The State AG Report Weekly Update June 23, 2016

Breaking News

New Jersey Governor Names New Acting Attorney General

  • New Jersey Governor Chris Christie appointed Christopher S. Porrino as the state’s acting Attorney General, effective June 21, 2016. Porrino comes from Lowenstein Sandler’s national litigation practice, and also served as Chief Counsel to Governor Christie between 2014 and 2015. Prior to that position, he served as Director of the Division of Law in the Attorney General’s office.
  • Porrino is replacing Robert Lougy, who Governor Christie nominated for a judgeship with the Superior Court in Essex County.

2016 Elections

Retired Judge Secures Indiana Democratic Nomination for Attorney General

  • Retired Lake County Circuit Court Judge Lorenzo Arredondo was nominated to be the Democratic nominee for Attorney General on Saturday, June 18, at the Indiana Democratic Party State Convention. Judge Arredondo was unopposed.
  • Indiana selects the Republican and Democratic candidates for AG during their respective state conventions. Last week, Indiana Republicans nominated Elkhart County Prosecutor Curtis Hill Jr. to be the Republican nominee.
  • Including Indiana, there are 10 AG races this year. The next AG primary will be in Utah on June 28. Incumbent Republican AG Sean Reyes and his Democratic opponent, Jon Harper, are both running uncontested for their parties’ nomination.

Charities

Former New Jersey Acting Attorney General Settles with Cancer Charity for Alleged Violations of New Jersey Charity Law

  • As one of his final acts in office, now-former New Jersey Acting AG Robert Lougy reached a settlement with the Walker Cancer Research Institute, Inc. (“WCRI”) to resolve an investigation conducted by the New Jersey Division of Consumer Affairs into alleged violations of the New Jersey Charitable Registration and Investigation Act.
  • According to the consent order, the investigation arose from concerns regarding WCRI’s fundraising activities and finances, including that the charity allocated fundraising expenses to operating expenses.
  • Under the terms of the consent order, WCRI agreed to, among other things, submit financial statements to the New Jersey Division of Consumer Affairs, Registration Section, and pay $375,000 to the Rutgers Cancer Institute of New Jersey and $95,000 to the Division of Consumer Affairs.

Climate Change

13 Attorneys General Write Dear Colleague Letter Regarding Climate Change Subpoenas

  • 13 AGs, led by Alabama AG Luther Strange, wrote a Dear Colleague letter to a separate group of AGs who are investigating whether fossil fuel companies misled investors and the public regarding the risks of climate change.
  • The AGs who joined the letter warn that “using law enforcement authority to resolve a public policy debate undermines the trust invested in our offices and threatens free speech” and urge their colleagues to halt such efforts.

Oil Company Seeks Injunction to Block Massachusetts Attorney General’s CID

  • Exxon Mobil Corporation (“Exxon”) filed a petition in federal court against Massachusetts AG Maura Healey seeking to bar enforcement of a civil investigative demand (“CID”) issued by AG Healey’s office earlier this year that sought internal company documents related to climate change.
  • Exxon’s petition alleges that the CID violates its constitutionally protected rights of freedom of speech, freedom from unreasonable searches and seizures, and due process of law, as well as improperly encroaches on Congress’ exclusive authority to regulate interstate commerce. Exxon recently filed a similar petition against the AG of the US Virgin Islands.
  • In related news, the Energy & Environment Legal Institute and the Free Market Environmental Law Clinic filed a complaint against Vermont AG William Sorrell to compel production of certain emails that appear to be related to his office’s participation in an AG climate change conference held earlier this year.

Consumer Financial Protection Bureau

CFPB Sues Structured Settlement Purchasing Company to Enforce CID

  • The Consumer Financial Protection Bureau (“CFPB”) filed a petition to enforce a CID it issued to J.G. Wentworth, LLC (“JGW”) as part of its investigation to determine whether the company’s business of purchasing structured settlements and annuities from consumers for lump sums violates federal consumer financial protection laws.
  • The CFPB’s petition comes after the CFPB denied JGW’s request that it set aside the CID for lack of jurisdiction over the company. According to JGW, the business practices in question do not constitute a consumer financial product or service within the CFPB’s jurisdiction and also do not violate the Truth in Lending Act.
  • According to the CFPB, it is authorized under the Dodd-Frank Act to issue a CID whenever it has reason to believe that any person may have information relevant to a possible violation of a federal consumer protection statute, without regard to whether they are subject to the Bureau’s enforcement authority.
  • The CFPB’s Petition comes shortly after a U.S. District Court Judge ruled that the CFPB lacked authority to enforce a CID request on a for-profit college accreditor after the CFPB filed a similar petition. The CFPB intends to appeal this decision.

Consumer Protection

Missouri Attorney General Announces Court Ruling that National Drugstore Chain Violated Consent Judgment Regarding Sales Tags

  • Missouri AG Chris Koster obtained a court judgment against Walgreens Co. for violating a 2014 consent judgment that AG Koster reached with Walgreens by failing to remove sales tags from store shelves in a timely manner.
  • According to the court, Walgreens violated the 2014 consent judgment by failing to remove 309 expired sales tags within 12 hours after the end of sales periods, as required under the consent judgment, which caused Missouri consumers to be overcharged.
  • The court ordered Walgreens to pay $309,000 in civil penalties. Earlier this year, New York AG Schneiderman reached a similar settlement with Walgreens regarding its alleged failure to remove sales tags promptly.

North Carolina Attorney General Settles with Lender for Allegedly Charging Excessive Interest Rates

  • North Carolina AG Roy Cooper reached a settlement with Future Income Payments LLC (“FIP”), f/k/a Pensions, Annuities and Settlements LLC, an unlicensed consumer lender, to resolve allegations that the company charged interest rates on pension advances above the state’s statutory limit.
  • According to the AG’s Office, FIP’s loans were allegedly above the interest rates allowable under the state usury laws, which cap interest rates at 16 percent for unlicensed lenders such as FIP.
  • Under the terms of the settlement, FIP will, among other things, refund overcharged consumers, set interest rates in accordance with the state’s usury statute, and pay $59,900 in civil penalties and investigation costs. Massachusetts AG Maura Healey reached a similar agreement with FIP earlier this year.

Employment

New York Attorney General Settles with Legal News Website Over Non-Compete Agreements

  • NY AG Eric Schneiderman reached a settlement with Law360, which is owned by Portfolio Media, Inc. to resolve allegations that the company violated New York law by requiring most of its employees to sign non-compete agreements.
  • According to the AG’s office, Law360 allegedly required the “vast majority” of employees, including recent college graduates, to sign non-compete agreements, restricting them from holding positions with competitors for one year after leaving Law360. This requirement allegedly violated New York law, under which non-compete agreements can only be used in limited circumstances.
  • Under the terms of the Assurance of Discontinuance, Law360 must end its use of the non-compete agreements for all non-senior staff and notify all current and former employees from the previous year that the non-compete agreements they signed are void.

State AGs in the News

NAAG Holds Summer Meeting in Vermont

  • The National Association of Attorneys General’s (“NAAG”) held its annual Summer Meeting in Burlington, Vermont between June 21 and June 23.
  • The agenda included several AG round table discussions, perspectives on Supreme Court cases, and discussions of issues such as health coverage for mental health treatment, private sector perspectives on privacy and data security regulation and law enforcement, federalism and preemption, and ethical social media use.
  • On the last day of the meeting, Connecticut AG George Jepsen will assume office as NAAG president for the 2016-2017 term.
Posted in Uncategorized

The State AG Report Weekly Update June 16, 2016

2016 Elections

Indiana Republicans Nominate County Prosecutor for Attorney General

  • Elkhart County Prosecutor Curtis Hill Jr. was nominated Saturday, June 12 at the Indiana Republican convention as the Republican nominee for Attorney General. Hill defeated former Attorney General Steve Carter, State Senator Randy Head, and Assistant Attorney General Abby Kuzma, after three rounds of balloting.
  • Indiana selects the Republican and Democratic candidates for Attorney General during their respective state conventions. The Democrats will select their nominee on June 18. The only publicly announced Democratic nominee is retired Lake County Circuit Court Judge Lorenzo Arredondo.

