State AG Monitor

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.

Antitrust

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.

Employment

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.

Environment

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.

Pharmaceuticals

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.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Environment, For-Profit Colleges, Insurance, Intellectual Property, Marijuana, Mortgages/Foreclosures, State AGs in the News

Antitrust

Illinois, Iowa, and Missouri Attorneys General Propose Settlement to Resolve Competitive Concerns Related to Tyson’s Acquisition of Hillshire

  • The AGs of Illinois, Iowa, and Missouri and the U.S. Department of Justice simultaneously filed a complaint and proposed final judgment in the U.S. District Court for the District of Columbia regarding Tyson Foods Inc.’s proposed acquisition of the Hillshire Brands Company. The proposed settlement would allow Tyson to proceed with the acquisition if it divests ownership of sow purchaser Heinold Hog Markets.
  • Tyson’s acquisition of Hillshire would allegedly combine two major sow purchasers and eliminate the benefit farmers have received from the competition between Heinold and Hillshire. “Our concern was that this buyout would have greatly reduced the competitive market and would affect purchase prices for Iowa hog breeders trying to sell their sows,” Iowa AG Tom Miller said. “Without the divestiture agreement we just reached, the Tyson-Hillshire deal would have combined companies that account for more than a third of all sow purchases. That’s significant.”
  • The settlement is subject to a 60-day public comment period and approval by the court.

California Attorney General Applauds Passage of Bill Related to Sale of Public Benefit Health Corporation Assets

  • California AG Kamala Harris applauded the passage of state Senate Bill 1094, introduced by State Senator Ricardo Lara, which would, among other things, extend the time the AG has to issue a decision regarding the sale of assets of a nonprofit public benefit corporation operating or controlling a health facility.
  • Under existing law, a nonprofit public benefit corporation operating or controlling a health facility must provide notice to the AG prior to selling or disposing of its assets and the AG must issue a decision regarding approval of that transaction within 60 days of notice. Senate Bill 1094 allows the AG 90 days, instead of 60 days, to issue a decision; to enforce conditions on the agreement or transaction; to amend conditions after a decision under specified circumstances; and to require the transferee to fulfill all representations made during the application process.
  • According to a news report, supporters of the bill say that the new restrictions are necessary to protect community interests at a time of industry consolidation. In comparison, the California Hospital Association argues that the AG already has broad authority and that allowing the AG to amend conditions after a decision will have a chilling effect on transactions.
  • AG Harris stated, “SB 1094 is about good public health policy that ensures choice and access to quality, affordable healthcare for underserved communities. I want to thank Senator Lara for introducing this bill and applaud the Assembly and Senate for passing this important legislation.”

Consumer Financial Protection Bureau

CFPB Settles With Debt-Settlement Payment Processor

  • The Consumer Financial Protection Bureau (CFPB) simultaneously filed a complaint and a proposed consent order in federal court to resolve allegations that debt-settlement payment processor Global Client Solutions and two of its principals (collectively, Global Client) violated the Telemarketing Sales Rule and Consumer Financial Protection Act.
  • Global Client allegedly assisted debt-settlement companies with charging and collecting unlawful upfront fees from consumers before settling the consumer’s debt.
  • If approved by the court, the consent order will require Global Client to pay over $6 million in consumer relief and a $1 million civil penalty. The order would also prohibit Global Client from enabling other companies to collect any unlawful advance fees, require it to screen and monitor its prospective debt relief service provider clients, and require it to be monitored by and report to the CFPB to ensure compliance.

Consumer Protection

Colorado State Court Orders Vacation Club to Pay Over $7 Million in Penalties and Restitution

  • A Colorado state court ordered Sea to Ski Vacations and its owners to pay over $7 million in civil penalties and restitution to consumers in a lawsuit brought by Colorado AG John Suthers alleging violations of the state Consumer Protection Act. The court also enjoins the owners from owning, managing, or operating travel-related businesses.
  • According to the complaint, the company and its owners allegedly engaged in unlawful deceptive trade practices, including using misleading sales presentations regarding the benefits of membership, branding deals as “exclusive” when they were purportedly not, and offering a misleading “buy-back guarantee.”

New York Attorney General Sues and Obtains Restraining Order Against Companies Allegedly Operating Fraudulent Home Loan Modification Program

  • New York AG Eric Schneiderman filed a lawsuit and obtained a restraining order against four interrelated companies and their principles alleging that they marketed and operated a fraudulent home loan modification program. The companies are Home Affordable Direct, Inc.; Home Affordable Solutions, Inc.; JR Holding Group Corp; and Clear Solutions and Settlements, Inc.
  • The companies allegedly engaged in fraudulent and misleading practices, including collecting unlawful advance fees, misrepresenting their affiliations, failing to make required disclosures, and failing to perform their promises of providing substantial relief from unaffordable mortgage payments through loan modifications and other forms of foreclosure prevention.
  • At the request of the AG, a court froze the companies’ assets and granted a temporary restraining order prohibiting the companies from collecting any unlawful advance fees or operating their business without making required disclosures to consumers.
  • The lawsuit seeks injunctive relief, restitution, damages, disgorgement, penalties, and costs.

Environment

Eleven States, the District of Columbia, and the City of New York Move to Intervene in Lawsuit Brought by Twelve Attorneys General Regarding the EPA’s Regulation of Power Plant Emissions

  • Eleven states, the District of Columbia, and the City of New York, led by New York AG Eric Schneiderman, filed a motion in the U.S. Court of Appeals for the DC Circuit to intervene in a lawsuit filed by 12 AGs, led by West Virginia AG Patrick Morrisey. The lawsuit challenges a prior settlement agreement in which the U.S. Environmental Protection Agency (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 coalition led by AG Schneiderman dispute the claim asserted by the AGs in their lawsuit that invalidating the prior agreement would block the ongoing EPA rulemaking. The coalition seeks, among other things, to ensure that the EPA encounters no further delays in finalizing the rules.
  • The 11 states led by AG Schneiderman are New York, California, Connecticut, Delaware, Maine, Massachusetts, New Mexico, Oregon, Rhode Island, Vermont, and Washington. The 12 AGs led by AG Morrisey are the AGs of West Virginia, Alabama, Indiana, Kansas, Kentucky, Louisiana, Nebraska, Ohio, Oklahoma, South Carolina, South Dakota, and Wyoming.

Texas Attorney General Issues Opinion on Municipal Prohibitions and Fees Related to Single-Use Plastic Bags

  • Texas AG Greg Abbott issued a formal opinion regarding whether municipalities can enact bans on or adopt fees for single-use plastic bags. In the opinion, he stated that a court would likely find a city ordinance that prohibited or restricted single-use plastic bags for waste management purposes impermissible. However, the opinion implied that a court might find such an ordinance permissible if it had a purpose other than waste management—for example, a purpose of protecting animal life.
  • In addition, the opinion states that a court would likely find that a city ordinance that assesses a fee on the sale or use of single-use plastic bags is prohibited.
  • The opinion was issued in response to a question from State Representative Dan Flynn.

Iowa State Court Orders Packing Company to Pay Civil Penalties and Restitution for Alleged Environmental Violations

  • An Iowa state court ordered Sioux-Preme Packing Company to pay a $54,000 civil penalty and almost $23,000 in restitution in a lawsuit brought by Iowa AG Tom Miller alleging environmental violations related to the company’s wastewater discharge operations.
  • The company admitted to violating its permitted discharge limits, environmental monitoring requirements, and other construction and operation permit requirements. According to the complaint, the actions leading to these violations allegedly caused a large fish kill involving almost 200,000 fish.
  • Pursuant to the consent decree, in addition to paying the civil penalty and restitution for the fish kill and the investigation into its cause, the company is subject to injunction and is required to submit engineering documents regarding its irrigation system and a permit application for its nondischarge wastewater treatment system.

For-Profit Colleges

Iowa Attorney General Sues Cosmetology School for Alleged Unfair and Deceptive Practices

  • Iowa AG Tom Miller filed a lawsuit against cosmetology school La’ James International College for alleged unfair and deceptive practices in violation of the state Consumer Fraud Act.
  • According to the complaint, La’ James allegedly harmed its students by understaffing its classrooms, operating more like a workplace than an educational institution, failing to disclose material information to prospective students, and charging unfair and deceptive late program completion fees.
  • The complaint seeks injunctive relief, restitution, disgorgement, civil penalties of up to $40,000 per violation, costs, and fees.

Insurance

Massachusetts Attorney General Settles With Companies Allegedly Engaged in Deceptive Marketing and Sale of Discount Health Plans

  • Massachusetts AG Martha Coakley settled with Guarantee Trust Life Insurance Company and its subsidiary Vantage America Solutions, Inc. for $1.3 million to resolve allegations that the companies deceptively marketed and sold a discount health plan to state consumers.
  • The companies allegedly falsely represented one of their discount health plans as enabling residents to meet the state’s health insurance coverage mandate and misled consumers to believe that the plan was health insurance.
  • Pursuant to the settlement, the companies must pay close to $476,000 in restitution, more than $272,000 in interest, and close to $552,000 in civil penalties and costs. The settlement also prohibits the companies from making any misrepresentations regarding discount health plans, marketing or selling products as health insurance that are not insured health plans, and from violating any regulations governing discount health plans and organizations.

