachusetts Resolves Allegations of Deceptive Sales Practices With Electricity Supplier
- Massachusetts AG Martha Coakley reached an agreement with Just Energy Group Inc. to resolve allegations that it deceived consumers through marketing and selling electricity supply contracts.
- The lawsuit alleged that Just Energy, through a third-party telemarketing vendor and door-to-door agents, misrepresented the true cost of service, falsely claimed to offer products affiliated with a state-run program, entered consumers into agreements without their consent, and charged costly termination fees that were not adequately disclosed.
- The Assurance of Discontinuance was filed in Suffolk Superior Court and requires Just Energy to pay $3.8 million to an independent trust fund for purposes of making restitution payments to certain consumers, and $200,000 to the Commonwealth.
False Claims Act
Five States Settle With Dialysis Provider Over Allegations of Illegal Kickbacks
- Colorado AG John Suthers, along with the AGs from California, Florida, Kentucky, and Ohio, reached an agreement with DaVita Healthcare Partners Inc. to resolve claims that DaVita violated state False Claims Acts by submitting false and fraudulent claims to state Medicaid programs.
- The AGs’ claims were based on allegations that DaVita provided a “kickback” through buying or selling ownership shares in joint ventures to the physicians at prices that were manipulated to make the transactions financially favorable for the physicians, with the understanding that the physicians would primarily refer patients to the resulting jointly-owned dialysis centers.
- Under the terms of the state settlement agreement, DaVita will pay $22 million to the five states, with Colorado receiving $3 million. DaVita previously settled with the U.S. Department of Justice on related allegations of violating federal law, agreeing to pay $350 million in restitution and $39 million in civil forfeiture. DaVita also entered into a corporate integrity agreement with the U.S. Department of Health and Human Services which requires it to restructure certain business arrangements and to appoint an independent monitor to prospectively review DaVita’s future business arrangements.
Massachusetts Settles With Telecom Provider for Overcharging the State
- Massachusetts AG Martha Coakley settled with Verizon New England Inc. over claims that the company overcharged the Commonwealth for telecommunications services provided under a statewide procurement contract. The settlement resolves a lawsuit filed by a whistleblower alleging violations of the False Claims Act, in which the Commonwealth intervened.
- The lawsuit specifically alleged that Verizon invoiced certain state customers at rates higher than those permitted by the state contract for various landline services from September 2006 to October 2012. As a result of the settlement, Verizon agreed to pay $1.3 million to the state and to be responsible for any additional related payments to towns, cities, and other entities impacted by the alleged overbilling.
- Verizon issued the following statement: “After a thorough review, Verizon and the attorney general have agreed to settle certain billing issues under a now-expired state contract…We have a long history of providing reliable, cost-efficient services, and promptly addressing issues that can arise under agreements as complex and wide-ranging as the state’s blanket contracts.”
New York Attorney General Goes After Medicaid Transportation Provider
- New York AG Eric Schneiderman settled with Apple Transportation of New York, Inc., resolving allegations that from January 1, 2004, to October 30, 2008, Apple overbilled the state Medicaid program for transportation services provided to Medicaid recipients to and from health care appointments.
- As part of the settlement, Apple admitted that it frequently billed Medicaid for ambulette services when it had only provided livery services to passengers. Transportation providers can bill Medicaid at a higher rate for ambulette services because physical assistance is provided to the Medicaid passenger in connection with a trip.
- Apple agreed to pay $300,000 to resolve the dispute.
For-Profit Healthcare Network Seeks Attorney General Approval to Buy Nonprofit Hospitals
- California AG Kamala Harris has until February 6 to decide whether to approve a proposal by Prime Healthcare Services to acquire the Daughters of Charity Health System, which consists of six nonprofit hospitals.
- Prime Healthcare, a for-profit network that operates 29 hospitals in nine states, has agreed to purchase the six hospitals for $843 million in cash and assumed liabilities. However, California law requires AG Harris to approve the sale because it would effectively change the status of the six hospitals from nonprofit to for-profit.
- Although Prime Healthcare has a record of reviving financially distressed hospitals, there are some concerns that the sale to Prime Healthcare will cause an erosion of services currently offered through the Daughters of Charity hospitals, especially those services oriented to low-income patients.
Ohio Attorney General Files Motion to Support Ohio Pension Funds as Lead Plaintiffs in Class Action
- Ohio AG Mike DeWine filed a motion in support of two Ohio pension funds, arguing that the funds should be appointed lead plaintiffs in a class action lawsuit by a variety of investors against American Realty Capital Properties, Inc. (ARCP), a real estate investment trust based in New York.
- The two pension funds, the State Teachers Retirement System of Ohio and the Ohio Public Employees Retirement System, reported losses in value of more than $7.5 million as a result of alleged accounting fraud by ARCP. The lawsuit alleges that ARCP overstated key performance metrics, and under reported net losses for reporting periods ending June 30, 2014.
- The Ohio funds, plaintiffs in Ciraulu v. American Realty Capital Properties, Inc., No. 14-08659 (S.D. N.Y. Oct. 30 2014), are seeking consolidation with at least six related lawsuits, and have filed a separate motion to be named lead plaintiffs of the consolidated action.
Consumer Financial Protection Bureau
State Attorneys General Join With the CFPB to Enforce Dodd-Frank Act
- AGs from Virginia and North Carolina joined the Consumer Financial Protection Bureau (CFPB) in an enforcement action against Freedom Stores, Inc.; Freedom Acceptance Corporation; Military Credit Services LLC; as well as owners and chief executives John F. Melley and Leonard B. Melley, Jr., (collectively, defendants) for alleged violations of the 2010 Consumer Financial Protection Act (CFPA) and related state laws.
- The complaint alleges that the defendants violated both state and federal law through the use of deceptive and abusive debt collection practices and the misuse of state courts to obtain default judgments against consumers who did not live or conduct business in the forum. Under Section 1042 of the Dodd-Frank Act, states have jurisdiction to enforce provisions of the CFPA.
- The parties entered into a consent order that requires that the defendants will provide more than $2.5 million in monetary compensation in the form of debt forgiveness and refunds. The order also requires defendants to pay a civil penalty of $100,000.