North Dakota Attorney General Defeated in Republican Primary Election for Governor

  • North Dakota held their primary elections for Governor on Tuesday, June 14, 2016. In the Republican primary, entrepreneur Doug Burgum defeated incumbent Republican AG Wayne Stenehjem and businessman Paul Sorum by a margin of 59.46% to 38.61% and 1.89%, respectively.
  • AG Stenehjem will be up for re-election as AG in 2018.

Consumer Protection

Florida Attorney General and the FTC Sue Alleged Illegal Debt Relief Operation

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) filed a complaint and obtained a temporary restraining order (“TRO”) against a Central Florida-based operation, collectively known as Life Management Services of Orange County, LLC, and its officers, for alleged violations of state and federal laws restricting unfair and deceptive practices and telemarketing.
  • According to the joint complaint, since at least 2013, the debt relief operation allegedly engaged in a telemarketing scheme that offered “phony debt relief services” that charged unlawful up-front fees, among other things, and also misrepresented the operation’s affiliations with financial institutions and the results it could obtain for consumers.
  • AG Bondi and the FTC filed a complaint against a credit card interest relief company, formerly known as Payless Solutions, and its officers for similar violations in July 2015.

New York Attorney General Alleges Internet Provider Advertised Internet Speeds Violated Consumer Protection Laws

  • New York AG Eric Schneiderman sent a letter to Charter Communications, Inc., which recently acquired Time Warner Cable, Inc., urging the company to “work with” the AG’s office to resolve concerns over claims regarding Time Warner Cable’s Internet service reliability, performance, and speed.
  • According to the recent letter, Time Warner Cable allegedly failed to provide reliable and fast Internet it purported to promise in advertisements, which stated its Internet was “blazing fast” and “super-reliable.” AG Schneiderman’s allegations are based, in part, on the use of an open-source tool that customers of major broadband providers can use to test the Internet speeds they are experiencing.
  • In October 2015, AG Schneiderman sent a letter to Time Warner Cable, Inc., Verizon Communications Inc, and Cablevision Systems Corp seeking information on whether their advertisements regarding Internet speeds violate state consumer protection laws. 

California Attorney General, State Agency Settle with Shipping Company Over Alleged Transport of Hazardous Wastes

  • California AG Kamala Harris and the California Department of Toxic Substances Control (“DTSC”) reached a settlement with FedEx Group Package System, Inc. (“FedEx Ground”) for alleged violations of state hazardous waste management laws.
  • According to DTSC, FedEx Ground allegedly failed to properly manage broken or leaking packages that contained hazardous materials and unlawfully transported hazardous waste packages to FedEx Ground facilities in California not authorized to accept or store hazardous waste, among other things.
  • Under the terms of the consent judgment, FedEx Ground must comply with the state’s hazardous waste management laws and must pay $3.4 million in penalties.
  • The settlement follows a $1.75 million settlement between California District Attorneys and FedEx to partially resolve allegations that the company stored and transported packages of products found to be damaged or leaking in August 2015.

 

Employment

Illinois Attorney General Sues Sandwich Restaurant Chain Over Non-Compete Clause

  • Illinois AG Lisa Madigan filed a lawsuit against Jimmy John’s Enterprises, LLC and Jimmy John’s Franchise, LLC (collectively “Jimmy John’s”) alleging its non-compete clauses in employment contracts violated the Illinois State Consumer Fraud and Deceptive Business Practices Act.
  • According to the complaint, Jimmy John’s allegedly imposed an undue hardship on current and former employees where it required employees, including those who are tasked with making and delivering sandwiches, to sign non-competition agreements that restrict them from holding any position with a company that earns more than ten percent of its revenue from selling deli sandwiches.
  • AG Madigan seeks, among other things, a penalty of $50,000 per violation of the Consumer Fraud and Deceptive Practices Act, restitution for harmed employees, and to void the non-competition agreements.

Environment

California Attorney General, State Agency Settle with Shipping Company Over Alleged Transport of Hazardous Wastes

  • California AG Kamala Harris and the California Department of Toxic Substances Control (“DTSC”) reached a settlement with FedEx Group Package System, Inc. (“FedEx Ground”) for alleged violations of state hazardous waste management laws.
  • According to DTSC, FedEx Ground allegedly failed to properly manage broken or leaking packages that contained hazardous materials and unlawfully transported hazardous waste packages to FedEx Ground facilities in California not authorized to accept or store hazardous waste, among other things.
  • The settlement follows a $1.75 million settlement between California District Attorneys and FedEx to partially resolve allegations that the company stored and transported packages of products found to be damaged or leaking in August 2015. Under the terms of the consent judgment, FedEx Ground must comply with the state’s hazardous waste management laws and must pay $3.4 million in penalties.

False Claims Act

Attorneys General and Feds Settle with Pharmaceutical Companies for Alleged Off-Label Drug Promotion

  • 4 AGs, the National Association of Medicaid Fraud Control Units, the U.S. Department of Justice, and other federal authorities reached a settlement with Genentech, Inc. and OSI Pharmaceuticals, LLC for allegedly violating state and federal False Claims Acts.
  • According to Massachusetts AG Maura Healey, the pharmaceutical companies allegedly promoted the prescription drug Tarceva, an oncology drug that treats certain advanced-stage cancers, to a subset of patients for whom the drug was not approved for treatment by the U.S. Food and Drug Administration because they lack a particular genetic mutation necessary for the drug to be effective.
  • Under the terms of the settlement, Genentech, Inc. and OSI Pharmaceuticals, LLC will pay $67 million to the United States and the states involved.

Unclaimed Property

21 Attorneys General File Suit Against the State of Delaware Over Unclaimed Property

  • 21 AGs, led by Arkansas AG Leslie Rutledge and Texas AG Ken Paxton, filed a lawsuit in the U.S. Supreme Court alleging that the state of Delaware has wrongfully collected at least $162 million in unclaimed and abandoned checks sold by MoneyGram Payment Systems, Inc. (“MoneyGram”) in violation of the Disposition of Abandoned Money Orders and Traveler’s Checks Act (“Federal Disposition Act”), which requires sums payable on unclaimed and abandoned checks to be remitted to the states where they were purchased.
  • According to the complaint, rather than transferring uncashed MoneyGram checks to the state in which the money order or check was purchased, MoneyGram turned the checks over to Delaware, as required under Delaware law, where MoneyGram is incorporated.
  • The complaint asks the Supreme Court to declare that the plaintiff states, and not Delaware, are entitled to the MoneyGram checks and to order Delaware to render the appropriate repayment to the plaintiff states.
Posted in Uncategorized

The State AG Report Weekly Update June 9, 2016

Charities

Minnesota Attorney General Sues Companies Over Charitable Donation Solicitation Practices

  • Minnesota AG Lori Swanson filed a complaint against Associated Community Services, Inc. and one of its affiliates, Central Processing Services, LLC, (collectively “ACS”) for allegedly violating state charities and consumer protection laws through its practice of soliciting donations for Foundation for American Veterans, a Michigan-based charity.
  • According to AG Swanson’s office, ACS allegedly misled consumers by, among other things, making fundraising calls to prospective donors and then sending “pledge reminders” that falsely indicated that people had pledged to donate.

Consumer Financial Protection Bureau

CFPB Sues Payment Processor for Alleged Violations of Consumer Financial Laws

  • The Consumer Financial Protection Bureau (“CFPB”) filed a complaint against payment processing company Intercept Corporation, d/b/a InterceptEFT, its president Bryan Smith, and its CEO Craig Dresser (collectively “Intercept”) for allegedly violating the Dodd-Frank Wall Street Reform and Consumer Protection Act with respect to its services provided to consumer financial companies.
  • According to the complaint, Intercept allegedly allowed its clients, which included payday lenders, auto-title dealers, debt collectors and sales financing companies, to conduct unauthorized and illegal withdrawals from consumer accounts, and allegedly inadequately investigated, monitored, and responded to warning signs of potential fraud and deception by its clients.
  • The CFPB seeks monetary and injunctive relief, as well as penalties.