Intellectual Property

Illinois Enacts Anti-“Patent Troll” Legislation

  • Illinois AG Lisa Madigan applauded the state governor for signing into law Senate Bill 3405, which protects businesses from “patent trolls” who allegedly seek to acquire patents to profit from fraudulent infringement claims. The bill was crafted by AG Madigan and sponsored by State Senator Daniel Biss and State Representative Ann Williams.
  • The law bans patent demand letters that contain false or deceptive information, are sent by individuals lacking the right to license or enforce the patent, falsely threaten litigation, or fail to identify necessary information such as who is asserting the patent or an explanation of the alleged infringement.
  • “The law balances restrictions to crack down on this abusive practice while ensuring legitimate patent holders have the right to pursue infringement claims,” stated AG Madigan.
  • The anticipated effective date for this legislation is January 1, 2015.

Vermont Attorney General Wins Another Victory in Alleged “Patent Troll” Lawsuit

  • Vermont AG William Sorrell announced another victory in his landmark lawsuit against MPHJ Technology Investments, LLC. A Vermont superior court denied MPHJ’s motion to dismiss for lack of personal jurisdiction.
  • As we previously blogged, AG Sorrell filed the case in state court in May 2013 alleging that MPHJ’s practice of sending patent demand letters, purportedly in bad faith, to individuals, businesses, and nonprofits violated Vermont consumer protection law. We more recently blogged about another of AG Sorrell’s victories in this case—a federal appeals court’s decision to dismiss MPHJ’s appeal of a ruling to send the case back to state court.
  • In its decision, the superior court acknowledged the state’s “strong interest in protecting its citizens from consumer fraud,” which the court stated weighed “heavily in favor of jurisdiction.” AG Sorrell announced, “We are pleased to be able to go forward with this litigation.”

Marijuana

Washington Court Holds That State Law Does Not Preempt City Ordinances Prohibiting Marijuana-Related Businesses

  • Following oral arguments, a Washington Superior Court judge issued a decision in MMH, LLC v. Fife holding that state Initiative 502 (I-502), which decriminalizes the state regulated use and sale of marijuana, does not preempt the City of Fife’s local ordinances prohibiting marijuana-related businesses.
  • Washington AG Bob Ferguson filed a brief in this case, which we blogged about last week, supporting a grant of summary judgment to uphold the city’s local ordinances. The brief alternatively argued that if the court found that I-502 did apply and override the city’s ordinances, then federal law did not preempt the city’s ordinances. Because the court found that state law did not preempt local law, the court did not need to address the federal preemption issue.
  • “Today’s ruling affirms the opinion of my office earlier this year and allows [I-502] to continue to be implemented in Washington state,” stated the AG. “As I have said from the beginning, the drafters of [I-502] could have required local jurisdictions to allow the sale of recreational marijuana. It could have been done in a single sentence, but it was not. Now it is up to the Legislature to decide whether to require local governments to allow for the sale of marijuana.”

Mortgages/Foreclosures

New York Attorney General Sues Banks for Alleged Discriminatory “Redlining”

  • New York AG Eric Schneiderman sued Evans Bank, N.A. and Evans Bancorp, Inc. on allegations that the banks engaged in unlawful discrimination by “redlining” in the City of Buffalo. Redlining is the practice of denying access to mortgage loans in select neighborhoods based on the composition of those neighborhoods.
  • The banks allegedly created a map that defined their lending area by excluding predominantly African-American neighborhoods and the residents of those neighborhoods. The AG alleges that this approach of defining a lending area resulted in the banks systematically denying mortgages and services to African-Americans in the Buffalo metro area regardless of their credit-worthiness.
  • The complaint alleges violations of the Fair Housing Act, the state Human Rights Law, and the city code. The AG seeks declaratory and injunctive relief, compensatory and punitive damages, civil penalties, fees, and costs. According to the AG, this action is part of an ongoing and wider investigation into mortgage redlining by banks operating in the state.

 

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Employment, False Claims Act, Health Care, Insurance, Marijuana, Medicaid Fraud, State AGs in the News, States v. Federal Government

Hot News

States and Federal Government Reach Record $16.65 Billion Settlement With Bank of America

  • Following multiple state and federal investigations, the U.S. Department of Justice and the AGs of California, Delaware, Illinois, Kentucky, Maryland, and New York settled for $16.65 billion with Bank of America Corporation and its current and former subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, (collectively, Bank of America) to resolve state and federal claims. This is the largest civil settlement with a single entity in U.S. history.
  • The settlement resolves allegations related to Bank of America’s packaging, marketing, sale, arrangement, structuring, and issuance of residential mortgage-backed securities (RMBS) and collateralized debt obligations and the underwriting and origination of mortgage loans. In the agreed upon statement of facts, Bank of America admits to selling RMBS without disclosing material facts about the quality of the loans to investors, originating risky mortgage loans, and making misrepresentations to Fannie Mae, Freddie Mac, and the Federal Housing Administration.
  • Of the $16.65 billion, Bank of America will pay almost $9.2 billion to the state and federal governments, $7 billion in consumer relief, and $490 million to a tax relief fund. The consumer relief will include principal reduction loan modifications and donations to communities recovering from the financial crisis. Pursuant to the settlement, California and New York will each receive $300 million and Illinois, Maryland, Delaware, and Kentucky will receive $200 million, $75 million, $45 million, and $23 million, respectively.

2014 Election

Arizona Primary Election Results

  • Incumbent AG Tom Horne was defeated by Mark Brnovich in the Republican primary by a margin of 53.2% to 46.4%. Brnovich will face 2010 Democratic AG nominee Felecia Rotellini, who ran unopposed in the Democratic primary.

Florida Primary Election Results

  • Incumbent AG Pam Bondi received her party’s nomination after running unopposed in the Republican primary. In the Democratic primary, George Sheldon defeated Perry Thurston by a margin of 60.7% to 39.3%.

Vermont Primary Election Results

  • Incumbent AG Bill Sorrell received his party’s nomination after defeating H. Brooke Paige in the Democratic primary by a margin of 80.4% to 18.9%, with 89% of precincts reporting. AG Sorrell will face Liberty Union party candidate Rosemarie Jackowski in November’s general election. There is no Republican candidate. If reelected, this will be AG Sorrell’s 10th term.

Antitrust

Acting New Jersey Attorney General Settles With Hotel to Resolve Price Gouging Allegations Related to Superstorm Sandy

  • As part of a larger enforcement initiative following Superstorm Sandy, acting New Jersey AG John Hoffman announced a settlement with Amy Hotels, LLC, doing business as Econo Lodge, to resolve allegations that it engaged in unlawful price gouging during a declared state of emergency.
  • The state price gouging statute prohibits excessive price increases during a declared state of emergency. Amy Hotels allegedly increased its room rates by as much as 150 percent following the declaration of the state of emergency.
  • Under the settlement, the hotel will pay almost $65,000, including almost $25,000 in consumer restitution, $25,000 in civil penalties, and almost $15,000 in costs and fees.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Takes Action Against Auto Finance Company for Alleged Inaccurate Reporting of Consumer Credit Information

  • The Consumer Financial Protection Bureau took action against auto finance company First Investors Financial Services Group Inc. for allegedly violating the Fair Credit Reporting, Dodd-Frank, and Consumer Protection Acts.
  • First Investors allegedly failed to fix known flaws in its computer systems that were used to report consumer credit information to credit reporting agencies, which caused reporting of inaccurate information and potential harm to its customers.
  • Pursuant to a consent order, First Investors will pay a civil penalty of $2.75 million, correct any errors on credit reports, help consumers obtain free copies of their credit reports, and establish new consumer safeguards.

Consumer Protection

Indiana Attorney General and State Lawmakers Propose State Servicemembers Civil Relief Act

  • Indiana AG Greg Zoeller and state lawmakers proposed the Indiana Service Member’s Civil Relief Act to increase consumer protections for military servicemembers.
  • The act would complement and provide state remedies for violations of the federal Servicemembers Civil Relief Act, which allows individuals that are serving to suspend or postpone certain obligations. Those obligations include debt collections, foreclosures, evictions, judicial and administrative proceedings, and certain lease or service terminations.
  • Illinois and Kentucky already have similar laws and we previously blogged about Delaware’s similar proposed legislation.

Airbnb Produces Host Information to New York Attorney General

  • Pursuant to an agreement with NY AG Eric Schneiderman and as part of an ongoing investigation into potential violations of state tax and hotel laws, Airbnb, which provides an online accommodations marketplace, will produce unredacted information on 124 of its hosts to the AG.
  • In May, to comply with a subpoena issued by the AG, Airbnb agreed to provide information about approximately 16,000 of its hosts, redacted of personal information, to the AG. Under that agreement, the AG reserved the right to follow up and request unredacted information on any of those hosts. The production of unredacted information on 124 Airbnb hosts is in response to such a request.
  • In a blog post, Airbnb stated that the AG might still request additional information.