- The consent order enjoins defendants from utilizing certain debt collection methods, including filing legal actions outside of a consumer’s county of residence or the county where the debt was incurred, charging credit or debit cards without consumer consent, garnishing wages, contacting third parties regarding the debt, and selling or transferring any portion of debt related to this enforcement action.
State Attorneys General and Federal Regulators Settle Cramming Allegations With T-Mobile
- The Federal Trade Commission, the Federal Communications Commission (FCC), and AGs from all 50 states and the District of Columbia reached a settlement with T-Mobile USA, Inc., to resolve allegations that T-Mobile engaged in unfair and deceptive practices by engaging in mobile cramming.
- The consent order requires T-Mobile to pay “no less than $90 million,” including at least $67.5 million dedicated to reimbursing consumers. It also requires T-Mobile to pay $18 million to the states and $4.5 million to the FCC.
- In addition, T-Mobile agreed to develop and implement a system to ensure that consumers provide express consent before being charged for any third-party services and that they are given a full refund or credit if they are charged for unauthorized services. T-Mobile will also provide information to consumers on how to block third-party charges and will display such charges in a dedicated section of the bill.
Members of Congress Seek Action by State Attorneys General on E-Cigarettes
- Members of the U.S. Congress have sent letters to various State AGs urging them to consider regulation of e-cigarettes as regular cigarettes under the Master Settlement Agreement (MSA).
- The MSA prohibits subjected tobacco companies from targeting youth when advertising, promoting, or marketing applicable tobacco products, or taking “any action the primary purpose of which is to initiate, maintain or increase the incidence of [y]outh smoking.”
- These letters dovetail with recent efforts to establish a more concrete and uniform regulatory framework for e-cigarettes, including a petition organized through the National Association of Attorneys General and signed by 40 State AGs urging the Food and Drug Administration to classify e-cigarettes as tobacco products under the Tobacco Control Act.
Twenty-Two State Attorneys General Urge Department of Defense to Reform Military Lending Regulations
- In a recent letter to the Department of Defense, a bipartisan group of 22 AGs issued recommendations for proposed amendments to regulations implementing the Military Lending Act (MLA).
- The AGs, while acknowledging previous efforts to protect U.S. servicemembers from predatory lending practices, identified additional practices that should be addressed by the amended regulations. The AGs target two areas for greater improvement: closing loopholes that allow loans to be structured that effectively exceed the maximum interest rate allowed on loans to servicemembers (currently 36 percent); and adapting the MLA to address loans nominally secured by the property purchased—such as auto loans or household electronics—but functionally lacking a valid or enforceable security interest.
Massachusetts Attorney General’s Investigation Into Auto Lender Mirrors Department of Justice’s
- Massachusetts AG Martha Coakley is reportedly investigating Banco Santander SA for predatory lending and securitization practices targeting subprime auto borrowers. AG Coakley is specifically looking into Santander’s use of borrowers’ credit histories in connection to the loan terms offered and the disclosures made to potential investors in the final securitized product.
- In regulatory filings earlier this year, Santander Consumer USA Holdings, Inc.—a U.S. subsidiary of Banco Santander, formerly known as Drive Financial Services LP, that specializes in auto loans—acknowledged that it had received a subpoena from the U.S. Department of Justice (DOJ). The DOJ subpoena sought documents and communications related to the underwriting and securitization of nonprime auto loans.
- In response, Santander has indicated that it is cooperating with investigators and reiterated that it will “comply with all lending and loan servicing laws, as well as the rules and guidance of our supervisors and regulators.”
State Attorneys General Claim Colorado Marijuana Laws Are Preempted
- AGs from Nebraska and Oklahoma sought leave to file a lawsuit with the U.S. Supreme Court challenging Colorado’s legalization of recreational marijuana use and establishment of a commercial marketplace.
- For more on this story, please see our recent blog post.
Last week AGs from Nebraska and Oklahoma filed a motion in the U.S. Supreme Court seeking leave to bring a lawsuit challenging Colorado’s Amendment 64, and related implementing regulations, which have established a regulatory framework allowing for the personal sale and consumption of marijuana. (Pursuant to Article III, § 2, cl.2 of the U.S. Constitution, and 28 U.S.C. § 1251(a), the Supreme Court has original and exclusive jurisdiction over cases and controversies between two or more states.) The AG plaintiffs argue that Amendment 64 to the Colorado Constitution violates the U.S. Controlled Substances Act (CSA) and is therefore unconstitutional under the Supremacy Clause.
The AGs argue that with the CSA, Congress made a clear effort to eliminate and prohibit commercial transactions for marijuana and a range of other drugs. The AGs argue that even though the CSA does not preempt all state law on the issue, Section 903 indicates a clear Congressional intent to preempt any state law that directly conflicts with the provisions of the CSA. As Amendment 64 seeks to permit the establishment of a commercial regulatory framework for marijuana, the AGs contend that it is the very type of state law preempted by the CSA. The AGs expressed concern that Colorado allowing the establishment of a commercial marijuana industry—as opposed to simply decriminalizing personal use of marijuana—will cause an increase in the amount of marijuana produced, and thus an increase in the amount that flows through informal channels, from Colorado into neighboring states where its use and sale remain illegal. The AGs argue that combating this increased flow will deplete their states’ fiscal resources, and strain their criminal justice systems.
In response to the lawsuit, Colorado AG John Suthers vowed to “vigorously defend” Amendment 64, indicating that Nebraska’s “primary grievance stems from non-enforcement of federal laws regarding marijuana, as opposed to choices made by the voters of Colorado.”
States will be closely watching to see how the Supreme Court addresses this case. AG Bob Ferguson of Washington State, where the commercial sale and use of marijuana was also legalized through a ballot initiative, indicated that he was “disappointed that Nebraska and Oklahoma took this step to interfere with Colorado’s popularly enacted initiative to legalize marijuana.” AG Ferguson echoed AG Suthers’ sentiments, and promised to “vigorously oppose any effort by other states to interfere with the will of Washington voters.”
Attorneys General Continue to Scrutinize Merger of Food Distributors
- In a letter to the Federal Trade Commission (FTC) dated December 10, 2014, Minnesota AG Lori Swanson questioned the effectiveness of divestitures proposed by Sysco Corporation and US Foods, Inc., as they seek regulatory approval to merge.
- Earlier this year, a group of AGs began reviewing the proposed merger, identifying certain regional markets where the resulting entity, according to some estimates, would have greater than 70 percent market share.