Consumer Protection

Arizona Attorney General Settles with Grant Funding Training Company for Alleged False Advertising

  • Arizona AG Mark Brnovich reached a settlement with grant funding training company Advanced Social Media LLC (“ASM”) for alleged violations of the state’s Consumer Fraud Act.
  • According to the AG’s office, ASM allegedly made false and deceptive claims regarding the effectiveness of its marketing and advertising campaigns, as well as about the amount of grant funding available to consumers, and the company’s expertise with obtaining grant funding.
  • Under the terms of the Assurance of Discontinuance, ASM must, among other things, cease operations and dissolve the company.

New York Attorney General Settles With Manhattan Developer for Concealing Prohibited Rent-Controlled Tenant Buyouts

  • NY AG Eric Schneiderman reached a settlement with 165 West 91st Street Holdings, LLC (“165 West 91st Street”), a Manhattan developer, for allegedly buying out rent-controlled tenants of a residential building that the developer was converting into a condominium in violation of the Martin Act, which gives such tenants an exclusive right to purchase their units and, in most cases, prohibits eviction.
  • According to the AG’s office, 165 West 91st Street allegedly failed to disclose that the buyout agreements were completed before the tenants had the opportunity to exercise their right to purchase their apartments. The developer also allegedly attempted to conceal the buyouts by imposing non-payment proceedings against the tenants.
  • According to the terms of the settlement, 165 West 91st Street will pay a $540,000 penalty, $490,000 of which will go to the New York City Affordable Housing Fund, as well as $50,000 to the AG’s office in costs.

West Virginia Attorney General Settles with Online Lender Over “Bank Partnership” Lending

  • West Virginia AG Patrick Morrisey reached a settlement with Avant, Inc. to resolve allegations that the online lending platform for unsecured installment loans violated the state’s Consumer Credit and Protection Act.
  • According to the settlement, Avant was allegedly a de facto lender and subject to state lending and consumer protection laws for loans it purchased and serviced through a “bank partnership” business model, whereby it marketed, promoted, and enabled unsecured consumer loans with a “partner” bank and then immediately purchased those loans from the bank and serviced them.
  • Under the terms of the settlement, Avant must refund and cease to collect at least $111,843 in interest and fees associated with the loans, and must pay a penalty of $225,000.

Data Privacy

15 Attorneys General Press the FCC for Increased Privacy Protections for Unlocked Cable Boxes

  • 15 AGs filed comments with the Federal Communications Commission (“FCC”) regarding the FCC’s proposed rulemaking to expand the commercial availability of cable and satellite programming through equipment other than a set-top box. The FCC filed a notice for a proposed rulemaking on February 18, 2016.
  • In the comments, the AGs urge the FCC to modify the proposed rule to facilitate state enforcement actions against third-party set-top box manufacturers that fail to comply with state consumer protection laws. The AGs note that the proposed rule would require cable and satellite providers to provide access only to third-party set-top box makers that certify to the providers that their products comply with the privacy protections required of the providers themselves. The AGs recommend that access be limited instead to only those third-party set-top box manufacturers that make “consumer-facing” statements regarding their compliance with the consumer protection laws.

For-Profit Colleges

Massachusetts Attorney General Obtains Admissions of Wrongdoing from For-Profit School

  • Massachusetts AG Maura Healey reached a settlement with the now closed for-profit school, Advanced Career Technologies, Inc., The Career Institute, LLC, and ABC Training Center of Maryland, Inc., (collectively “ACI”), and its owners, for violations of the Massachusetts Consumer Protection Act.
  • According to the amended complaint, ACI allegedly falsified records, forged documents with student signatures, misrepresented graduation and job placement rates, and unlawfully enrolled and collected tuition from students unable to qualify for federal student loans.
  • Under the terms of the consent judgement, ACI admits to a number of the allegations, and ACI and its owners must pay $365,000 to the AG. The remaining penalties, fees, and restitution sought are suspended due to ACI’s insolvency. According to the AG’s office, $2 million in private student loan debt owed to ACI will also be discharged as the result of a parallel action.

State v. Federal

Supreme Court Rules That Clean Water Act Jurisdictional Determinations Are Final and Appealable Agency Actions

  • The U.S. Supreme Court unanimously affirmed a U.S. Court of Appeals for the Eighth Circuit decision finding that a jurisdictional determination (“JD”) by the Army Corps of Engineers (“Corps”) that certain property owned by mining company Hawkes Co., Inc. (“Hawkes”) had areas protected by the Clean Water Act constitutes a final agency action that is judicially reviewable under the Administrative Procedure Act.
  • In its decision, United States Army Corps of Engineers v. Hawkes Co., Inc., the Supreme Court held that a JD is a final agency action subject to judicial review because a JD has direct and appreciable legal consequences to property owners, who otherwise do not have adequate alternatives to judicial review. The Court’s decision allows Hawkes to challenge the Corps’ claim that its property sits on federal wetlands.
  • 23 AGs filed an amicus curiae brief urging the Supreme Court to allow private property owners to challenge decisions by the Corps that subject their property to regulation under the Clean Water Act.

Utilities

3 Attorneys General, State Agencies Settle with Utility Over Improper Charges to Consumers

  • Massachusetts AG Maura Healey, along with the AGs of Connecticut and Rhode Island, as well as other state agencies, reached a settlement with utility company New Hampshire Transmission to resolve allegations that the company improperly charged consumers millions of dollars for costs associated with a development project.
  • According to AG Healy’s office, New Hampshire Transmission allegedly charged and collected millions of dollars from consumers for development of a transmission project that was not actually built. AG Healy filed a complaint regarding the charges with the Federal Energy Regulatory Commission in April of 2015.
  • Under the terms of the settlement, New Hampshire Transmission will, among other things, refund a total of $6.5 million that it already billed to consumers, and will forgo $305,000 in billing.
Posted in Uncategorized

The State AG Report Weekly Update June 2, 2016

Consumer Financial Protection Bureau

CFPB Files Enforcement Action Against Individual Loan Officer for Alleged Mortgage Fee Shifting Scheme

  • The Consumer Financial Protection Bureau (“CFPB”) filed an administrative consent order against David Eghbali, a former Wells Fargo loan officer, for alleged violations of the Real Estate Settlement Procedures Act (“RESPA”), which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service.
  • According to the CFPB, while Eghbali was employed at a Wells Fargo branch in California, he allegedly had an arrangement with an escrow company which, at Eghbali’s direction, shifted mortgage fees from some customers to others, allowing Eghbali to increase his commissions by manipulating loan costs to close more loans.
  • Under the terms of the consent order, Eghbali has been ordered to pay an $85,000 penalty to the CFPB’s Civil Penalty Fund and is prohibited, for one year, from working in the mortgage industry.

CFPB Proposes Rule That Would Impose Strict Regulations on Payday, Auto-Title and Other High-Cost Lenders

  • The CFPB issued a proposed rule that would bring payday, auto title, and certain other high-cost loans under federal regulation, and would require lenders, among other things, to carry out strict borrower reviews.
  • The proposed rule would, among other things: (a) require lenders to conduct a comprehensive review of a customer’s ability to repay a loan to determine whether a borrower could afford each loan payment and still meet basic living expenses; (b) cap the number of short-term loans a borrower could take out in succession at three, and then subject borrowers to a mandatory 30-day cooling-off period before taking out another loan; and (c) limit the number of times that a lender could attempt to access a consumer’s bank account at two before being required to get written permission to withdraw funds.
  • The proposed rule would apply to certain short term loans, including typical payday loans and short-term vehicle title loans, as well as certain longer-term loans with high total costs of credit and certain other characteristics.
  • Comments on the proposed rule are due on September 14, 2016.