Employment

Illinois Attorney General and State Department of Labor Jointly Investigate Chinese Restaurants for Alleged Wage Violations and Discriminatory Practices

  • Illinois AG Lisa Madigan and the state Department of Labor announced a joint investigation into potential wage violations and discriminatory practices against minority and immigrant workers at Chinese restaurants.
  • Chinese restaurants across the state allegedly require immigrant and minority workers to work long hours without breaks, live in restaurant-owned housing with substandard conditions, work for less than minimum wage, and work under threats of abuse and violence.
  • As part of the investigation, the AG and the state Department of Labor jointly issued subpoenas regarding the workers’ claims.

False Claims Act

New York Attorney General Settles for $1.56 Million to Resolve Whistleblower Lawsuit Brought Under State False Claims Act

  • New York AG Eric Schneiderman settled with appliance retailer Topline Appliance Center and its owner for $1.56 million to resolve a lawsuit brought by a whistleblower under the state False Claims Act.
  • After an investigation, the AG alleged that Topline knowingly failed to collect and pay state and local sales taxes and corporate franchise taxes over a ten-year period.
  • According to the AG, the state False Claims Act is one of the state’s most powerful civil fraud enforcement tools and has been useful in obtaining other tax-related recoveries for the state.

Health Care

Oregon Sues Technology Company Over Health Insurance Exchange Website

  • Oregon AG Ellen Rosenblum sued Oracle America, Inc., several of its executives, and a company that distributes and resells Oracle’s products (collectively, Oracle) in state court alleging fraud, breach of contract, and violations of the state False Claims and Civil Racketeer Influenced and Corrupt Organizations Acts.
  • Oracle allegedly failed to timely provide a functional health insurance exchange website. The complaint seeks substantial damages, penalties, interest, rescission, costs, and fees.
  • Earlier this month, Oracle had filed a lawsuit related to the website against the state in federal court alleging breach of contract and seeking $23 million in allegedly unpaid fees, interest, and an unspecified amount of damages.

Insurance

Louisiana Attorney General Sues Automobile Insurer Alleging Violations of Monopoly and Unfair Trade Practices Laws

  • Louisiana AG Buddy Caldwell sued State Farm Fire and Casualty Company, State Farm General Insurance Company, and State Farm Mutual Automotive Insurance Company (collectively, State Farm) alleging that they engaged in a pattern of unfair and fraudulent business practices meant to control the auto repair industry and resulting in unsafe vehicle repairs.
  • The complaint alleges violations of the state Monopolies Law and the Unfair Trade Practices Act. State Farm allegedly entered into service agreements with repairers that required the use of certain State Farm pricing structures for parts and labor. State Farm also alleged artificially decreased labor rates and mandated the use of substandard, inexpensive parts under these agreements. These practices purportedly resulted in unsafe repairs.
  • The AG seeks injunctive relief, restitution, civil penalties, and costs.

Marijuana

Washington Attorney General Files Brief in Support of City Ordinances Prohibiting Marijuana-Related Businesses

  • Washington AG Bob Ferguson filed a brief in MMH, LLC v. Fife supporting a grant of summary judgment to uphold a city’s local ordinances prohibiting marijuana-related businesses.
  • Washington passed Initiative 502 (I-502), which decriminalizes the use of marijuana and establishes a state regulated system for the production, processing, and retail sale of marijuana. In his brief, the AG asserts that I-502 does not address its impact on the authority of local governments, rather, that continues to be governed by the state constitution, which allows local governments to make and enforce their own local laws. The AG asserts that state courts have adopted a strong presumption against state preemption of nonconflicting local authority and therefore the city’s local ban should be upheld.
  • The AG alternatively argues that if the court rules that I-502 requires the city to allow marijuana-related businesses, the Court should reject the city’s claim that such a requirement is preempted by federal law because there is a strong and established presumption against finding that federal law overrides state authority.
  • A hearing on cross motions for summary judgment are scheduled for August 29.

Arkansas Attorney General Rejects Proposed Marijuana Ballot Item

  • Arkansas AG Dustin McDaniel rejected a proposed popular name and ballot title of a potential ballot item to legalize the use of marijuana in the state due to “ambiguities and misleading tendencies.”
  • According to formal opinion issued by the AG, the proposed popular name, “The Cultivate Hemp and Regulate Marijuana Amendment,” is, among other things, confusing and inconsistent with the text of the proposal. The AG states that multiple additions and changes to the language of the proposal are necessary for further review and possible certification.
  • We blogged last week about two other ballot proposals to legalize marijuana that the AG certified.

Medicaid Fraud

New York Attorney General Settles Medicaid Fraud Allegations With Nursing Home

  • New York AG Eric Schneiderman and the U.S. Attorneys Office announced settlements with nursing home Ralex Services, Inc. and its owner to resolve allegations of Medicaid fraud.
  • Ralex and its owner allegedly submitted claims to the Medicaid program for services that were provided at artificially high rates.
  • Under the agreements, Ralex and its owner will return $2.2 million to the Medicaid program, which is jointly funded by the state and federal governments, with $1.32 million of that amount being returned to New York.

States v. Federal Government

Thirteen State Attorneys General Send Letter to EPA Demanding the Withdrawal of Proposed Carbon Emission Rules

  • Nebraska AG Jon Bruning, Oklahoma AG Scott Pruitt, and West Virginia AG Patrick Morrisey, joined by 10 other state AGs, sent a letter to the U.S. Environmental Protection Agency (EPA) Administrator objecting to the EPA’s plan to regulate carbon dioxide emissions from existing and modified power plants.
  • The letter states that the EPA violated the Clean Air Act because it failed to include required information in the regulatory dockets of two recent proposed rules relating to the carbon dioxide emissions for existing and modified sources. According to the AGs, information on which a proposed rule is based must be made available to the public at the time of the proposal to ensure meaningful comment and sound rulemaking.
  • The AGs state that because of the violations, the proposed rules need to be withdrawn because finalizing a rule without meaningful comment would be unlawful.

State AGs in the News

Posted in Antitrust, Charities, Consumer Financial Protection Bureau, Consumer Protection, Contingency Fee Counsel, Employment, Environment, Health Care, Intellectual Property, Marijuana, Medicaid Fraud, Mortgages/Foreclosures, State AGs in the News

Antitrust

Ohio Attorney General Investigates Businesses for Potential Price Gouging Following a City Tap Water Ban

  • In response to consumer complaints, Ohio AG Mike DeWine is investigating businesses for any possible bottled water price gouging during the city of Toledo’s water ban. The city of Toledo banned the use of tap water for drinking and food preparation after allegedly finding toxins in its water supply.
  • As part of his investigation, AG DeWine has sent letters to 58 businesses seeking information about the price of bottled water before, during, and after the water ban.
  • While the state does not have a statute that defines price gouging, the state Consumer Sales Practices Act prohibits unfair, deceptive, or unconscionable sales practices. According to the AG, under that law, a practice could be considered unconscionable if the supplier knew at the time of the transaction that the price was substantially higher than the price at which similar goods or services could be readily obtained. In addition, it could be considered unfair or deceptive to dramatically increase the price of in stock products in response to current events.

Charities

Massachusetts Attorney General Sues and Obtains Restraining Order Against Charity

  • Massachusetts AG Martha Coakley has filed a lawsuit and obtained a temporary restraining order against the Focus on Veterans, Inc. charity, alleging that the charity violated state charitable solicitation laws by soliciting funds without a required certificate and used deceptive practices.
  • The charity allegedly failed to submit annual financial filings, which are required to obtain a valid certificate from the AG that enables the charity to solicit charitable funds in the state. The charity also allegedly misled potential donors by falsely representing that it would use donations to assist veterans in the state.
  • The temporary restraining order bars the charity from soliciting in the state. The complaint requests further injunctive relief, declaratory relief, and disgorgement.

Contingency Fee Counsel

Massachusetts Attorney General Resolves Allegations of Inappropriate Contingency Fee Agreement With Lobbying Firm

  • Massachusetts AG Martha Coakley entered into a joint disposition agreement with lobbying firm the Brennan Group, Inc. to resolve allegations that the Brennan Group profited from an illegal contingency fee agreement.
  • According to the AG, lobbying firms are prohibited from entering into contingency fee agreements with clients. The Brennan Group allegedly entered into a payment contract with the Franciscan Hospital for Children that required the Brennan Group to lobby the legislature on the hospital’s behalf in exchange for payment based on a two-tiered fixed percentage structure determined by the amount of money the hospital received following the lobbying.
  • Under the joint disposition agreement, the Brennan Group will return $100,000 to the hospital.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Settles Servicemember Consumer Protection Allegations With Retail Store

  • The Consumer Financial Protection Bureau (CFPB) settled with retail chain USA Discounters, Ltd. to resolve allegations that it engaged in deceptive marketing, misled servicemembers, and failed to provide services for which it was paid.
  • USA Discounters, which sells home goods, often has retail stores located near military bases. It allegedly charged a $5 fee for representative services to assist servicemembers with their rights under the Servicemembers Civil Relief Act (SCRA), which provides certain legal protections to active duty servicemembers, including protections from debt collection lawsuits. The CFPB alleged that these services were unnecessary or sometimes never performed.
  • The consent order requires the company to pay a $50,000 penalty, not engage in any unfair or deceptive practices, not charge for SCRA services, and provide restitution to affected servicemembers.