- In order to provide greater competition in these regional markets, and thus secure FTC and State AG approval, the merging entities proposed selling $5 billion in assets to a smaller distributor, Performance Food Group, Inc. AG Swanson’s letter argues that these asset divestitures will not be enough to ensure competition.
Non-Profit Organization Tests California Disclosure Law on First Amendment Grounds
- The Americans for Prosperity Foundation (AFP), a non-profit organization founded by Charles and David Koch, filed a lawsuit to enjoin California AG Kamala Harris from enforcing certain disclosure provisions of the California Supervision of Trustees for Charitable Purposes Act (the Charities Act).
- The Charities Act requires organizations to register with the state and to submit the names and addresses of individuals who donate more than $5,000 in a tax year (information that organizations are also required to list on Schedule B of Form 990 to the IRS). In 2013, AG Harris requested that AFP submit a copy of its Schedule B for tax years 2011 and 2012. AFP resisted.
- In its lawsuit, AFP contends that requiring the disclosure of Schedule B to California would hinder citizens’ ability to freely and anonymously associate with AFP in violation of the First Amendment. AFP also argues that such disclosure is preempted by Section 501 of the Internal Revenue Code.
- AG Harris faced a similar challenge to the disclosure requirements in the Charities Act earlier this year, when the Center for Competitive Politics (CFCP) sued to enjoin the disclosure of its Schedule B. In that lawsuit, the District Court refused to grant the CFCP’s request for a preliminary injunction, and CFCP is currently appealing that decision to the 9th Circuit.
Six States Reach Settlement with Digital Advertising Firm Over Cookie Practices
- New Jersey Acting AG John Hoffman and six other AGs entered into a settlement with PointRoll, Inc., a digital advertising and tech services company owned by Gannett Co., Inc., for allegedly violating various state consumer protection laws.
- Following an investigation led by AG Hoffman, the AGs alleged that PointRoll engineered a process that allowed it to circumvent users’ privacy controls and place internet tracking cookies on web browsers—even where the user had adopted privacy settings specifically designed to block such cookies.
- The assurance of voluntary compliance requires PointRoll to pay $750,000 and prohibits PointRoll from overriding consumers’ browser settings without their consent. In addition, PointRoll must implement a privacy program, including: placing a conspicuously-displayed explanation of what cookies are and how PointRoll uses them on its website, conducting employee training on consumer privacy, requiring third-party service providers to operate under similar privacy protocols, and organizing an annual assessment of the effectiveness of PointRoll’s privacy-enhancing policies.
Maryland Attorney General Settles With Medicaid Supplier
- Maryland AG Doug Gansler reached a settlement with Americle Healthcare, Inc.—a supplier of medical equipment and adult incontinence supplies to Maryland Medicaid recipients—resolving allegations that, from 2005 to 2009, Americle submitted bills to Medicaid for goods it did not provide, or that were not properly documented as being medically necessary.
- The settlement requires Americle to pay $1 million in restitution and other recoveries to the state. The investigation was conducted with the Inspector General from the U.S. Department of Health and Human Services.
Massachusetts Attorney General Enforces Prevailing Wage Laws
- Massachusetts AG Martha Coakley ordered New Hampshire-based R&A Drywall, LLC, and owner Allan Vitale to pay $200,000 in restitution and penalties for allegedly violating Massachusetts prevailing wage and recordkeeping laws.
- AG Coakley alleged that R&A mislabeled certain employees as apprentices and underpaid other employees, according to standards set by Massachusetts law, which requires certain wages for companies completing public works projects. AG Coakley also found that R&A had failed to submit payroll records, in violation of state record keeping laws. In addition to restitution and penalties, R&A and Vitale were precluded from submitting bids for Massachusetts public works projects for one year.
New York State Bans Fracking Indefinitely
- New York Governor Andrew Cuomo announced a permanent ban on extracting natural gas and oil through a process called hydraulic fracturing (fracking), following the completion of a study that found “significant public health risks” associated with the practice.
- This ban comes shortly after New York AG Eric Schneiderman concluded agreements with oil and gas development companies to disclose to shareholders and the public the financial risks associated with the regulatory and environmental uncertainty associated with fracking. It also follows a ruling by the New York Court of Appeals affirming that towns have the authority to ban fracking through zoning laws.
Attorney General Settles With For-Profit College Over Alleged Deceptive Practices
- Massachusetts AG Martha Coakley reached an agreement with Premier Education Group, L.P. and Salter College: A Private Two-Year College, LLC (collectively, Salter), to settle allegations that Salter violated the Massachusetts Consumer Protection Act by using deceptive practices to market its educational programs to potential students.
- The complaint alleged that Salter made a number of misrepresentations to potential students, including overstating the rate at which it placed students in their career field, the level of job placement services provided, its success at finding externships for students, and the extent to which tuition included the costs of necessary post-graduation certification programs.
- The consent judgment requires Salter to pay $3.5 million to the state, and to forgive $200,000 in outstanding student debt held by former Salter students. In addition, Salter must provide full disclosure to prospective students that it is an open enrollment institution and does not guarantee employment in the student’s desired field.
New York Attorney General Resolves Investigation With Medical Clinic
- New York AG Eric Schneiderman entered into a settlement agreement with PATH Medical, P.C., to resolve claims that PATH provided false and misleading information to patients regarding the price of, and the extent to which insurance would cover, certain exotic and expensive medical services it recommended, such as “brain electrical activity mapping” and various psychological and cognitive assessments. AG Schneiderman also resolved claims that PATH improperly transmitted protected health information over unsecured personal email accounts, offered unlimited access to medical care for a fixed fee, and other violations of state and federal law.
- In an assurance of discontinuance, PATH agreed to refund former patients for overcharges and to provide increased price transparency, better payment options for lower-income patients, staff training programs, and HIPAA-compliant email policies. PATH also agreed to pay $15,000 in civil penalties.
Attorneys General Investigate Mortgage Servicer, Again
- A group of State AGs on the National Mortgage Settlement Monitoring Committee are investigating whether Ocwen Financial Corporation provided false or misleading information when it reported compliance with a 2012 national settlement agreement.