Consumer Protection

Florida Attorney General, Federal Trade Commission File Complaints Against Student Debt Relief Companies

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) filed joint complaints against student loan debt relief operators Consumer Assistance, LLC, Consumer Assistance Project, Corp., Palermo Global, LLC, and Chastity Valdes (collectively “Consumer Assistance”) and Student Aid Center Inc., Damien Alvarez, and Ramiro Fernandez-Moris (collectively “Student Aid Center”) for alleged violations of state and federal consumer protection laws.
  • According to the complaint filed against Consumer Assistance, the company allegedly charged illegal up-front fees and falsely told its customers that they qualified for government student loan forgiveness programs that would reduce their debt loads and repair their credit scores. The complaint filed against Student Aid Center alleges that the company falsely told consumers that they would qualify for loan forgiveness or lower monthly payments if they paid illegal up-front fees, and further alleges that the company’s website contained false claims that consumers could qualify for student loan forgiveness and consolidation, as well as false representations about the company’s money-back guarantee.
  • The complaints seek, among other things, restitution and refunds for consumers, disgorgement of ill-gotten moneys, and other equitable relief.
  • The AGs of Washington and the District of Columbia also filed separate actions against Student Aid Center.

Kansas Attorney General Settles with Billing Services Company to Resolve Cramming Allegations

  • Kansas AG Derek Schmidt reached a settlement with Billing Services Group North America, Inc. (“Billing Services”) over allegations that the company added unauthorized charges to consumers’ home telephone bills – a practice commonly known as “cramming.”
  • According to the AG’s office, Billing Services allegedly billed Kansas consumers for third-party services to their landline telephone bills when the consumers had not authorized or accepted the charges.
  • Under the terms of the settlement, which follows an earlier action by the FTC, Billing Services agreed to cease its practice of adding unauthorized charges to consumers’ bills.

Data Privacy

FTC Weighs in on FCC Privacy Rules for Broadband Internet Service Providers

  • The FTC filed comments with the Federal Communications Commission (“FCC”) regarding the FCC’s proposed rulemaking that would regulate how broadband Internet Service Providers (“ISPs”) can use and share customer data. The FCC filed a notice for a proposed rulemaking on April 20, 2016.
  • The FTC comments express general support over the FCC proposed rulemaking, but also urge the FCC to, among other things, revise the definition of personally identifiable information (“PII”) to: (a) explicitly include consumer devices, not just consumers; (b) require privacy notices to be clearer, shorter and more standardized by providing a safe harbor for companies that utilize an FCC drafted “model notice”; (c) require express consent for changes in data use of previously collected consumer information; and (d) ensure the rules protect broadband ISPs ability to stop unwanted calls to consumers.
  • In a separate statement filed by FTC Commissioner Maureen K. Ohlhausen, the Commissioner stated that she “strongly supports” the FTC staff’s comments, but cautioned the FCC to avoid promulgating rules with broad opt-in requirements that may stifle usages of data by companies that benefit consumers.

White House Releases Privacy Framework for Health Initiative

  • The White House released a framework of privacy rules to protect health data as part of President Barack Obama’s Precision Medicine Initiative (“PMI”), which is set to use patient-powered research to improve health care by making it more individualized.
  • The framework aims to protect data collected or used by individuals, researchers, developers, citizen scientists and health care providers, including genetic, health and environmental data, while still allowing individuals access to their own information and promoting research and development.
  • According to the administration, it will implement the framework for any federal agencies that will take part in the PMI.

 Health Care 

Connecticut Attorney General Settles with Psychiatrist Over Alleged False Claims Act Violations

  • Connecticut AG George Jepsen, along with the U.S. Department of Health and Human Services’ Office of the Inspector General (“OIG”), reached a settlement with psychiatrist Naimentulla Syed to resolve allegations that he violated state and federal false claims act laws by allegedly submitting false claims to the state’s Medicaid program and to the federal Medicare program.
  • According to the AG’s office, Syed allegedly knowingly submitted up-coded claims for services provided under the state’s Medicaid program. Specifically, the AG’s office alleged that Syed submitted medical claims for providing psychotherapy services and office visits for longer durations than he actually provided.
  • Under the terms of the settlement, Syed will, among other things, make a cash payment of approximately $400,000 to the state and federal government, and will forfeit approximately $21,000 that the state withheld during the investigation.

Connecticut Attorney General Settles with Group Home Operator to Resolve Joint State and Federal Investigation Regarding Medicaid Overpayment

  • Connecticut AG George Jepsen, along with the OIG, reached a settlement with REM Connecticut Community Services, Inc. (“REM”), a Medicaid group home operator, to resolve allegations that the company submitted claims for unallowable expenses to the state’s Medicaid program.
  • According to the AG’s office, REM allegedly reported certain interest costs in its annual cost report that were not allowed under standards set by the state. As a result, REM was allegedly overpaid by the state’s Medicaid program.
  • Under the terms of the settlement, REM will, among other things, make a cash payment of approximately $311,000 to the state and federal government, and will forfeit approximately $1.19 million in payments that the state withheld during the investigation.
  • The settlement proceeds will be split equally between Connecticut and the federal government.

New York Attorney General Settles with Pharmacy to Resolve Allegations Regarding Prescriptions Written by Excluded Provider

  • New York AG Eric Schneiderman reached a settlement with pharmacy Vasuscript, Inc. (“Vasuscript”), to resolve allegations that it violated the state False Claims Act by billing the state Medicaid program for prescriptions that were written by an excluded Medicaid provider.
  • According to the AG’s office, Vasuscript allegedly submitted and received payments on approximately 4,600 Medicaid claims for prescriptions that were written by Dr. Mikhail Strutsovskiy. Dr. Strutsovskiy had previously been excluded from the Medicaid program by the New York Department of Health, rendering prescriptions written by him ineligible for Medicaid reimbursement.
  • Under the terms of the settlement, the pharmacy will pay New York State $442,000 plus $36,000 in damages.
Posted in Uncategorized

The State AG Report Weekly Update May 26, 2016

Breaking News

Businesses Have the Mic at the NAAG Consumer Protection Seminar

  • In a new blog post, Maria Colsey Heard and Ann-Marie Luciano discuss the National Association of Attorneys General (“NAAG”) 2016 Spring Consumer Protection Seminar, held in Washington, D.C. this week.  The semi-annual event drew consumer protection staff from AG offices across the country who are responsible for initiating and conducting investigations and litigations under states’ broad unfair and deceptive trade practices law.

Briefing by Cozen O’Connor’s State AG Practice Members

  • Cozen O’Connor’s State AG Practice Members Maria Colsey Heard and Sean Riley briefed attendees at a continuing legal education event hosted by ALM, the publisher of the National Law Journal, The American Lawyer, and other legal news sources. The briefing, titled “State Attorneys General Investigations and Enforcement,” included information on sources of AG consumer protection authority, recent AG actions in the areas of Medicaid fraud and privacy, and tips on what to do when a company receives an AG subpoena.

2016 AG Elections

Cozen O’Connor’s State AG Practice Co-Hosts Teleconference on the 2016 AG Elections

  • Earlier this week, Bernard Nash and Lori Kalani, Co-Chairs of Cozen O’Connor’s nationally recognized State AG Practice, shared their insights and prognostications on the ten 2016 state AG elections (5 incumbents, 5 open seats), as part of Cozen O’Connor Public Strategies’ series of briefings on the 2016 presidential election.
  • To hear a recording of the briefing, click here.

Consumer Financial Protection Bureau

Arkansas Attorney General Requests the CFPB Hold a Meeting About Recent Proposed Federal Rule Changes

  • Arkansas AG Leslie Rutledge sent a letter to the Consumer Financial Protection Bureau (“CFPB”) requesting that the agency hold a conference of the states to discuss the agency’s proposal for regulating a number of financial products, including credit lines, installment loans, deposit advances, automobile-title secured loans, and payday loans.
  • In the letter, AG Rutledge states that the CFPB proposal “ignores the interests of the states and seeks to impose a one-size-fits-all federal approach.” AG Rutledge writes that the proposed regulations would conflict with, constrict, and otherwise unnecessarily interfere with existing state consumer protection laws, lending standards, licensing systems, and regulatory enforcement mechanisms.
  • The letter urges the CFPB to convene a conference of the states to discuss these issues before taking further action, asserting that a conference of the states would provide an opportunity to discuss various state regulatory and enforcement systems, what states have learned from their own efforts to protect consumers, and how potential federal-state conflict might be avoided.