Consumer Protection

Maryland and New York Attorneys General Enter Into Agreements With Ask.com

  • Maryland AG Douglas Gansler and New York AG Eric Schneiderman entered into separate, but similar, agreements with Ask.com, an operating company of IAC/InterActiveCorp., to protect users of the newly acquired Ask.fm.
  • Ask.fm is an online social networking website that allows users to post anonymous questions to other users. The agreements are meant to diminish cyberbullying and harassment of Ask.fm users.
  • Pursuant to the agreements, Ask.fm will enhance its safety policies and procedures, which will include creating a safety center resource, hiring a trust and safety officer, and establishing a board to oversee safety issues. Ask.fm will also, among other things, review user complaints within 24 hours and delete accounts of certain alleged repeat violators.

New York Attorney General Settles Illegal Payday Loan Collection Allegations

  • New York AG Eric Schneiderman settled with Forster & Garbus, one of the state’s largest debt collection firms, to resolve allegations that it violated state law by collecting on “payday” loans. Payday loans are short-term loans with high interest rates and are illegal in New York because they exceed the maximum allowed interest rate of 16 percent.
  • Forster allegedly unknowingly collected on payday loans placed with it by another company. After being notified by the AG’s office, Forster stopped collecting on the loans. The AG stated that lack of knowledge that a loan is a payday loan is not an acceptable excuse for violations of state predatory lending laws.
  • Pursuant to the settlement, Forster must pay $10,000 in costs and penalties. In addition, Forster may not file a consumer credit action against a state resident without obtaining a copy of the loan document and determining that the loan is not a payday loan. Forster must also obtain a copy of the loan document if it receives a consumer complaint regarding an existing settlement or judgment, then vacate any judgments and pay restitution if Forster determines that the loan at issue is a payday loan.
  • The settlement is part of ongoing payday loan enforcement efforts by the AG.

Acting New Jersey Attorney General Settles With “As Seen on TV” Company

  • After an investigation, acting New Jersey AG John Hoffman and the state Division of Consumer Affairs filed a complaint against Telebrands Corp., which is known for its “As Seen on TV” products, alleging that it violated the state Consumer Fraud Act and the terms of a 2001 consent judgment. The 2001 consent judgment resolved prior litigation with the state and required compliance with the state Consumer Fraud Act.
  • Telebrands allegedly committed several violations of state law, including using aggressive sales techniques to “upsell” products, failing to allow customers to opt out of ordering processes, shipping and billing for products not ordered by consumers, using misleading advertisements, making false promises and misrepresentations, and omitting material facts.
  • The lawsuit seeks restitution for affected consumers, civil penalties, costs, and fees. The state is seeking enhanced penalties of up to $20,000 per violation, instead of the standard $10,000 per violation allowed under the state Consumer Fraud Act, because of the alleged violation of the 2001 consent judgment.

New York Attorney General Enters Into Agreement With Retailer Regarding Allegations of Racial Profiling of Customers

  • Following an investigation, New York AG Eric Schneiderman entered into an agreement with Macy’s Retail Holdings, Inc. to resolve allegations that it racially profiled and falsely detained minority customers.
  • The AG found that Macy’s allegedly used heightened surveillance for and wrongfully detained minority customers and denied interpreter services to customers with limited English proficiency. Macy’s operated under a consent decree from 2005 to 2008 to resolve allegations that it had violated antidiscrimination laws.
  • Under the agreement, Macy’s will pay $650,000 in costs, fees, and penalties; designate an independent antidiscrimination expert; hire a security monitor; post a customer bill of rights; establish new recordkeeping requirements; adopt new antiprofiling policies; train employees; and investigate any customer complaints.
  • We recently blogged about a similar settlement reached by the AG with Barneys New York.

Florida Attorney General Sends Letter to FDA Regarding Regulation of Tobacco Products

  • Florida AG Pam Bondi sent a letter to the Food and Drug Administration (FDA) regarding its proposed rule that will further regulate certain tobacco products, including e-cigarettes and cigars, and extend certain regulations that are already in place for cigarettes to these products.
  • AG Bondi supports regulation of e-cigarettes, including regulation of these products for youth, but stated in her letter that the FDA needed to “more narrowly tailor these overbroad regulations.” Specifically, AG Bondi expressed concern for a small Florida cigar company, J.C. Newman Cigar, stating that it was unique in the industry and “should not be regulated in the same manner as the nation’s largest cigarette companies.”
  • We recently blogged about a separate letter submitted by 29 AGs in support of the proposed rule and additional regulation of e-cigarettes, which emphasized the importance of regulatory protections for youth.

Employment

New York Attorney General and Taxi and Limousine Commission Settle With Medallion Leasing Agent for Over $1.6 Million

  • New York AG Eric Scheiderman and the state Taxi and Limousine Commission (Commission) settled with Yellow Cab SLS Jet Management Corp, a taxi medallion leasing agent, to resolve allegations that it violated the Commission’s rules governing “lease cap rules.”
  • Most taxi drivers in New York City lease the medallions required to operate their taxis from owners and leasing agents. The Commission has lease cap rules to protect drivers and limit fees drivers may be charged for leasing medallions to ensure a baseline level of take-home earnings for drivers.
  • SLS Jet allegedly caused drivers to incur or charged late fees in violation of the Commission’s lease cap rules.
  • Under the agreements with the AG and the Commission, SLS Jet will pay almost $1.39 million in restitution, $125,000 in penalties, $125,000 to the commission, and $25,000 to monitor compliance. It will also ensure future compliance by training employees, posting notice of the lease cap rules, appointing a compliance officer, reporting quarterly to the AG’s office, and notifying the Commission of any new fees.

Environment

Vermont Attorney General Settles Alleged Hazardous Waste Violations

  • Vermont AG William Sorrell has settled with Sisters and Brothers Investment Group, LLP to resolve allegations that it violated state Hazardous Waste Management Rules relating to the release of waste oil.
  • Pursuant to the court approved consent order, the company admitted liability for 11 violations of the state rules, including failing to make a hazardous waste determination, using improper hazardous waste containers, and failing to notify the state Agency of Natural Resources of the release.
  • Under the agreement, the company will pay $70,000 in civil penalties.

Health Care

Indiana Attorney General Announces Partial Victory in Lawsuit Regarding Affordable Care Act

  • Indiana AG Greg Zoeller announced a partial victory in the lawsuit that he and 39 school corporations brought against the U.S. Internal Revenue Service (IRS), the U.S. Department of Health and Human Services, and the U.S. Department of the Treasury, alleging that the IRS overstepped its authority by requiring financial penalties for employers in states that did not create health insurance exchanges under the Affordable Care Act (ACA). In ruling on a motion to dismiss, the U.S. District Court for the Southern District of Indiana ruled that that the main parts of the lawsuit can continue.
  • The court held that the plaintiffs could proceed with the allegations that the IRS violated the Administrative Procedures Act. A similar argument was recently successful in a separate legal challenge to the ACA in Halbig v. Burwell.
  • According to the AG, the state does not plan to seek an interlocutory appeal. Oral arguments on summary judgment are scheduled for October 9.

Intellectual Property

Vermont Attorney General Wins Another Victory in Alleged “Patent Troll” Lawsuit

  • Vermont AG William Sorrell announced another victory in his landmark lawsuit against MPHJ Technology Investments, LLC. The U.S. Court of Appeals for the Federal Circuit dismissed MPHJ’s appeal of the federal district court’s ruling to send the case back to state court for resolution.
  • As we previously blogged, AG Sorrell filed the case in state court in May 2013 alleging that MPHJ’s practice of sending patent demand letters, purportedly in bad faith, to individuals, businesses, and nonprofits violated Vermont consumer protection law. MPHJ removed the case to federal court arguing that it involved issues of patent law implicating a federal question, as well as asserting that diversity existed between the state and MPHJ. The federal district court rejected those arguments and ordered the case back to Vermont state court. MPHJ appealed the district court’s decision.
  • “We’re pleased the Federal Circuit has rejected MPHJ’s appeal. Now we can turn in earnest to litigate the case in state court—where it began and where it rightfully should be,” stated the AG.

Marijuana

Arkansas Attorney General Certifies Proposed Medical Marijuana Ballot Item for 2016

  • Arkansas AG Dustin McDaniel certified the ballot title and popular name of a proposed ballot item for the 2016 ballot that would legalize the use of marijuana for medical purposes. Arkansans for Compassionate Care is sponsoring the proposed item. It was unable to obtain the required signatures before the deadline for this year’s general election ballot. A similar proposal on the 2012 ballot was defeated.
  • According to a news report, the AG stated that the proposal meets state requirements that will allow the sponsor to begin gathering signatures, but the AG warned that the “complexity and far-reaching effects of the proposal” could make it susceptible to challenges.
  • The AG also recently certified another proposal for a constitutional amendment that would make marijuana legal without restricting it to medical use. According to another news report, a lawyer in the state is anticipating a third marijuana ballot proposal for 2016 that would legalize medical marijuana. The proposal would be similar to the Arkansans for Compassionate Care proposal, but would not include provisions allowing home growth or lower-cost options for low income individuals.