- The investigation centers on determining if Ocwen has properly implemented an independent internal audit process to determine whether it was meeting standards for dealing with struggling borrowers as required by the settlement. In addition to the AGs’ investigation, National Mortgage Settlement Monitor Joseph A. Smith Jr. has indicated that he will also take a close look at Ocwen’s compliance.
- In response to the investigation, Ocwen issued a statement that “[it] will continue to support the monitor’s efforts to ensure that [Ocwen is] fully compliant with all aspects of the national mortgage settlement.”
Dickstein Shapiro Presents a Webcast on Antitrust Scrutiny: Ways to Plan, Prepare and Respond
- Dickstein Shapiro is partnering with the National Constitution Center to provide a 90-minute webcast on December 17th at 1:00 PM ET discussing recent developments in antitrust laws.
- Jim Martin and Jennifer Hackett, both partners in Dickstein Shapiro’s Antitrust & Financial Services Practice, will provide analysis on the evolving governmental framework for antitrust scrutiny and advice for designing customized compliance programs.
- To access a recording of the webcast, please click here. The presentation slides are also available here.
More States Join Texas Lawsuit Against President’s Immigration Order
- Seven additional states have joined Texas AG Greg Abbott’s lawsuit challenging President Obama’s Executive Order on immigration as unconstitutional and in violation of the U.S. Administrative Procedures Act.
- The amended complaint now lists a total of 25 plaintiffs, including 19 State AGs.
Idaho Attorney General Settles With Physician Group
- Idaho AG Lawrence Wasden settled with four doctors who allegedly violated the Idaho Competition Act. During negotiations with Madison Memorial Hospital in Rexburg, the doctors allegedly collectively sought compensation, in addition to hospital privileges, in return for providing on-call coverage.
- AG Wasden clarified that the focus of his investigation was on whether the doctors formed an agreement to cease providing on-call coverage that constituted an unreasonable restraint of commerce in violation of state antitrust law, and not whether the doctors had a right to negotiate increased compensation.
- The settlement requires that the physicians refrain from conspiring with other physicians in future negotiations with the hospital over compensation. It also requires them to certify their compliance with Idaho Competition Act to AG Wasden for each of the next five years.
Forty-Five Attorneys General Settle With Satellite Radio Provider
- Led by Ohio AG Mike DeWine, 45 states reached a settlement with Sirius XM Radio Inc. for $3.8 million following an investigation of the company’s advertising and billing practices. In addition to the payment to the states, Sirius will also provide restitution to consumers who have eligible claims based on the problems identified in the investigation.
- The settlement resolves allegations that Sirius violated numerous state consumer protection laws through deceptive advertising and billing practices, including: automatically renewing subscriptions without customer consent, making it difficult for customers to cancel service and failing to honor customer requests to cancel once made, failing to provide timely refunds, and refusing to refund unapproved charges.
- Sirius signed a detailed Assurance of Voluntary Compliance in which it agreed to increase customer disclosure and transparency through a wide range of compliance procedures. Sirius denied any wrongdoing, and stated that it had disclosed all relevant features of its billing practices and had obtained the proper consumer consent at the time of initial purchase.
Massachusetts Settles With Bank Over Lost Data
- Massachusetts AG Martha Coakley settled with TD Bank, N.A., to resolve an investigation into a 2012 incident where TD Bank lost unencrypted server backup tapes that contained information, including names, addresses, Social Security numbers, account numbers, and date of birth for approximately 90,000 Massachusetts residents, and failed to comply with state data breach notification requirements.
- The settlement requires TD Bank to pay $325,000 in civil penalties and $75,000 in attorney’s fees and costs. It also requires TD Bank to provide $225,000 to a fund administered by the AG’s Office to promote data breach education and fund local programs aimed to increase consumer protection. TD Bank further agreed to encrypt personal information stored on backup tapes, to require third-party service providers to adopt stricter security practices, and to monitor service providers for compliance.
- Earlier this year, nine states, led by Florida AG Pam Bondi, also reached a settlement with TD Bank for $850,000 to resolve their investigations into the 2012 data breach.
Attorneys General Pair With Nonprofit Organizations to Challenge EPA Rule at DC Circuit
- Kansas AG Derek Schmidt, together with Nebraska AG Jon Bruning, filed a petition to the U.S. Circuit Court of Appeals for the District of Columbia challenging the Environmental Protection Agency’s Rule requiring states to use a new air pollution estimating model as they create their State Implementation Plans under the U.S. Clean Air Act.
- AG Schmidt contends that the EPA Rule was promulgated without notice and an opportunity for states to comment. AG Schmidt also contends that the MOVES2014 methodology required by the Rule produces false conclusions regarding the use of ethanol as an additive to gasoline, ultimately harming Kansas’s and Nebraska’s ethanol industries.
- The AGs joined as petitioners with Urban Air Initiative Inc. and the Energy Future Coalition. The petition identifies the Energy Future Coalition as “an unincorporated initiative of the Better World Fund, which is in turn a nonprofit publicly supported endowment incorporated in a manner consistent with Section 501(c)(3) of the Internal Revenue Code.” It identifies Urban Air Initiative as a “social welfare organization incorporated in a manner consistent with Section 501(c)(4) of the Internal Revenue Code.”
False Claims Act
Florida and the U.S. Intervene in False Claims Suit Against For-Profit College
- Florida AG Pam Bondi joined with the U.S. Attorney for the Southern District of Florida to intervene in a two-yearold lawsuit against FastTrain II Corporation d/b/a FastTrain College, and its owner Alejandro Amor, alleging violations of both the federal and state False Claims Acts.
- The lawsuit alleges that from at least January 1, 2009 through June 22, 2012, FastTrain and Amor submitted numerous false claims for payment to the U.S. Department of Education by fabricating false documents, such as high school diplomas, and by inducing otherwise ineligible students to falsify applications for federal student aid programs. The lawsuit also alleges that FastTrain kept students on its financial aid recipient list long after those students were no longer attending. In total, FastTrain students received over $6.5 million in Federal Pell Grants and other federally-provided financial aid. FastTrain administered for-profit college programs across seven campuses in southern Florida, but is now defunct.
- The lawsuit was originally filed on April 17, 2012 by Juan Pena, a former admissions employee of FastTrain. The case, U.S. ex rel Pena v. FastTrain II Corp. 1:12-cv-21431, is pending in U.S. District Court for the Southern District of Florida.