Consumer Protection

California Attorney General Sues Software Provider for Allegedly Providing Illegal Gambling Devices

  • California AG Kamala Harris filed a complaint against software provider Pong Marketing & Promotions Inc. (“Pong”) for allegedly violating state criminal and unfair competition laws by engaging in illegal gambling.
  • According to the AG’s office, Pong’s software allegedly was used in computer gambling devices in “sweepstakes” cafes across the state, which, according to the AG’s office, operate as mini-casinos. After the California Supreme Court ruled that the devices were illegal, Pong allegedly modified its software so that users could redeem cash prizes by executing the “skill” of clicking a mouse to stop a moving cursor during a specified time period. Generally, games of skill are exempt from California’s gambling laws.
  • The AG’s complaint seeks injunctive relief and approximately $10 million in penalties.

FTC Settles with Dietary Supplement Marketers for Allegedly Deceptive Advertisements

  • The Federal Trade Commission (“FTC”) reached a settlement with Lunada Biomedical, Inc. and its officers over allegations the company violated the FTC Act by using unsubstantiated claims to deceptively market a dietary supplement.
  • According to the amended complaint, Lunada allegedly made unsubstantiated claims that dietary supplement Amberan alleviates every common symptom of menopause and causes weight loss, and allegedly also failed to disclose their relationship with consumer endorsers and falsely claimed high consumer satisfaction and success rates.
  • Under the terms of the proposed stipulated order, Lunada must pay $250,000 of a suspended $40 million judgment, and is prohibited from, among other things, making claims that a dietary supplement treats specific symptoms of menopause, causes weight loss, or treats any disease unless they have human clinical testing sufficient to substantiate such claims.

Texas Attorney General Reaches Settlement with PayPal Over Privacy and Security Disclosures

  • Texas AG Ken Paxton settled with PayPal, Inc. over allegations PayPal violated the Texas Deceptive Trade Practices Act by failing to explain to users of its mobile phone money transfer application how users’ personal information would be used and shared.
  • According to the AG’s office, PayPal’s mobile money transfer application Venmo allegedly used consumers’ phone contacts without clearly disclosing how the contacts would be used, did not clearly disclose how consumers’ transactions and interactions with other users would be shared, and misrepresented that communications from Venmo were actually from other Venmo users.
  • Under the terms of the settlement, PayPal agreed to pay $175,000 to the State of Texas and improve its disclosures to consumers regarding privacy and security.

Employment

New York Attorney General Sues Pizza Delivery Chain and Its Franchisees for Alleged Underpayment of Wages

  • New York AG Eric Schneiderman filed a lawsuit against Domino’s Pizza, Inc., Domino’s Pizza LLC and Domino’s Pizza Franchising LLC (collectively, “Domino’s”), as well as three Domino’s franchisees, over allegations that they violated state labor laws by underpaying pizza delivery workers.
  • According to the petition, the three franchisees underpaid pizza delivery workers by failing to pay the legal minimum wage and overtime rates, and failing to adequately reimburse workers for their delivery expenses. According to the AG’s office, the alleged underpayments were primarily due to a computer system that Domino’s allegedly urged franchisees to use for payroll, which under-calculated gross wages.
  • The petition also alleges that Domino’s is responsible for the underpaid wages as a joint employer of the franchisee workers. According to the AG’s Memorandum of Law in support of the petition, Domino’s is a joint employer because it exercised an “unusually high level of control over employee conditions,” and played a role in causing the wage violations.

Environment

New York Attorney General Settles with Home Improvement Stores Over Alleged Violations of State Law Protecting New York Waters

  • New York AG Eric Schneiderman entered into two separate settlements with The Home Depot, Inc. and Lowe’s Home Centers, LLC to resolve allegations that they failed to display phosphorus-containing lawn fertilizers in a manner required by state law.
  • New York’s Nutrient Runoff Law, intended to reduce water pollution caused by excess phosphorus running off lawns into New York waters, requires retailers to display lawn fertilizers containing phosphorous separately from those that are phosphorus-free, as well as to post signs that notify consumers about the legal restrictions on using phosphorus-containing lawn fertilizer. According to the AG’s office, Home Depot and Lowe’s were commingling phosphorous-containing fertilizers with phosphorus-free fertilizers in their displays and failing to display the required signage in violation of state law.
  • According to the settlements, Home Depot will pay $78,000 and Lowe’s will pay $52,000 in penalties to New York State. The settlements further require both retailers to bring their stores in New York into full compliance with the Nutrient Runoff Law.
  • In May 2015 the AG reached a settlement with Wal-Mart Stores, Inc. involving similar allegations.

Health Care

California, Washington Attorneys General Sue Medical Product Manufacturer for Alleged False and Deceptive Practices Related to Surgical Mesh Product

  • California AG Kamala Harris and Washington AG Bob Ferguson filed separate complaints against Johnson & Johnson, Ethicon, Inc., and Ethicon US, LLC (collectively “J&J”) in state courts for alleged violations of state consumer protection laws for allegedly false and deceptive marketing of a surgical mesh product (“mesh”) designed to treat pelvic floor conditions in women. AGs Harris and Ferguson co-led an investigation by 46 states and the District of Columbia into the company’s practices regarding the mesh.
  • According to the California and Washington complaints, J&J allegedly misrepresented the safety of the mesh and neglected to inform consumers and physicians of potential treatment complications and the full risks associated with the mesh. The AGs allege that the mesh caused women to face issues with urinary dysfunction, loss of sexual function, chronic inflammation and pain, and risk of chronic infection.
  • The AGs seek, among other things, injunctive relief, monetary penalties and investigation costs.
Posted in Uncategorized

Businesses Have the Mic at the NAAG Consumer Protection Seminar

Consumer protection staff from State Attorney General offices around the country are in Washington, D.C., this week to attend the National Association of Attorneys General (NAAG) 2016 Spring Consumer Protection Seminar. This twice-a-year seminar provides government officials and staff an opportunity to share information and coordinate on enforcement activities. Yesterday included three sessions open to the public: AG civil investigations, fantasy sports, and on-line ticket sales. These sessions offered private sector representatives the opportunity to provide helpful information to the AG offices and engage in a constructive dialogue on these issues.

During the first session on investigations, in-house and outside counsel for private companies discussed recurring issues in investigations.  There was an emphasis on the importance of open lines of communication between the investigating AG office and the company.  The company representatives set the stage by explaining the desire to engage in a dialogue about a concern before a subpoena is served.  Once a subpoena is served, the panelists stated, the focus can shift away from the substance to the deadlines and burden of responding to the subpoena. The panelists also explained that there is a realistic expectation that the AG office will provide necessary context for its inquiry, explain its position, and share information.  Doing so both assists internal company communication and the delivery of requested information to the AG office.  Finally, there was a discussion regarding the various reasons companies are interested in confidentiality agreements, including the desire for clarity on exemptions for commercially sensitive business information, to protect consumer and customer data, and to provide adequate protections if the requesting AG office shares the produced information with other AG offices.

The second session provided a primer on fantasy sports.  The consumer popularity was discussed, with an estimated 50 million Americans participating each year.  The audience was walked through the skill needed – the information gathering and analysis – for a fantasy sports player, whether season-long or daily, to compete. It was stated that because fantasy sports is a game of skill, it is not gambling, and this has been confirmed by Congress’ exemption of fantasy sports from the Unlawful Internet Gambling Enforcement Act of 2006 and six states enacting laws to exempt fantasy sports from the state’s definition of gambling (Indiana, Kansas, Maryland, Mississippi, Tennessee, and Virginia).  On the other hand, some states consider fantasy sports play within their state borders prohibited, and there was discussion of the technology that the fantasy sports platforms use to exclude those state residents from play in accordance with the current legal interpretation.  A representative of the American Gaming Association stated its position on the need for “legal clarity” for this relatively new consumer product.