Medicaid Fraud

New York Attorney General Settles Allegation of Medicaid Fraud With Adult Day Health Care Program for $6.5 Million

  • Following an investigation, New York AG Eric Schneiderman settled for $6.5 million with Northern Manor Multicare Center, Inc. to resolve allegations that its health care facility, Northern Manor Adult Day Health Care Program (Northern Manor ADHCP), did not provide services as represented in its claims for payment to Medicaid. The AG also announced the arrest of four employees of Northern Manor ADHCP.
  • Northern Manor ADHCP allegedly hired unqualified individuals and admitted more registrants than the state certified it to admit.
  • Northern Manor Multicare Center agreed to pay $6.5 million and close Northern Manor ADHCP. The employees were charged with grand larceny for causing Medicaid payments based on false claims, falsifying business records, and unauthorized practice of a profession.

Mortgages/Foreclosures

CFPB Settles With Mortgage Provider for Over $19.3 Million

  • The CFPB settled with Amerisave Mortgage Corporation, its affiliate Novo Appraisal Management Company, and the companies’ owner to resolve allegations of engaging in deceptive practices.
  • Amerisave allegedly advertised misleading interest rates, charged improper upfront fees, failed to honor advertised rates, and illegally overcharged for affiliated services offered by Novo.
  • Pursuant to the consent order, Amerisave and Novo will refund customers $14.8 million and Amerisave will pay a $4.5 million penalty. The agreement also prohibits Amerisave from advertising any unavailable mortgage rates or charging any illegal fees. In addition, the owner will pay a $1.5 million penalty.

State AGs in the News

Posted in 2014 Election, Consumer Financial Protection Bureau, Consumer Protection, Employment, Environment, Medicaid Fraud, Mortgages/Foreclosures, Pharmaceuticals

2014 Election

Connecticut Election Results

  • Incumbent AG George Jepsen (D) and Kie Westby (R) received their respective parties’ nomination after both ran unopposed in the primary. They will face Stephen Fournier (Green Party) in the general election.

Minnesota Election Results

  • Incumbent AG Lori Swanson (D), who ran unopposed in the Democratic primary, will face Scott Newman (R), Andy Dawkins (Green Party), Brandon Borgos (Independence Party), Mary O’Connor (Libertarian Party), and Dan Vacek (Independent) in November’s general election. Newman defeated Sharon Anderson in the Republican primary by a margin of 63% to 37%.

Wisconsin Election Results

  • In an open seat primary in Wisconsin, Susan Happ defeated Jon Richards and Ismael Ozanne for the Democratic nomination by a margin of 52% to 33% and 15%. Happ will face Brad Schimel, who ran unopposed in the Republican primary, and Thomas Nelson, Sr. (Libertarian) in November’s general election. Incumbent AG J.B. Van Hollen (R) chose not to run for reelection.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Begins Accepting Virtual Currencies Complaints

  • The Consumer Financial Protection Bureau (CFPB) simultaneously issued a consumer advisory and announced that it will begin accepting complaints related to virtual currencies, such as Bitcoin, which are alternatives to current payment systems.
  • According to CFPB Director Richard Cordray, the virtual currency market is like the “Wild West.” The CFPB stated that virtual currency exchange rates are volatile, have unclear costs, are subject to risk from serious data security threats, and may not offer refunds for lost or stolen funds.
  • The CFPB also warns consumers that neither the Federal Deposit Insurance Corporation nor the National Credit Union Share Insurance Fund, which insure losses in the event a covered entity fails, extends coverage to virtual currency accounts.

Consumer Protection

Twenty-Nine Attorneys General Submit Comments to FDA Urging Regulation of E-Cigarettes

  • The AGs from Illinois, Indiana, Massachusetts, and New York, joined by 25 other AG signatories, submitted comments to the Food and Drug Administration (FDA) in support of an FDA proposed rule and urging it to take additional steps in the regulation of e-cigarettes. The AGs particularly emphasized the importance of adding regulatory protections for young people.
  • The FDA’s proposed rule would deem e-cigarettes tobacco products and bring those products within the FDA’s jurisdiction under the Food, Drug, and Cosmetic Act, as amended by the Family Smoking Prevention and Tobacco Control Act.
  • Among other things, the AGs urged the FDA to prohibit flavors, other than tobacco and menthol; apply the same advertising and marketing restrictions already in place for cigarettes to e-cigarettes; and strengthen health warnings.

Vermont Attorney General Seeks to Dismiss Lawsuit Filed in Opposition to State Genetically Engineered Food Labeling Law

  • In Vermont federal district court, Vermont AG William Sorrell filed a motion to dismiss a lawsuit brought by food manufacturer trade associations. The lawsuit seeks to invalidate state Act 120, which requires the labeling and disclosure of foods produced with genetic engineering.
  • The motion argues that the act’s essential requirements are appropriate under the First Amendment and serve legitimate state interests, that the statute is not impermissibly vague, that the act does not violate the Commerce Clause because there is not a significant burden on interstate commerce, and that the act is not expressly or impliedly preempted because it is a valid exercise of the state’s regulatory power.
  • The motion also argues that several plaintiffs lack standing to bring the lawsuit and that the state governor and health and finance commissioners are not proper defendants because they are not responsible for enforcing the act.

New York Attorney General Enters Into Agreement With Retailer Regarding Allegations of Racial Discrimination of Customers

  • After an investigation, New York AG Eric Schneiderman entered into an agreement with Barneys New York to resolve allegations that it racially discriminated against minority customers.
  • The AG found that Barneys lacked comprehensive written policies regarding racial profiling and objective race-neutral criteria for investigating possible shoplifting or credit card fraud.
  • Pursuant to the agreement, Barneys will pay $525,000 in costs, fees, and penalties; retain an antiprofiling consultant; establish new recordkeeping requirements; limit access to closed-circuit televisions; adopt new loss-prevention and antiprofiling policies; develop new employee training; and investigate all customer complaints of profiling.

Vermont Attorney General Settles “Cramming” Allegations

  • Vermont AG William Sorrell settled “cramming” allegations with Enhanced Services Billing, Inc., for $200,000. “Cramming” is the practice of adding unauthorized charges to telephone bills.
  • According to the complaint, which the AG filed in May, Enhanced Services violated state law by facilitating cramming by Localbizusa, a web services seller, and failing to alert customers of the charges. Localbizusa allegedly signed businesses up for web services without consent, used deceptive telemarketing, and failed to provide required disclosures.
  • Enhanced Services will pay $75,000 in refunds to affected businesses and $125,000 to the state.

Virginia Attorney General Enters Into Agreement With Uber and Lyft Ridesharing Services

  • Virginia AG Mark Herring and Governor Terry McAuliffe announced agreements with ridesharing services Uber Technologies, Inc. and Lyft that will allow operation of these services in the state.
  • The agreements are the result of discussions with the companies following cease and desist letters sent by the Virginia Department of Motor Vehicles in June. According to the AG, the goals of the agreements are ensuring passenger safety, compliance with state law, appropriate insurance coverage, transparency of operations, and fairness among transportation providers.
  • Uber thanked the AG and Governor for “putting consumers first and embracing innovation, choice and opportunity.” Lyft stated that the agreement allows it “to continue providing safe rides and economic opportunity to Virginians as we work with state leaders to secure a permanent future for ridesharing.”

Employment

Massachusetts and New Hampshire Attorneys General Send Letter to Retail Chain Regarding Laws Governing Worker Terminations

  • Massachusetts AG Martha Coakley and New Hampshire AG Joseph Foster sent a letter to Market Basket to remind it of state laws governing employee terminations. AG Coakley also established a hotline for Market Basket employees to use to file complaints.
  • Market Basket allegedly terminated several employees, which resulted in a number of calls to the AGs’ offices regarding workers’ rights.
  • The letter reminds the retailer that the states’ laws require an employer to pay an employee all wages upon termination. Wages include any bonuses; earned sick, holiday, or vacation pay; any benefit plan contributions due; and any earned commission. The letter also reminds the retailer that any violations of these laws may result in civil or criminal penalties or a civil lawsuit.

Environment

Fifteen Attorneys General Send Letter to EPA Objecting to Rule Potentially Impacting Clean Water Act Exemption

  • Nebraska AG Jon Bruning, joined by Iowa AG Tom Miller and 13 other state AGs, sent a letter to the Environmental Protection Agency (EPA) to object to its rule, which would allegedly narrow the Clean Water Act exemption for “normal farming activities.”
  • The Clean Water Act provides an exemption for normal farming activities from permitting requirements for discharge of dredged or fill material. The AGs argue that normal farming activities is broadly defined and includes upland soil and water conservation practices, but that the EPA rule would arbitrarily narrow the scope and impermissibly eliminate the exemption for many of these activities.
  • The AGs also argue that the rule is unlawful because it was not issued in compliance with the notice and comment procedure required by the Administrative Procedure Act.

Kansas Attorney General Petitions DC Circuit to Block an EPA Settlement Agreement Regarding Implementation of Carbon Emissions Regulations

  • Kansas AG Derek Schmidt petitioned a federal appeals court to block a final settlement agreement between the EPA, 11 states, and private environmental organizations. The terms of that agreement allow the EPA to proceed with regulating carbon dioxide emissions from existing coal-fired power plants under the Clean Air Act.
  • In support of his argument, AG Schmidt states that the U.S. Supreme Court has held that the EPA lacks authority to regulate existing power plants under the Clean Air Act and that doing so will impose substantial new costs on existing power plants that will be passed on to consumers. He also states that the agreement represents a “sue and settle” arrangement that allows special interests and federal regulators to improperly exclude consumers and citizens from the process.
  • We recently blogged about a petition submitted by 12 other AGs in this case that seeks review of the agreement and asserts that the agreement was unlawful as to coal-fired power plants because those plants are already regulated under the Clean Air Act and cannot be subject to double regulation.