Nebraska Ordered to Pay Attorneys’ Fees in Failed Attempt to Limit Alleged Patent Trolls
- The U.S. District Court for the District of Nebraska has ordered the state to pay $725,000 in legal fees to MPHJ Technology Investments, LLC, and ActiveLight, Inc. (formerly known as Activision TV Inc.). MPHJ and ActiveLight were awarded attorneys’ fees for prevailing in their action to preempt an investigation by Nebraska AG Jon Bruning.
- AG Bruning had sought to use state consumer protection and deceptive trade practices laws to prevent MPHJ and ActiveLight from asserting their patent rights, allegedly in bad faith or in a deceptive manner.
- We have followed this story from the outset, and reported on the court’s decision to grant summary judgment to MPHJ and ActiveLight and to enjoin AG Bruning from conducting further investigations or enforcement actions.
States v. Federal Government
Attorneys General Argue Against Preemption by Natural Gas Act
- Twenty-one State AGs, led by Kansas AG Derek Schmidt, submitted an amici brief in a U.S. Supreme Court case involving natural gas prices and state law. The AGs’ brief supports the respondents—manufacturers, public schools, hospitals, and other direct purchasers of natural gas—in arguing that the U.S. Natural Gas Act (NGA) does not preempt state antitrust laws that apply to retail transactions for the sale of natural gas.
- The core of the AGs’ argument is that although the federal government has had a long-standing role in regulating the wholesale markets and interstate transportation of natural gas, it “disavowed any intent to preempt state regulation of retail sales of natural gas.”
- This dispute emerged from multiple lawsuits, some of which were brought individually by the respondents under various state antitrust laws, claiming that the petitioners—mostly energy companies—conspired to fix higher-than-market prices for natural gas sold at the retail level. The petitioners, who were defendants in the state lawsuits, removed the cases to federal court, where they were consolidated in the District of Nevada. The district court ultimately found that the NGA preempted state law. However, on appeal, the 9th Circuit unanimously reversed, and held that the NGA cannot preempt state antitrust in the area of retail sales.
- The case, Oneok, Inc. v Learjet, Inc., No. 13-271, is scheduled for oral argument on January 12, 2015.
States Bring Lawsuit Challenging White House Immigration Order
- Led by Texas, 14 State AGs and three governors have filed a lawsuit in federal court in the Southern District of Texas, alleging that President Obama’s 2014 Executive Order granting relief from deportation to approximately 4.4 million undocumented immigrants violates the U.S. Constitution’s Take Care Clause (Art. II, Sec 3 Cl. 5) and the U.S. Administrative Procedures Act, Sections 553 and 706.
- The lawsuit names as defendants the United States of America plus officials in the U.S. Department of Homeland Security, including Customs and Border Protection, Immigration and Customs Enforcement, and Citizenship and Immigration Services.
- The case is Texas v United States 1:14-cv-00254 (S.D. Tex. Dec. 3, 2014). We will follow this lawsuit as it unfolds in future editions of State AGs in the News.
Consumer Financial Protection Bureau
Sixteen Attorneys General Urge the CFPB to Regulate Pre-Dispute Arbitration Clauses
- Delaware AG Beau Biden, along with Massachusetts AG Martha Coakley and Kentucky AG Jack Conway, led a group of AGs urging the Consumer Financial Protection Bureau (CFPB) to exercise its statutory authority to regulate the use of mandatory pre-dispute arbitration clauses in connection with contracts for financial services.
- In their letter to CFPB Director Richard Cordray, the AGs argued that the inclusion of mandatory arbitration clauses in consumer contracts for financial services is counter to the public interest because consumers rarely understand the ramifications and lack the bargaining power to negotiate. The AGs also stated that arbitration can be procedurally unfair to consumers because arbitrators are likely to be biased in favor of the financial services company, as they will be the “repeat players” in arbitration.
- Before the CFPB can create regulations in this area, the Dodd-Frank Act requires it to conduct a study and issue a report to Congress. The CFPB initiated this process with a public inquiry in April 2012 and published its preliminary results in December 2013.
Maryland Attorney General Settles Claims With Verizon
- Maryland AG Douglas Gansler announced a settlement with Verizon Communications Inc. to resolve allegations that it misrepresented the actual costs of its television, internet, and phone services to consumers through promotional activities.
- Under the terms of the settlement, Verizon will pay restitution to current and former customers who were charged termination or equipment fees that were not adequately disclosed. In addition to the estimated $1.375 million restitution, Verizon will pay a civil penalty of $250,000 and $75,000 for costs.
- Verizon also agreed to change its advertising practices and will provide written disclosures of the terms of customers’ orders and broader cancellation rights if the first bills do not accurately reflect those orders.
Arizona Attorney General Sues General Motors for $3 Billion
- Arizona AG Tom Horne filed a lawsuit in Maricopa County Superior Court against General Motors LLC (GM), alleging that it violated the Arizona Consumer Fraud Act by selling automobiles that it knew were unsafe. The complaint asks for injunctive relief, along with disgorgement, civil penalties up to $10,000 for each violation, attorneys’ fees, and investigation costs.
- The lawsuit alleges that GM promoted its vehicles as “safe, reliable and high quality” while deliberately concealing defects to ignition, airbags, seatbelts, brakes, and electronic stability control systems. It also alleges that GM failed to timely recall certain models, even though such defects had become apparent. Finally, the lawsuit seeks to address losses in the resale value of certain models based on their record for defects. Although the lawsuit seeks only to account for GM’s conduct post-2009 bankruptcy, many of the defects occurred in models produced by GM pre-bankruptcy.
- GM responded in a statement, saying the lawsuit “misrepresents the facts, the performance of our vehicles and our work to ensure the safety of our customers.”
- A group of 47 State AGs is also investigating GM’s recalls and safety procedures, but have not yet filed lawsuits.
Illinois and Ohio Attorneys General Pair With the FTC to Enjoin Credit Monitor
- Illinois AG Lisa Madigan and Ohio AG Mike DeWine, together with the Federal Trade Commission (FTC), settled claims against defendants One Technologies, LP; One Technologies Management, LLC; and One Technologies Capital, LLP, for selling online credit monitoring services to consumers allegedly in violation of the Restore Online Shoppers Confidence Act (ROSCA), Section 5(a) of the FTC Act, the Ohio Consumer Sales Practices Act, and the Illinois Consumer Fraud Act.