The final session was another primer, this time on on-line ticket sales.  Representatives of Ticketmaster and StubHub explained the ticket buying experiences on their respective websites.  These companies both stated they strive to offer, in both the primary and resale market, a transparent and trustworthy platform for ticket sales.  They both discussed the substantial efforts they undertake to battle “bots” – software tools that so-called scalpers use to buy tickets before they can get purchased by individual consumers who wish to attend the events.  The companies urged support for anti-bot legislation.

The next Consumer Protection Seminar will be held October 3-5, 2016, in Phoenix, Arizona.

Posted in Uncategorized

The State AG Report Weekly Update May 19, 2016

2016 AG Elections

Save the Date: Cozen O’Connor’s State AG Practice Co-Hosts Teleconference on Prognostications for the 2016 Attorney General Elections

  • On Tuesday, May 24 from 12pm to 1pm, Cozen O’Connor’s State AG Practice Co-Chairs Bernard Nash and Lori Kalani will provide their insights and prognostications on the 2016 state AG elections, as part of Cozen O’Connor Public Strategies’ series of 2016 briefings on the presidential election.
  • Click here to learn more about next week’s briefing and how to participate.

Climate Change

Texas and Alabama Attorneys General Seek to Intervene in Climate Change Investigation Against Oil Company

  • Texas AG Ken Paxton and Alabama AG Luther Strange moved a state court in Texas to intervene in a case that seeks to quash a subpoena issued to Exxon Mobil Corp. (“Exxon”) by U.S. Virgin Islands AG Claude Walker, the territories’ law firm Cohen Milstein Sellers & Toll, PLLC (“Cohen Milstein”), and the law firm attorney handling the matter, Linda Singer.
  • In the case, Exxon alleges, among other things, that a subpoena that sought internal company documents regarding climate change violates Exxon’s constitutionally protected rights of freedom of speech, freedom from unreasonable searches and seizures, and due process of law.
  • The AGs similarly argue that the investigation violates Exxon’s First Amendment rights, adding that the case “appears to be driven by ideology, and not law.” According to the AGs, the investigation constitutes an improper fishing expedition that seeks to punish Exxon for its opinion with respect to climate change.

Consumer Protection

Supreme Court Holds that Private Counsel Can Use Attorney General Letterhead when Representing the State in Debt Collection

  • The U.S. Supreme Court unanimously overruled a U.S. Court of Appeals for the Sixth Circuit decision, finding that letters sent by private debt collection attorneys on behalf of Ohio AG Mike DeWine, using AG DeWine’s official letterhead, did not violate the Fair Debt Collection Practices Act (“FDCPA”).
  • In its decision, Sheriff et al. v. Gillie et al., the Supreme Court held that the letters were not misleading because the private debt collection attorneys, or “special counsel,” acted with the authorization of the AG’s office and were required by the AG to use official letterhead when communicating with debtors. The Court did not decide whether the special counsel, hired by an AG qualify as “state officers” who are exempt under the FDCPA, as the private attorneys had argued.
  • 8 AGs, led by Michigan AG Bill Schuette, filed an amicus curiae brief urging the Supreme Court to find special counsel to be state officers under the FDCPA, noting in part that States should be entitled to exercise their sovereign power to implement solutions through independent contractors and benefit from those contractors having state-officer status.
  • The Sixth Circuit had held that special counsel were not exempt from the FDCPA as officers of the state and that a jury could find their use of state letterhead misleading.

Financial Industry

Vermont Attorney General Announces that His Office Assisted Google’s Ban of Payday Loan Advertisements

  • Vermont AG William Sorrell announced that his office assisted Google in the company’s efforts to ban advertisements for high-interest personal loans, also referred to as “payday” loans. Google recently announced that effective July 13, 2016, it would ban advertisements for personal loans that charge more than a 36 percent annual interest rate or require repayment within sixty days.
  • In April and December of 2014, AG Sorrell provided Google with listings of online money vendors that did not comply with Vermont state laws because they made online loans without state lending licenses and charged interest rates higher than limits set in state usury laws.

State v. Federal

6 Attorneys General File Amicus Brief in Support of Keystone Pipeline

  • 6 AGs from Kansas, Montana, Nebraska, Oklahoma, South Dakota, and Texas filed an amicus brief in the U.S. District Court for the Southern District of Texas in support of TransCanada Keystone XL Pipeline LP’s (“TransCanada”) motion for summary judgment in the case it filed earlier this year. TransCanada filed a complaint against the Obama Administration arguing that the Administration exceeded its authority by blocking completion of the pipeline.
  • In the brief, the AGs contend that the Obama Administration unlawfully interfered with Congress’s power to regulate interstate and international commerce by failing to approve a required permit that would have allowed the pipeline to be completed. The Obama Administration argued that completion of the pipeline conflicted with the national interest because it would have hurt its efforts to persuade other countries to address climate change.

Utilities

Illinois Attorney General Settles with Energy Company Over Alleged Misrepresentations Regarding Pipe Replacement Project

  • Illinois AG Lisa Madigan settled with Peoples Gas Light and Coke Company (“Peoples”) and its parent company, Integrys Energy Croup (“Integrys”), which is owned by WEC Energy Group, Inc. (“WEC”), to resolve an investigation into alleged misrepresentations made to the state about the cost of a pipe replacement project known as the Accelerated Main Replacement Program.
  • According to the AG’s office, Peoples and Integrys allegedly failed to advise the Illinois Commerce Commission (“ICC”) when seeking approval for their merger that the project, which replaces aging gas mains in Chicago with modern pipes, would cost its customers $8 billion in fees. According to the AG’s office, prior to Peoples’ merger with WEC, company executives allegedly estimated the cost of the program at $4.5 billion.
  • Under the terms of the settlement with the AG and the ICC, Peoples, Integrys, and WEC agreed to pay a total of $18.5 million.
Posted in Uncategorized

The State AG Report Weekly Update May 12, 2016

Consumer Financial Protection Bureau

CFPB Proposes Rule Banning Mandatory Arbitration Clauses That Prevent Class Action Lawsuits

  • The Consumer Financial Protection Bureau (“CFPB”) issued proposed regulations that would prohibit the use of mandatory arbitration clauses in certain financial product and service contracts that would prevent class action lawsuits.
  • Under the proposed regulations, providers of certain consumer financial products and services would be prohibited from including arbitration provisions in consumer contracts that bar consumers from filing or participating in class action lawsuits concerning the products or services. Companies overseen by the CFPB that employ arbitration clauses would be required to submit records to the CFPB regarding arbitral proceedings, which the CFPB would monitor and publish in some form.
  • The proposed regulations, if finalized, will apply to providers of a wide range of financial products and services, including those involved in consumer credit, debt relief and foreclosure assistance, consumer debt collection, credit reporting, checking and deposit accounts, prepaid cards, money transfer services, certain auto and auto-title loans, payday and installment loans, and student loans.

Federal District Court Judge Rules That CFPB Lacks Authority to Force For-Profit Accreditor to Comply with a Civil Investigative Demand

  • U.S. District Judge Richard J. Leon ruled that the CFPB cannot force the Accrediting Council for Independent Colleges and Schools (“ACICS”), a for-profit college accreditor,  to comply with a civil investigative demand (“CID”) issued by the CFPB seeking information on ACICS’s method for accrediting schools.
  • The CFPB, which was granted authority to regulate the financial services industry by the Dodd-Frank Wall Street Reform and Consumer Protection Act, issued the CID to ACICS in August 2015, stating that the purpose for the CID was to determine if any unlawful acts were being committed by ACICS in connection with its accreditation of for-profit colleges. When ACICS did not comply with the CID, the CFPB filed a petition to enforce the demand in the U.S. District Court for the District of Columbia.
  • Judge Richard J. Leon denied CFPB’s CID request, explaining that the accreditation process had no connection to a school’s private student lending practices and that ACICS is not involved in the financial aid decisions of the schools it accredits. Judge Leon concluded that the CFPB’s investigative authority is limited to inquiries to determine whether there has been a violation of any consumer financial laws and does not extend to the accrediting process of for-profit colleges.