Texas Attorney General Opposes Proposed EPA Rule Regarding Navigable Waters

  • Texas AG Greg Abbott sent a letter to the EPA urging it to withdraw proposed rulemaking for navigable waters under the Clean Water Act. AG Abbott claims that the proposed rule exceeds the EPA’s authority to regulate navigable waters and will convey to the federal government a potentially boundless amount of jurisdiction over water and land.
  • In support of his argument, AG Abbott stated that the proposed rule is contrary to Congress’s objective in passing the Clean Water Act, is inconsistent with U.S. Supreme Court precedent, lacks cooperative federalism, is without scientific or economic justification, and would erode private property rights.

Medicaid Fraud

Texas Attorney General Settles Medicaid Fraud Allegations for $19.5 Million

  • Following an investigation, Texas AG Greg Abbott settled with Taro Pharmaceuticals USA, Inc., for $19.5 million to resolve allegations that it fraudulently reported inflated drug prices to the Medicaid program, causing the program to reimburse pharmacies more than it should have for certain products.
  • According to the AG, when manufacturers report inflated market prices for products to the Medicaid program, the program may reimburse the pharmacies at the inflated rate. Taro allegedly used the difference between actual market rate and the inflated rate to induce pharmacies to purchase its products.
  • Because the state and federal governments jointly fund Medicaid, a portion of the settlement will be paid to the federal government.

Mortgages/Foreclosures

Connecticut and Florida Attorneys General Sue Mortgage Rescue Relief Service Provider

  • Connecticut AG George Jepson and Florida AG Pam Bondi sued and obtained a temporary restraining order against Berger Law Group, Resolution Law Group, and related entities and individuals alleging that they engaged in deceptive practices and illegally collected upfront fees from distressed homeowners.
  • The temporary restraining order freezes assets and prohibits the defendants from collecting any fees or making any misrepresentations. The complaint alleges collection of advance fees, misrepresentations, and failure to make certain disclosures in violation of Regulation O; violations of the state deceptive and unfair trade practices act; and civil theft.
  • The AGs seek permanent injunctive relief; consumer relief, including rescission and reformation of contracts, refunds, restitution, and disgorgement; civil penalties; and costs.

Pharmaceuticals

Forty-Two Attorneys General Settle for $35 Million to Resolve Allegations of Deceptive Marketing Practices

  • Forty-two AGs settled with Pfizer to resolve claims that its subsidiary, Wyeth Pharmaceuticals Inc., engaged in improper marketing of the drug Rapamune prior to Wyeth’s acquisition by Pfizer. The settlement requires Pfizer to pay $35 million to the states.
  • Rapamune is an immunosuppressive drug approved by the FDA for use after kidney transplants. Wyeth allegedly improperly promoted Rapamune for unapproved uses, including for use after liver, heart, and lung transplants.

 

State AGs in the News

Posted in Antitrust, Consumer Protection, Energy, Environment, Financial Industry, Health Care, State AGs in the News

Hot News

Navigating State AG Subpoenas: A Map

  • Dickstein Shapiro State AG Practice Partner Milton A. Marquis and Counsel Ann-Marie Luciano published an article in the Summer 2014 issue of the American Bar Association’s State and Local Law News outlining strategies for handling a subpoena from a State Attorney General.
  • The article maps out the key areas every business should explore when navigating an AG subpoena and civil investigatory process to ensure efficiency and limit exposure.
  • To read more, please see the full article.

Recent NLRB Directive Against McDonald’s Provides Fuel for Active Attorneys General

  • The general counsel of the National Labor Relations Board (NLRB) authorized 43 complaints of unfair labor practices brought by McDonald’s franchise workers to proceed against the franchisor, McDonald’s USA LLC.
  • Allowing the workers’ cases to proceed against McDonald’s is not only unprecedented, but could have far-reaching implications for the entire franchise industry, including other restaurants, hotels, car and auto services, and financial services, among other businesses.
  • By increasing corporate franchisors’ potential liability, the NLRB’s directive, if upheld, could overturn decades of established franchise law and jeopardize the viability of the franchise business model. To learn more, please read our blog post.

Troll Tamers: State Attorneys General’s Role in the Patent Reform Debate

  • Dickstein Shapiro State AG Practice Partner Bernie Nash and Associate Christopher Allen discuss non-practicing entities (NPEs), also known as patent trolls, in their article published on July 31 in the Association of Corporate Counsel’s CLO Executive Bulletin.
  • Over the past two years, State AG offices have found themselves central to dealing with allegedly frivolous patent infringement claims that threaten litigation from NPEs. As Congressional reform efforts have stalled, AGs will likely continue to lead in this area as the debate continues about not only stopping patent trolls, but also how to balance innovation with intellectual property rights and economic growth.
  • To read more, please see the full article.

2014 Election

Kansas Primary Election Results

  • Incumbent AG Derek Schmidt (R) and A.J. Kotich (D) received their respective party’s nomination after both ran unopposed in the primary.

Antitrust

Proposed Apple E-Book Settlement Preliminarily Approved by Court

  • The court preliminarily approved the proposed settlement in the Apple e-book case. The case is an antitrust class action lawsuit brought against Apple Inc. by consumers and 33 AGs alleging that it conspired with publishers to fix prices.
  • As we previously blogged, the settlement proposes that Apple pay up to $450 million. The settlement is still contingent on the outcome of Apple’s pending appeal of a 2013 ruling finding that Apple violated antitrust laws. Pursuant to the agreement, if the appeals court vacates the verdict or finds that Apple did not violate antitrust laws, the amount that Apple pays under the settlement could be reduced to a lesser amount or to nothing.
  • A final fairness hearing is set for November 21.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Releases Report on Bank Overdraft Fees

  • The Consumer Financial Protection Bureau (CFPB) released a report about overdraft fees and services for bank debit cards and ATM transactions. The CFPB asserts that overdraft practices continue to have an ongoing impact on consumers.
  • According to the report, the majority of debit card overdraft fees are incurred on transactions of $24 or less and  the majority of overdrafts are repaid within three days. The CFPB calculated that when analyzed in lending terms, these numbers equate to a loan with a 17,000 percent annual percentage rate.
  • In remarks regarding the report, the CFPB Director stated that banks should not be precluded from offering overdraft coverage. The CFPB Director proposed further examination of the issue as the next step in reducing any alleged consumer harm.

Consumer Protection

Arizona Attorney General Issues Opinion That State Luxury Taxes and Smoking Prohibitions Do Not Apply to E-Cigarettes

  • In response to a question from State Senator Steven Yarbrough, Arizona AG Thomas Horne issued a formal opinion that state tobacco luxury tax and smoking prohibition laws do not apply to liquid nicotine vapor products, commonly known as electronic cigarettes or e-cigarettes.
  • According to the opinion, the state tobacco luxury tax applies only to defined categories of tobacco products. The AG stated that e-cigarettes do not fall into any of these defined categories because they do not contain any tobacco. The AG acknowledged that Minnesota applies tobacco luxury tax to e-cigarettes, the Minnesota statute applies to tobacco products and products “derived from tobacco,” while Arizona’s statute does not include the “derived from” language or terms broad enough to apply to e-cigarettes.
  • The AG also interpreted the state smoking prohibitions as only applying to “lighted tobacco product[s].” The AG stated that since e-cigarettes are neither lit nor tobacco products for purposes of the statute, the smoking prohibitions do not apply. The AG also stated that e-cigarettes do not violate the purpose of the statute, which is to protect people from the alleged health risks associated with secondhand smoke.

Thirteen Attorneys General and the CFPB Settle With Military Consumer Lender

  • Thirteen AGs and the CFPB, led by New York AG Eric Schneiderman, settled with Colfax Capital Corporation (formerly known as Rome Finance Co., Inc.); its subsidiary, Culver Capital, LLC (formerly known as Rome Finance LLC); and the companies’ owners (collectively, Rome Finance).
  • Rome Finance allegedly financed consumer debts to military servicemembers. The AGs and the CFPB alleged multiple violations of state and federal law, including failure to accurately disclose finance charges and interest rates; failure to provide required periodic disclosures; violations of state and federal laws governing unfair, deceptive, or abusive acts and practices; and violation of the Military Lending Act for excessive interest, onerous provisions, and for requiring allotment payment backed by access to a bank account.
  • The settlement requires liquidation of the companies, provides almost $92 million in debt relief to affected servicemembers, reports debt as paid to consumer finance reporting agencies, vacates any related judgment, and bans the companies and owners from consumer lending.
  • In addition to the CFPB and the New York AG, AGs from the following states participated in the settlement: Colorado, Delaware, Florida, Georgia, Indiana, Iowa, Kentucky, Massachusetts, Michigan, North Carolina, Tennessee, and Vermont.