- The complaint alleged that defendants deceptively marketed their credit monitoring services by offering consumers “free” access to their credit scores without adequately disclosing that such access automatically enrolled them in defendants’ credit monitoring program for which they were charged a monthly fee of $29.95. The complaint also claimed that consumers were not adequately informed how to cancel the service, and often had to request cancellation numerous times.
- The consent order requires defendants to pay $22 million in compensation to the FTC and State AGs, and to cease making misrepresentations, express or implied, as to the price of goods and services. It also requires defendants to provide reports on their compliance with the terms of the order and to maintain records related to any goods or services sold with a negative option feature for 10 years.
Florida Also Joins With FTC to Enjoin Computer Services Companies
- Florida AG Pam Bondi and the FTC filed complaints against multiple companies to prevent them from inducing consumers to purchase unnecessary computer repair services in violation of Section 5 of the FTC Act, the Telemarketing Sales Rule, and the Florida Deceptive and Unfair Trade Practices Act.
- The lawsuits allege that Inbound Call Experts, LLC; Vast Tech Support, LLC; and a host of related companies provide “free” diagnostic computer scans, offered through deceptive online advertisements and telemarketing efforts. The companies, whose diagnostic scans falsely detect viruses and malware, proceed to sell unnecessary repairs to fix the nonexistent problems. As a whole, defendants have allegedly collected over $120 million in revenues from these practices.
- On November 12, 2014, U.S. District Court Judge Kenneth Marra, for the Southern District of Florida, entered temporary restraining orders against the defendants, freezing related assets and placing business operations under a court-appointed receiver.
Vermont Settles Claims Against Discount Club
- Vermont AG William Sorrell settled claims against Stonebridge Benefit Services, Inc., and J.C. Penney Corporation, Inc., in connection with the sale of discount membership programs to consumers allegedly in violation of Vermont’s 2012 Discount Membership Program Act (DMPA).
- The DMPA prohibits selling memberships to discount clubs unless the consumer provides complete credit card information at the time of purchase. It also requires sellers to periodically remind consumers that they are being charged and precludes clubs from charging members for more than 18 consecutive months without completing the initial sign-up process again.
- AG Sorrell alleged that J.C. Penney provided Stonebridge with customer credit card information and Stonebridge used this information to sign up and bill consumers for discount club memberships.
- Pursuant to the Assurance of Discontinuance, Stonebridge will send refund checks totaling $227,651 to all consumers who were billed unlawfully after May 2012, and is required to make refunds to any consumers who were billed prior to May 2012 and submit a complaint. Stonebridge will also pay $175,000 to the state and agreed to strictly comply with Vermont law. In addition, J.C. Penney is enjoined from providing credit card information to Stonebridge.
Thirty-Eight Attorneys General Request Update to FTC Telemarketing Rule
- Through a letter from the National Association of Attorneys General, a group of 38 State AGs recommended that the Federal Trade Commission (FTC) update its Telemarketing Sales Rule to reflect the realities of the current marketplace, and to better protect consumers from telemarketing fraud and abuse.
- The AGs note in their letter that there has been a marked increase in the number of consumer fraud claims originating from telemarketing activities in recent years and ask the FTC to amend the Telemarketing Sales Rule to prohibit the use of pre-acquired account information to better address the use of negative option sales techniques in telemarketing, and to require telemarketers to create and maintain call records.
Massachusetts Enters Consent Judgment With Hospital Over Data Breach
- Massachusetts AG Martha Coakley entered into a Consent Judgment with Beth Israel Deaconess Medical Center, Inc. over allegations that the hospital failed to safeguard personal data and protected health information of 3,990 patients and employees.
- The information was compromised by the theft of an unencrypted personal computer from a physician’s office. Although the hospital had a policy in place that required all computers containing personal health information to be secured and encrypted, AG Coakley alleged that it was poorly enforced and that the hospital waited too long to notify affected persons.
- The hospital agreed to pay $70,000 in civil penalties, $15,000 in costs and attorneys’ fees, and $15,000 for future educational programs concerning the protection of personal and protected health information. The hospital also agreed to audit overall security measures and to better secure, encrypt, and track laptops containing personal and protected health information.
California Reaches Settlement With AT&T Over Electronic Waste
- California AG Kamala Harris settled claims that Pacific Bell Telephone Company d/b/a AT&T California, AT&T Corp., and AT&T Services, Inc., (collectively AT&T) allegedly failed to prevent electronic equipment, batteries, aerosol cans, and certain gels and liquids from being sent to landfills as regular trash. The consent judgment requires AT&T to pay the state a total of $23.8 million and to implement enhanced environmental compliance measures including the use of “staging bins” prior to placing waste in dumpsters, as well as hundreds of unscheduled annual inspections.
- In response to the settlement, AT&T issued the following statement: “We take environmental stewardship seriously, and we’ve cooperated closely with the state and Alameda County to resolve this issue in a way that is in the best interests of the environment, our customers and all Californians. The settlement recognizes the company for taking prompt action, dedicating significant additional resources toward environmental compliance, and improving our hazardous and universal waste management compliance programs.”
States v. Federal Government
Supreme Court Grants Cert to Review States’ Objections to EPA Mercury Rule
- The U.S. Supreme Court granted certiorari to Michigan AG Bill Schuette and 22 other states requesting review of the D.C. Circuit’s decision to uphold the Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards (MATS) Rule.
- The AGs asserted in the Michigan petition that the use of the term “appropriate” in Section 112 of the Clean Air Act required the EPA to consider potential compliance costs when it made a decision to promulgate the MATS Rule—or any rule to regulate hazardous air pollutants from electricity utilities. In its brief in opposition, the EPA argued that it had reasonably construed the Clean Air Act as only requiring the consideration of compliance costs when establishing the appropriate level of regulation, not for the determination of whether to regulate power plants’ mercury emissions.
- The Supreme Court consolidated Michigan’s appeal with two other appeals involving the MATS Rule. If affirmed, the MATS Rule will go into effect in 2015 and coal-fired power plants will be required to cut mercury emissions by more than 90% over four years.