Consumer Protection

Arizona Attorney General Settles with Used Car Dealer for Alleged Wrecked Car Scam

  • Arizona AG Mark Brnovich reached a settlement with used car dealer Discount Auto Sales LLC (“Discount Auto”) and its owner Eivan Shahara to resolve allegations that they violated Arizona’s Consumer Fraud Act.
  • According to the AG’s office, Discount Auto allegedly purchased vehicles at out-of-state auctions that had been previously wrecked or declared “totaled” but were not labeled as such because of loopholes in the vehicle branding laws of the other states. After making substantial repairs on the vehicles, Discount Auto allegedly sold the vehicles to customers without disclosing the vehicles’ accident, ownership, and repair histories.
  • Under the terms of the court-approved consent judgement, Discount Auto and Shahara will pay $125,000 in restitution and attorney’s fees. They are also prohibited, among other things, from making false statements or material omissions about the condition, repair, or accident history of the vehicles they sell and must provide accurate copies of vehicle titles to vehicle purchasers.

Michigan Attorney General Files Cease and Desist Order Against Fundraiser Over Alleged Deceptive Solicitation Tactics

  • Michigan AG Bill Schuette filed a Cease and Desist Order and Notice of Intended Action against the fundraiser Corporations for Character for allegedly engaging in deceptive solicitation tactics to extract charitable contributions from Michigan residents in violation of the state’s Public Safety Solicitation Act.
  • According to the AG’s office, an investigation of Corporations for Character revealed 23 violations of Michigan’s Public Safety Solicitation Act, which prohibits misleading and deceptive acts and taking advantage of the vulnerable and requires licensed fundraisers to record their calls. The alleged violations include sending pledge collection forms to individuals who had declined to contribute and taking advantage of vulnerable call recipients.
  • The Notice of Intended Action orders Corporations for Character to cease and desist any further actions that violate the Public Safety Solicitation Act and gives the company 21 days to resolve the matter or face civil action in court.

Nebraska Attorney General Latest to Settle with Payday Lender Over Allegedly Unlawful Loans

  • Nebraska AG Doug Peterson and the Nebraska Department of Banking and Finance reached a settlement with Western Sky Financial, LLC, CashCall, Inc., its subsidiary WS Funding, LLC, and affiliate Delbert Services Corporation, and their owners, for allegedly making and servicing unlicensed loans with illegally high interest rates in violation of state consumer protection and lending laws.
  • Under the terms of the settlement, the companies are prohibited from lending in the state until they comply with Nebraska law, must forgive all current loans made to Nebraska consumers, and must pay $950,000 in restitution to consumers and $150,000 to the State.
  • AG Peterson’s settlement is the latest in a string of actions taken against Western Sky and CashCall by other AGs and the CFPB, after failed attempts by Western Sky to assert that its loans were immune from state laws under tribal sovereign immunity because it was based on an Indian reservation and owned by a member of the Cheyenne River Sioux Tribe.

Data Privacy

FTC Seeks Information From Mobile Device Manufacturers on Security Software Update Practices

  • The Federal Trade Commission (“FTC”) issued orders to eight mobile device manufacturers requiring them to provide information on how they issue security updates to address vulnerabilities in smartphones, tablets, and other mobile devices.
  • According to the FTC’s orders, the FTC is studying the policies, procedures, and practices for providing security updates to mobile devices offered by unnamed persons, partnerships, corporations, or others in the United States. The orders ask the manufacturers a number of questions about the specific mobile devices they offer to consumers, including how they decide to patch vulnerabilities, what vulnerabilities have affected particular devices, and whether and when they were repaired.
  • The FTC’s latest study comes after the agency sent orders to nine auditing companies in March requiring them to provide information on how they conduct audits of major payment card issuing companies as part of an FTC investigation into the role data security compliance auditing has on protecting consumers’ information and privacy.

E-Cigarettes/Vaping

FDA Will Regulate All Tobacco Products, Including E-Cigarettes

  • The U.S. Food and Drug Administration (“FDA”) finalized a rule that extends the agency’s authority to all tobacco products, including e-cigarettes, under the Family Smoking Prevention and Tobacco Control Act of 2009.
  • Under the final rule, among other things, retailers will be prohibited from selling e-cigarettes, hookah tobacco or cigars to people under the age of 18 and manufacturers will be subject to FDA scrutiny over their product claims and ingredients.
  • A number of AGs have long supported and urged the FDA to expand its authority to include e-cigarettes.  In October 2013, the National Association of Attorneys General (“NAAG”) sent a letter, with 42 AG signatories, to the FDA urging the agency to propose rules to regulate the products. Last year, two signatories of the 2013 NAAG letter, Indiana AG Greg Zoeller and Maine AG Janet Mills, who previously served as chair and vice-chair, respectively, of the NAAG Tobacco Committee, sent a joint letter urging the FDA to finalize the proposed rule without further delay.

State AGs in the News

NAAG Presidential Initiative Summit Held in South Dakota

  • South Dakota AG Marty Jackley, the President of NAAG, hosted the NAAG’s Presidential Initiative Summit on May 2nd and 3rd in Deadwood, South Dakota.
  • The Summit, titled “To Protect and Serve with 21st Century Policing,” focused on the latest approaches and solutions to improving criminal justice in the areas of internet gambling, mental health and substance abuse, police body-worn cameras, protection of electronic data, campus sexual assaults, and use of state-of-the-art technology for crime prevention.
Posted in Uncategorized

The State AG Report Weekly Update May 5, 2016

Breaking News

DAGA Announces New Executive Director

  • The Co-Chairs of the Democratic Attorneys General Association (“DAGA”), Oregon AG Ellen Rosenblum, District of Columbia AG Karl Racine, and Virginia AG Mark Herring, announced the appointment of Sean Rankin as the new Executive Director of DAGA.
  • Mr. Rankin is a political consultant at his own firm, the Apollo Group, and has aided federal and statewide political operations in 18 states and the District of Columbia.  Most recently, Mr. Rankin served as general consultant to AG Racine in his successful 2014 campaign to become the first elected AG in the District of Columbia.
  • Mr. Rankin will transition over the next few months and officially take over the post on July 1, 2016. He will replace Travis Berry, who has been Executive Director of DAGA for the last 14 years.

Antitrust

FTC Settles With Medical Product Supplier for Alleged Antitrust Violations

  • The Federal Trade Commission (“FTC”) reached a settlement with Invibio, Inc., Invibio Limited, and Victrex plc (collectively “Invibio”) to resolve allegations that it violated the FTC Act by entering into long-term exclusive contracts with medical device manufacturers for its sale of “implant-grade” polyetherketone (“PEEK”), which allegedly allowed the company to maintain a monopoly.
  • According to the FTC’s administrative complaint, Invibio’s contracts required medical device manufacturers to only use Invibio’s PEEK for all or nearly all of their implantable medical devices, which allowed the company to maintain high prices for the product and keep other companies from effectively competing for customers.
  • Under the terms of the proposed consent order, Invibio is, among other things, barred from entering into additional exclusive contracts, not permitted to prohibit its current customers from using alternate sources of PEEK in new products, and is required to allow certain customers to modify their current contracts so they can purchase PEEK from other sources. The proposed consent order is subject to a 30 day public comment period, after which the FTC will decide whether it will be finalized.

Consumer Protection

Court Ends Indiana Attorney General’s Lawsuit Against Energy Shot Company for Alleged Misrepresentations

  • The Indiana Superior Court of Marion County granted summary judgment in favor of Living Essentials, LLC, and Innovation Ventures, LLC, the makers of liquid energy shot product 5-hour ENERGY, against all claims alleged by Indiana AG Greg Zoeller.
  • In its order, the court found the AG’s allegations that the companies made implied claims that misrepresented, in part, the benefits of non-caffeine ingredients in 5-hour ENERGY were not actionable under Indiana law.