Hawaii Attorney General Reaches Settlement for $11.3 Million to Resolve Allegations of Deceptive Credit Card Marketing Practices

  • Hawaii AG David Louie settled with Bank of America, JP Morgan Chase, Discover Financial Services, and Citibank for $11.3 million to resolve allegations that they engaged in deceptive marketing practices related to credit card payment protection plans in violation of state law.
  • The AG alleged that while selling credit card payment protection plans, the companies provided misleading information, enrolled customers without their consent, distorted plan benefits, billed for services that were not provided, unfairly charged customers interest and fees, and denied plan benefits to eligible participants.
  • The settlement proceeds will go to a state fund. According to the AG, federal enforcement actions by the CFPB and U.S. Office of the Comptroller of the Currency, and private class action lawsuits, have sought and are seeking restitution for consumers.

Energy

North Carolina Attorney General Sends Cease and Desist Notice to Company Seeking “Fracking” Rights

  • North Carolina AG Roy Cooper sent a cease and desist notice to Crimson Holdings requesting that it stop soliciting leases from state landowners for “fracking,” or hydraulic fracturing. The notice comes in advance of the expected legalization of fracking that is anticipated for next year.
  • The AG alleges that the company’s leases violate state law because they lack cancellation rights and appropriate disclosures and are for terms that are longer than the state limit of 10 years. The AG also alleges that the company’s solicitations are illegal because its land agent is not registered in the state.
  • The AG demands that the company stop doing business in the state, cancel any signed leases, and supply the AG’s office with the names of all landowners who sold fracking rights to the company.

Environment

Twelve Attorneys General Petition DC Circuit to Review an EPA Settlement Agreement to Compel Withdrawal of a Proposed Regulation

  • Twelve AGs, led by West Virginia AG Patrick Morrisey, petitioned the U.S. Court of Appeals for the DC Circuit for review of a 2011 settlement agreement, in which the U.S. Environmental Protection Agency (EPA) committed to proposing and finalizing a rule that required states to regulate existing coal-fired power plants under the Clean Air Act (CAA).
  • The AGs allege that the agreement is unlawful because coal-fired power plants are already regulated under a separate section of the CAA and the law prohibits double regulation of these plants.
  • The petition for review requests that the court find that the settlement agreement is unlawful to the extent that it commits the EPA to proposing or finalizing a coal-fired power plant rule, to enjoin the EPA from complying with the settlement by continuing the ongoing comment period or finalizing its proposed rule, and to vacate the relevant parts of the settlement agreement.

Financial Industry

California Attorney General May Sue Bank for Alleged Misrepresentations Regarding Securities and Investment Vehicles

  • According to a regulatory filing and news reports, California AG Kamala Harris may file a lawsuit against Morgan Stanley for allegedly making misrepresentations about residential mortgage-backed securities and structured investment vehicles (SIV). In addition, the SIV Cheyne Finance LLC allegedly issued securities marketed to the California Public Employees Retirement System before going bankrupt in 2007.
  • According to one news report, the state retirement system purchased $1.3 billion worth of the SIV. The regulatory filing states that the AG’s office has made preliminary conclusions that Morgan Stanley violated state law and that the AG may seek injunctive relief, treble damages, and penalties.

New York Attorney General Allegedly Expands “Dark Pool” Probe to Two More Banks

  • According to news reports, New York Attorney General Eric Schneiderman expanded his probe of “dark pools,” which are privately owned and operated trading exchanges, to include the dark pools run by Goldman Sachs and Morgan Stanley.
  • We previously blogged about a lawsuit that AG Schneiderman brought against Barclay’s Capital Inc. and Barclays PLC alleging wrongful practices related to the operation of its dark pool. Barclays has denied the charges.

Health Care

West Virginia Attorney General Sues U.S. Department of Health and Human Services for Allegedly Not Enforcing the Affordable Care Act

  • West Virginia AG Patrick Morrisey sued the U.S. Department of Health and Human Services (HHS) in the U.S. District Court for the District of Columbia. The lawsuit alleges that the President and HHS unlawfully suspended enforcement of Affordable Care Act (ACA) requirements for existing health care policies and shifted the burden and responsibility of cancellation or approval of individual health plans under the ACA to the states.
  • In the complaint, AG Morrisey claims violations of the Affordable Care and Administrative Procedure Acts, unlawful delegation of executive and legislative responsibility to the states, and violation of state sovereignty under the U.S. Constitution.
  • The AG requests declaratory relief, remand of the case to the U.S. Department of Health and Human Services “to permit the Administration promptly to work with Congress to address the fact that the ACA rendered millions of Americans’ health insurance plans unlawful,” costs, and fees.

State AGs in the News

Florida Attorney General Launches Mobile App

  • Florida AG Pam Bondi launched an application, or “app,” for mobile devices designed to allow consumers to file complaints and gain easy mobile access to news, announcements, and other information.
  • The app provides information about the AG and her office, news releases, the AG’s weekly briefing, and an online form to directly file a Medicaid Fraud Control Unit complaint or other complaint.
  • “By launching this Attorney General’s Office app, we are bringing key services right to Floridians’ smart phones and devices,” stated AG Bondi. “It is our hope that by making interacting with my office more convenient, we can enhance the services we provide to all Floridians.”

 

Recent NLRB Directive Against McDonald’s Provides Fuel for Active Attorneys General

Posted in Employment, States v. Federal Government

This week the general counsel of the National Labor Relations Board (NLRB), Richard Griffin, authorized 43 complaints of unfair labor practices brought by McDonald’s franchise workers to proceed against the franchisor, McDonald’s USA LLC. Allowing the workers’ cases to proceed against McDonald’s is not only unprecedented, but could have far-reaching implications on the entire franchise industry, including other restaurants, hotels, car and auto services, and financial services, among other businesses. By increasing corporate franchisors’ potential liability, the NLRB’s directive, if upheld, could overturn decades of established franchise law and jeopardize the viability of the franchise business model.

The NLRB directive is based on the theory that the Fair Labor Standards Act (FLSA), which extends liability to employers, encompasses in the definition of employer any individual that possesses sufficient control over the workers in question based on the economic realities of the relationship. See Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61, 66 (2d Cir. 2003). Although courts have analyzed the employer-employee relationship between the franchisor and a franchisee’s employees, no court has extended FLSA liability to a franchisor for the acts of its franchisee. Instead, courts generally recognize that while the franchisor imparts minimum standards on the franchisee to ensure high quality and consistency across its brand, the franchisee independently owns and operates the franchise and, thus, is responsible for managing its day-to-day activities, including hiring and firing employees, setting wages, and establishing work schedules.

If upheld, the NLRB’s directive will likely embolden many AGs, particularly those who have been active in workplace issues in their role as counsel to their state labor agency, to pursue larger franchisors for the actions and decisions of their franchisees. Recently, AGs have actively investigated the labor violations of franchisees and other employers of low-wage workers.  For example, Massachusetts AG Martha Coakley fined a Massachusetts Burger King franchisee $50,000 for violations of child labor laws, New York AG Eric Schneiderman recovered $500,000 from seven McDonald’s franchisees and $450,000 from six Domino’s franchisees for wage and hour violations, and Illinois AG Lisa Madigan recovered $100,000 from a contractor for underpaying employees on a public works project. AG Schneiderman and Washington AG Bob Ferguson have also been active in supporting the rights of low-wage workers.

In light of these recent actions, businesses should expect AGs to continue to seek new ways to pursue legal action against corporate franchisors for alleged labor violations of their franchisees.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Employment, Environment, Financial Industry, For-Profit Colleges, Health Care, Mortgages/Foreclosures, State AGs in the News

Antitrust

West Virginia Attorney General Settles Allegations of Antitrust Violations

  • West Virginia AG Patrick Morrisey settled antitrust allegations with GE Funding Capital Market Services, Trinity Plus Funding Co. LLC, and Trinity Funding Co. LLC for $950,000. Those allegations included violations of the Sherman Act and the state Antitrust Act by illegally rigging bids, fixing prices, and manipulating the municipal derivatives market.
  • The AG sued more than 20 companies as part of this initiative and previously had settled with Royal Bank of Canada, Bank of America, Morgan Stanley, and JPMorgan Chase. The other lawsuits are ongoing.
  • Pursuant to the settlement, the money paid by the companies, minus fees and costs, will go to state agencies that invested in municipal derivatives. The companies denied the allegations during the lawsuit and denied any liability in the settlement.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Director Invites Consumers to Share Personal Financial Marketplace Experiences

  • In conjunction with the Consumer Financial Protection Bureau’s (CFPB) third anniversary, the CFPB Director invited consumers to share their personal financial marketplace experiences. The CFPB maintains that these stories can help show trends and provide insight into consumer financial products and services.
  • The invitation closely follows the CFPB’s proposed policy statement that it would add consumer complaint narratives to its consumer complaint database. Currently, the CFPB only publishes basic summary and demographic information related to consumer complaints. This proposal has been highly controversial among commentators and several concerns have been raised, including concerns regarding privacy and unverified data.