New Alaska Governor Bill Walker (I), who was sworn in Monday, has appointed his former law partner Craig Richards to be the next Alaska AG. In Hawaii, David Louie’s term as AG ended when new Governor David Ige (D) took office Monday, although Governor Ige has yet to appoint a replacement. Alaska and Hawaii are two of five states in which the governor appoints the AG (along with New Hampshire, New Jersey, and Wyoming).
Craig Richards, a Republican, has been a partner with Governor Walker in the Anchorage law firm Walker & Richards LLC, which Governor Walker founded in 1995. A prominent oil and gas attorney, Richards’s law practice has centered on natural gas project development, finance, taxation, and oil and gas leasing. He holds a J.D. from Washington and Lee University, an M.B.A. from Duke University, and a finance degree from the University of Virginia. Richards is originally from Fairbanks, Alaska. He is expected to be confirmed by the legislature and will replace AG Michael Geraghty (R), an appointee of former Governor Sean Parnell (R), who Governor Walker narrowly defeated in November.
Hawaii Governor Ige is still considering candidates to appoint. In the meantime, Deputy AG Russell Suzuki will run the Hawaii AG office until a successor is named.
Consumer Financial Protection Bureau
CFPB Proposes New Regulations for Prepaid Accounts
- The Consumer Financial Protection Bureau (CFPB) issued proposed regulations pertaining to prepaid accounts under the Electronic Fund Transfer Act and the Truth in Lending Act.
- The proposed regulations require companies issuing prepaid accounts to disclose applicable fees using an industry-wide, standardized format. The regulations also require that issuers provide free access to account balances, investigate and resolve errors efficiently, and limit consumer losses for stolen funds or lost cards.
- The proposed regulations call for credit-style protections if the prepaid account is combined with a credit product. Issuers must determine a consumer’s ability to make payments prior to offering credit, provide a monthly billing statement, and limit late fees and interest charges. The credit protections also prohibit issuers from automatically using funds loaded on a prepaid account to repay the credit account.
- The proposed regulations are open for public comment for 90 days following publication in the Federal Register.
CFPB Takes Action Against Mortgage Lender
- The CFPB and Franklin Loan Corporation agreed to entry of a Stipulated Final Judgment and Order in federal court in California to resolve allegations by the CFPB that Franklin violated the Federal Reserve Board’s Loan Originator Compensation Rule and the Consumer Financial Protection Act.
- The CFPB’s complaint alleged that Franklin improperly paid loan officers quarterly bonuses for steering borrowers into mortgages with higher interest rates.
- Franklin has agreed to pay $730,000 to the CFPB to redress affected consumers and to be permanently enjoined from making unlawful compensation payments to its loan officers.
Pennsylvania Attorney General Sues Payday Lending Operation
- Pennsylvania AG Kathleen Kane filed a lawsuit against Think Finance Inc., Selling Source, LLC, and associated companies and individuals for making illegal pay-day loans to consumers using the internet. The lawsuit alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Corrupt Organizations Act, and the Fair Credit Extension Uniformity Act.
- The lawsuit is based, in part, on defendants’ alleged use of a complex scheme to evade state laws prohibiting payday lending, including partnerships with Native American tribes and the use of “rent-a-bank” facilities as cover for illegal lending activity.
- The attempted use of tribal immunity to avoid state lending laws has been a recurring theme in other operations targeted by the CFPB, the Federal Trade Commission, and various AGs.
- The lawsuit is pending in the Court of Common Pleas of Philadelphia County and seeks injunctive relief, restitution, and civil penalties. It also asks that defendants notify the relevant credit bureaus and request that they remove all negative information related to the lending operation.
Massachusetts Shuts Down Vacation Club
- Massachusetts AG Martha Coakley reached a settlement with C&S Marketing, Inc., d/b/a Fantasia Travel Group and Only Way 2 Go Travel, Travel Services Inc. d/b/a Outrigger Vacation Club, and Charles Caliri and other related individuals, for alleged violations of the Massachusetts Consumer Protection Act.
- The lawsuit alleged that consumers were sold memberships that were essentially worthless and that defendants induced consumers to purchase vacation club memberships using high pressure sales tactics and falsely promising deep discounts on vacation packages, cruises, accommodations, and other travel services.
- The consent order requires the defendants to pay over $200,000 in restitution and prohibits defendants from selling travel or vacation services in Massachusetts.
Florida Leads Multistate Effort Against Life Insurance Practices
- Florida AG Pam Bondi, along with the Department of Financial Services and the Office of Insurance Regulation (FLOIR), led a multistate effort that culminated in a $3.2 million settlement with Sun Life Assurance Company of Canada and related companies (Sun Life) over allegations of unfair insurance trade practices.
- The investigation and settlement with Sun Life is part of a larger multistate examination process initiated in 2011 in coordination with the National Association of Insurance Commissioners’ Life/Annuities Claim Settlement Practices Task Force.
- The multistate process grew out of an initial investigation by FLOIR that allegedly revealed that life insurance companies used the Social Security Administration’s Death Master File to cease payments of annuities to decedents, but did not use that same information to initiate payments to beneficiaries under the decedents’ life insurance plans.
- In addition to the payment, Sun Life will be required to undertake modifications of its business practices, provide quarterly reporting to state officials, and be subject to compliance monitoring for more than 3 years.
States v. Federal Government
Attorneys General From Twenty-One States Argue Against Maryland Gun Law
- A group of AGs from 21 states filed an amici brief in the U.S. Court of Appeals for the Fourth Circuit, arguing that the Maryland Firearm Safety Act of 2013 violates the Second Amendment of the U.S. Constitution.
- The Maryland law, which prohibits ownership of certain models of semiautomatic rifles and high capacity magazines, was upheld on summary judgment at the U.S. District Court for the District of Maryland on August 12, 2014.
- The lawsuit is Steven V. Kolbe et al v. Martin J. O’Malley, No. 1:13-cv-02841 (D. Md. 09/27/2013), Appeal No. 14-1945 (4th Cir.).
Maryland AG Doug Gansler, who fell short in his 2014 gubernatorial bid after Lt. Governor Anthony Brown prevailed over him in the Democratic primary, announced that he will join the Washington, DC-based law firm BuckleySandler LLP when he leaves office in January. Gansler has said that he will be joining the firm’s Government Enforcement and Complex Litigation practices, focusing particularly on cybersecurity and privacy compliance.
This marks a return to private practice for Gansler after years of public service. He began his career at the law firm Coburn & Schertler, and later joined Howrey & Simon, before becoming an Assistant U.S. Attorney in 1992. After six years, in 1998, he was elected State’s Attorney for Montgomery County, where, among other cases, he prosecuted the Beltway Snipers. In 2006, he was elected AG of Maryland and was reelected in 2010. Gansler’s replacement, AG-elect Brian Frosh (D), takes office on January 5, 2015.
New York Attorney General Opposes Taxi and Limousine Commission Rule
- In a letter to the New York City Taxi and Limousine Commission, New York AG Eric Schneiderman urged the Commission to revise its proposed rule that would require for-hire vehicle companies to agree in writing before allowing their drivers to accept dispatches from rival companies.
- The proposed rule would prohibit for-hire vehicle drivers – many of whom operate as independent contractors – from accepting fares outside of their primary dispatching company, a practice that allows drivers to reduce downtime between dispatches, increasing driver efficiency and shortening customer waiting time.
- AG Schneiderman indicated that the proposed rule raised serious antitrust concerns by encouraging agreements between competitors, ultimately leading to higher fares and lower-quality service.
Florida Attorney General Claims Fraud Recovery Scheme is Deceptive
- Florida AG Pam Bondi filed a lawsuit against Consumer Collection Advocates Corp. (CCA) and its principal, Michael Robert Ettus, for allegedly violating the Florida Deceptive and Unfair Practices Act and the Florida Telemarketing Act.
- The lawsuit alleges that CCA targeted previous fraud or scam victims by promising to recover their lost funds in exchange for upfront payments and a percentage of any recovery. The lawsuit further alleges that CCA rarely succeeded in recovering victims’ lost funds.
- The Federal Trade Commission (FTC) filed a similar lawsuit against CCA and Ettus in federal court in the Southern District of Florida. In that suit, the FTC seeks injunctive relief, restitution, disgorgement, and costs.
Nevada Attorney General Settles with Hormone Therapy Provider
- Nevada AG Catherine Cortez Masto reached a $9.5 million settlement to resolve claims that Wyeth Pharmaceuticals Inc. and Wyeth LLC (both acquired by Pfizer Inc. in 2009), and Pharmacia & Upjohn Company LLC (acquired by Pfizer in 2003) allegedly mislead consumers about the safety and efficacy of certain hormone treatments for postmenopausal women in violation of the Nevada Deceptive Trade Practices Act.
- As part of the settlement, Pfizer agreed to donate $8 million to fund women’s health care programs at the University of Nevada School of Medicine and University Medical Center. In addition, Pfizer will pay $1.5 million to offset investigation costs.
Missouri Attorney General Secures $7.3 Million From Lead Mining Companies
- Missouri AG Chris Koster announced a $7.3 million settlement with Cyprus Amax Minerals Company and Missouri Lead Smelting Company for alleged violations of the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, the U.S. Clean Water Act, and the Missouri Clean Water Law.
- The claimed environmental damages at the core of the settlement stem from lead mining and smelting operations at the Buick Mine during the period 1968 to 1986.
- The settlement included the U.S. Department of Interior, Fish and Wildlife Service and the U.S. Department of Agriculture, Forest Service, and has been lodged as a consent decree in U.S. District Court for the Eastern District of Missouri.
Vermont Attorney General Sues Landfill for Failure to Control Odors
- Vermont AG William Sorrell filed a lawsuit against Moretown Landfill Inc. for alleged violations of the Vermont Solid Waste Management Rules, Air Pollution Control Regulations, Water Pollution Control statute, and other violations relating to facility certifications and permits.
- The AG’s lawsuit alleges that Moretown failed to capture and control certain landfill gases, maintain safe leachate levels, prevent windblown debris, and conduct random load inspections. The lawsuit seeks civil penalties and costs.
False Claims Act
Oklahoma Attorney General Settles With Dental Practice
- Ocean Dental, P.C., has agreed to pay $5,050,000 to settle claims brought by Oklahoma AG Scott Pruitt, working together with the U.S. Attorney for the Western District of Oklahoma, based on alleged violations of the U.S. False Claims Act.
- AG Pruitt and the U.S. Attorney alleged that during the period 2005 to 2010, dentists working for Ocean Dental submitted false claims to the Oklahoma Medicaid program by billing for more dental work than was actually performed.
- In 2012, in a related criminal case, one of the dentists associated with Ocean Dental’s conduct pled guilty to health care fraud, and was ordered to pay $375,672 in restitution to Medicaid and to serve 18 months in federal prison.
Colorado Attorney General Settles With Foreclosure Firms
- Colorado AG John Suthers settled with three law firms alleged to have violated the Colorado Consumer Protection Act and the Colorado Fair Debt Collection Practices Act by charging improper and inflated fees for foreclosure-related services.
- The firms Janeway Law Firm, Medved Dale Decker & Deere, LLC, and the Law Office of Michael P. Medved, and their principals, agreed to pay $1.8 million, collectively, in restitution, costs, and fees, along with an additional $1.1 million of suspended fees if they fail to comply with the consent judgment. The consent judgment requires the firms, among other things, to avoid the use of affiliated third-party vendors and to charge only the actual amount incurred for the services of third-party vendors.
- AG Suthers previously settled with the firm Aronowitz & Mecklenburg, LLP, for $13 million and has filed suit against Castle Law Group based on similar claims. According to AG Suthers, these two firms handle the majority of foreclosures in Colorado.
States v. Federal Government
At Supreme Court, Maryland Fights for the Right to Tax Income Earned Outside the State
- On November 12, The U.S. Supreme Court heard oral argument in Comptroller of the Treasury of Maryland v. Wynne. The case centers on the scope of authority a state has to tax income earned in other states.
- Maryland AG Douglas Gansler argued that states have the authority to tax residents’ income earned in other states, even where the residents can demonstrate that they paid income taxes to another state on that quantum of income.
- The case is on appeal from a 2013 decision by the Maryland Court of Appeals, holding that Maryland’s tax scheme violated the Commerce Clause of the U.S. Constitution. Specifically, the court ruled that Maryland’s lack of a credit against Maryland taxes for income-related taxes paid in other states created a barrier to interstate commerce.