Consumer Protection

Amicus Brief Filed in U.S. Supreme Court by 27 Attorneys General Regarding the Truth in Lending Act

  • A coalition of 27 AGs, led by New York AG Eric Schneiderman, filed an amicus brief in the U.S. Supreme Court in the case of Jesinoski v. Countrywide Home Loans. The coalition requested that the Court overturn a ruling by the U.S. Court of Appeals for the Eighth Circuit and find that consumers may rescind a transaction under the federal Truth in Lending Act (TILA) without filing a lawsuit.
  • TILA requires creditors to disclose the terms of loans to consumers and inform them of their statutory rights. If creditors fail to do this, consumers may rescind a loan within three years of the date of the loan. The question presented to the court is whether notice to creditors of intent to rescind a covered home loan is sufficient or whether consumers must also file a lawsuit.
  • The AGs argue that TILA does not contain an express requirement for a lawsuit to enforce rescission rights. They also argue that rescission is a powerful consumer remedy and that requiring consumers to file court actions to exercise TILA rescission rights would dilute the deterrent purpose of the remedy and place it out of reach for many consumers.
  • Argument in the case has not been scheduled yet.

Vermont Attorney General Sues Discount Retail Chain for Allegedly Violating Its Prior Settlement With the State

  • Vermont AG William Sorrell filed a lawsuit against Dollar Tree Stores, Inc., alleging that it violated a 2010 settlement agreement with the state that prevented it from selling jewelry that contained toxins, such as lead or cadmium, in violation of state law.
  • The complaint is seeking injunctive relief that will prohibit Dollar Tree from selling jewelry in the state, consumer relief, civil penalties of up to $10,000 per violation of the state Consumer Protection Act, costs, and fees.

New York Attorney General and Ridesharing Service Reach Agreement

  • New York AG Eric Schneiderman and the state Superintendent of Financial Services reached an agreement with Lyft that will allow the launch of ridesharing services in New York City.
  • Pursuant to the agreement, Lyft will operate in compliance with state laws and regulations, launch in New York City using only commercial drivers, and suspend operations in Buffalo and Rochester. The AG and Superintendent will withdraw the application for a temporary restraining order and preliminary injunction that they previously filed against Lyft.

Connecticut Attorney General and Federal Trade Commission Settle With Ticket Resellers

  • Connecticut AG George Jepsen and the Federal Trade Commission (FTC) filed a complaint and consent orders related to allegations that TicketNetwork, Inc. (a ticket resale company), its subsidiary, two business partner companies, and the owners of those business partner companies (collectively, TicketNetwork) violated the state Unfair Trade Practices Act and the Federal Trade Commission Act.
  • The AG and FTC allege that TicketNetwork falsely created the impression for consumers that TicketNetwork websites were the websites of the official venues or other entities authorized to sell tickets at face value.
  • The agreements, which the court must approve, prohibit TicketNetwork from making any misrepresentations on their websites, require them to make certain disclosures on their websites, and require them to collectively pay $1.4 million to the state.

Data Privacy

Massachusetts Attorney General Settles Data Breach Allegations

  • Massachusetts AG Martha Coakley settled with Women & Infants Hospital to resolve allegations that it violated the HIPAA Privacy Rule and state rules and regulations designed to protect personal and protected health information.
  • The settlement arose from a data breach that the hospital reported to the AG’s office in November 2012. The hospital allegedly discovered several missing unencrypted backup tapes containing personal and protected health information. The AG alleged that inadequate employee training and policies contributed to delays in the discovery and reporting of the breach.
  • Pursuant to the settlement, the hospital agreed to pay $150,000 to the state. That amount includes a civil penalty, fees, costs, and payments to funds to support future information security litigation and promote data protection education and awareness. The hospital also will take measures to enhance its compliance program, including changing its inventory process and conducting an audit and any necessary remediation of its security measures.

Employment

Indiana Attorney General Requests Stay of Ruling Regarding State Right to Work Statute

  • Indiana AG Greg Zoeller requested an immediate stay of a county judge’s ruling finding the state right to work statute unconstitutional. The statute prohibits charging union dues to nonmembers as a condition of employment. The judge ordered the ruling to take effect upon entry, but the AG seeks a stay pending appeal.
  • “Strong opinions exist on both sides about involuntary union dues, but the Attorney General’s Office has a duty to defend the laws the Legislature passes from legal challenges plaintiffs file. If a trial court finds a law unconstitutional, then the appropriate action is to stay its ruling pending the appeal,” stated the AG.
  • The AG is defending the statute in another case where a judge found the law unconstitutional. That case is stayed pending appeal to the state supreme court. Oral arguments for that appeal are scheduled for September 4.

Environment

Colorado Attorney General Responds to Fracking Decision

  • Colorado AG John Suthers applauded a state district court decision that a city may not ban hydraulic fracturing (also known as fracking) or storage and disposal of fracking waste.
  • City of Longmont voters had passed an amendment to their city charter that banned fracking and the storage and disposal of fracking waste. The city asserted that the amendment was a valid exercise of local police power and land use authority and that the state oil and gas conservation commission does not regulate fracking.
  • The court disagreed and ordered that the amendment was invalid as preempted by the Colorado Oil and Gas Conservation Act. The court issued a stay of its order pending appeal.
  • “The law regarding preemption of local oil and gas regulation by the Colorado Oil and Gas Conservation Act is clear and the court got it right. Under the current law, local governments can’t ban fracking,” stated the AG.

Michigan Attorney General Issues Notice Regarding Great Lakes Pipelines

  • Michigan AG Bill Schuette and Michigan Department of Environmental Quality Director Dan Wyant sent a formal notice of noncompliance and request for corrective action to Enbridge Energy and Enbridge Pipelines, L.L.C., (collectively, Enbridge) regarding two of their Great Lakes pipelines.
  • In April, AG Schuette and Director Wyant sent a letter to Enbridge requesting information about their pipelines. Pending full review of Enbridge’s response, the AG and Director issued a notice that two of Enbridge’s pipelines were not in compliance with a state easement that limits the maximum span of unsupported pipe.
  • AG Schuette and Director Wyant requested that Enbridge correct the alleged noncompliance within 90 days or take remedial action as soon as reasonably possible.

Financial Industry

Bank Seeks to Dismiss Lawsuit Alleging Wrongful “Dark Pool” Practices

  • Barclays filed a motion to dismiss the lawsuit recently brought by New York AG Eric Schneiderman alleging wrongful practices related to Barclays’ operation of its “dark pool,” a type of privately owned and operated trading venue.
  • In its motion, Barclays argued that it did not make any false statements to its sophisticated clients and investors, that the AG’s claims fail on their merits, that the AG lacks standing to sue on behalf of private parties, and that the AG lacks authority to bring claims under the Martin Act.
  • “Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York attorney general,” stated a bank representative. “However, we do not believe that this suit is justified, and we have a duty to our shareholders, clients and staff to defend our position.”

For-Profit Colleges

Minnesota Attorney General Sues For-Profit Schools

  • Minnesota AG Lori Swanson sued the Minnesota School of Business and Globe University alleging that they misrepresented job opportunities available to graduates and the transferability of credits.
  • The AG alleged that the schools advertised about or recommended their degree programs for certain professions, but did not disclose that those professions required additional certification or degrees. The AG also alleged that the schools inaccurately told students that their credits could transfer to regionally accredited schools.
  • The lawsuit seeks injunctive relief, civil penalties, and restitution.

Health Care

Two Conflicting Federal Appeals Court Decisions Issued Regarding Affordable Care Act

  • Two federal appeals courts issued two conflicting decisions regarding the Affordable Care Act (ACA) employer mandate. In Halbig v. Burwell, the U.S. Court of Appeals for the DC Circuit held that the Internal Revenue Service’s (IRS) rules authorizing federal subsidies and the ACA employer mandate in states that opted not to set up a state-based exchange were invalid. In King v. Burwell, the U.S. Court of Appeals for the Fourth Circuit upheld those same rules.
  • Kansas AG Derek Schmidt, who led one set of amicus briefs in both cases in opposition to the IRS rules, stated that the “rulings move this important legal dispute one step closer to final resolution. Our interest is to ensure the IRS follows the law and Kansas obtains the benefit it anticipated when state policy makers chose not to establish a state-run health insurance exchange. Congress might not have expected so many states to decline to establish an exchange under the Affordable Care Act, but that misjudgment cannot justify allowing the IRS to effectively rewrite the statute to satisfy policy and political objectives. We will continue to represent the state’s interest as this litigation proceeds to its next stage, perhaps ultimately to the U.S. Supreme Court.”
  • Alabama, Georgia, Nebraska, Oklahoma, South Carolina, Virginia, and West Virginia also filed briefs in opposition to the IRS rule in Halbig and King.

Mortgages/Foreclosures

The CFPB, Federal Trade Commission, and 15 Attorneys General Take Action Against Foreclosure Relief Service Providers

State AGs in the News

Illinois Attorney General Testifies Before U.S. Senate About the Role of States in Higher Education

  • Illinois AG Lisa Madigan testified before the U.S. Senate Health Education Labor and Pensions Committee regarding the role of states in higher education.
  • Her testimony included recommendations for the committee to consider as it works to reauthorize the Higher Education Act, including heightened funding controls, a streamlined and accessible information system for students, and legislation to allow students to refinance federal loans.
  • This testimony follows the AG’s recent first-in-the-nation lawsuit that targeted an alleged new industry of student loan debt relief fraud.