Oregon Attorney General Settles With Company That Allegedly Sent Fake Invoices to Businesses

  • Oregon AG Ellen Rosenblum reached a settlement with a company known as “Oregon State Compliance” that allegedly sent fake invoices to Oregon businesses.
  • According to the AG’s office, the company allegedly sent invoices falsely made to look like they originated from the State of Oregon for a labor law poster that the state provides for free online. In total, the company received payments totaling $24,740.70 from 293 Oregon businesses.
  • Under the terms of the settlement, restitution in full was obtained for the companies that paid the invoices, and the “Oregon State Compliance” company has been permanently banned from operating in the state.

False Claims Act

DOJ, 36 Attorneys General Settle with a Pharmaceutical Company Over Medicaid Drug Rebates

  • The U.S. Department of Justice (“DOJ”), 36 AGs, and other law enforcement entities reached a $784.6 million settlement with Wyeth, a wholly-owned subsidiary of Pfizer, Inc. (“Pfizer”), to resolve alleged false claims act violations that Wyeth knowingly reported false and fraudulent prices to the government on two of its proton pump inhibitor (“PPI”) drugs prior to Wyeth’s acquisition by Pfizer.
  • According to the government’s complaint, Wyeth allegedly avoided paying millions of dollars in Medicaid rebates by hiding discounts on PPI drugs sold under bundled sales arrangements from the government. Under the Medicaid Drug Rebate Program, drug companies are required to report the discounts they offer to their customers to the government and are required pay rebates to state Medicaid programs based on those discounts.

Attorneys General and the DOJ Settle with Olympus Corporation to Resolve Alleged Kickback Claims

  • A coalition of AGs and the U.S. Department of Justice (“DOJ”), acting on behalf of the Department of Health and Human Services and the Defense Health Agency, reached a joint settlement with Olympus Corporation (“Olympus”), a medical equipment manufacturer, to resolve allegations that it paid illegal kickbacks to healthcare providers in violation of federal and state False Claims Acts.
  • The Civil Complaint, filed jointly against Olympus by the DOJ and AGs from 29 states and the District of Columbia, alleges that between January 1, 2006 and December 31, 2011, Olympus used improper financial incentives, such as grants, fellowships, consulting payments, and free trips, to induce doctors and executives to purchase a variety of endoscopes and other surgical equipment manufactured by Olympus.
  • Under the terms of the settlement, Olympus will pay a total of $267.3 million to the federal government and $43.5 million to the Medicaid participating states.

State v. Federal

Nine Attorneys General File Amicus Brief Challenging the Regulatory Taking of Private Property

  • 9 AGs, led by Nevada Attorney General Adam Laxalt, filed an amicus brief with the U.S. Supreme Court challenging a ruling by the Wisconsin Court of Appeals in Murr v. Wisconsin that denied compensation for a regulatory taking of private property.
  • The case involves a family that owns two neighboring parcels of land in Wisconsin – one that is developed and one that is undeveloped. Subsequent to the Murr’s purchase of the undeveloped parcel, certain zoning regulations changed which precluded the development of the property. When the Murr family sued, the Wisconsin Court of Appeals treated the two adjoining parcels as one for takings analysis and ruled against the Murrs, holding that no taking occurred because, when the properties were combined, the Murrs retained some usage of the aggregated property.
  • The AGs argue in their brief that separate parcels should be treated separately for takings purposes and landowners should not be penalized for owning neighboring property.
Posted in Uncategorized

The State AG Report Weekly Update April 28, 2016

2016 Election

Pennsylvania Attorney General Primary Election Results

  • Pennsylvania held their primary elections for Attorney General on Tuesday, April 26.  In the Democratic primary, Montgomery County Commissioner and Former State Representative Josh Shapiro won the nomination against Pittsburgh District Attorney Steve Zappala and Northhampton County District Attorney John Morganelli by a margin of 47% to 37% and 16%, respectively.  In the Republican primary, State Senator John Rafferty defeated former police officer Joe Peters by a margin of 64% to 36%.  Incumbent Attorney General Kathleen Kane did not run for re-election.
  • The next Attorney General primary will be West Virginia on May 10. Both Incumbent Republican Attorney General Patrick Morrisey and Democrat Doug Reynolds are running unopposed.

Consumer Financial Protection Bureau

CFPB Sues Owners of an Online Aggregator of Short-Term Loans for Alleged Unfair and Abusive Practices 

  • The Consumer Financial Protection Bureau (“CFPB”) filed complaints against the co-founders of T3Leads, a lead aggregator for payday and installment loans, over alleged violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The CFPB filed a separate lawsuit against the company in December.
  • A “lead aggregator” buys consumer information, called “leads,” from “lead generators,” which are websites that market payday and installment loans, and then sells the information to lenders.
  • According to the CFPB, the co-founders of T3Leads allegedly provided substantial assistance and had significant responsibility for T3Leads, which the CFPB alleges, in part, steered consumers to lenders who violated state laws and offered consumers less favorable terms than the consumers were promised.

CFPB Issues Consent Orders to Law Firm, Debt Buyer for Allegedly Unfair and Deceptive Debt Collection Practices

  • The CFPB issued consent orders to debt collection law firm Pressler & Pressler, LLP and two of its principal partners (collectively “Pressler”), as well as debt buyer New Century Financial Services, Inc. (“New Century”) for alleged violations of the Fair Debt Collection Practices Act and the Dodd-Frank Act.
  • According to the consent orders issued to Pressler and New Century, New Century allegedly bought and collected defaulted consumer debts and turned the debts over to Pressler, which then allegedly filed lawsuits against the debtors based on unreliable and false information and harassed debtors with court filings that were unsubstantiated.
  • Under the terms of the consent orders, Pressler and New Century will pay penalties of $1 million and $1.5 million, respectively, to the CFPB’s Civil Penalty Fund. In addition, both companies must no longer file lawsuits or threaten to sue unless they review specific “account-level” information to confirm that the debts in question are accurate and enforceable and must take specific steps to ensure that affidavits used in court filings accurately represent the relevant facts.

Consumer Protection

New York Attorney General Settles With Six Ticket Brokers for Alleged Unlawful Ticket Resales

  • New York AG Eric Schneiderman reached a settlement with ticket brokers TicketToad.com, Inc., Charm City Entertainment LLC, Just In Time Tickets, Inc., A2Z Tix LLC, Flying Falco Entertainment, Inc. (d/b/a Avery Tickets), and All Events Utah, LLC to resolve allegations the companies unlawfully purchased and resold tickets.
  • According to the AG’s office, the companies allegedly sold tickets to events in New York without obtaining required resale licenses, and, except for Charm City Entertainment, allegedly used illegal software that enabled them to purchase large numbers of tickets on ticket websites before they could be bought by consumers.
  • Under the terms of the settlements, which are part of a broader investigation by AG Schneiderman into the concert and sports ticket industry, the companies must maintain proper ticket reseller licenses, abstain from using illegal ticket purchasing software, and pay a combined $2.8 million in disgorged profits and penalties to the state.

New York Attorney General Reaches Settlement With National Drugstore Chain for Allegedly Overcharging Customers and Misleading Advertisements

  • New York AG Eric Schneiderman announced a settlement with Walgreen Co. and its subsidiary Duane Reed (collectively “Walgreens”) to resolve allegations that it violated state consumer protection laws.
  • According to the AG’s office, Walgreens allegedly deceptively induced consumers to purchase products sold at its stores by, for example, charging prices that differed from prices published in print advertisements and on expired tags on store shelves, and representing that goods were a “Great Buy,” “Last Chance,” or “Clearance” when they were sold at the original retail price or not limited time deals.
  • Under the terms of the settlement, Walgreens will pay $500,000 in penalties, fees, and costs and change certain aspects of its advertising and business practices in the state, including removing expired shelf tags within 36 hours and conducting internal and external price check audits in its stores.

New York Attorney General Issues Letters to Retailers Calling for Removal of Children’s Toys Containing High Lead Levels

  • New York AG Eric Schneiderman issued letters to several major brick-and-mortar and on-line retailers of Cra-Z-Art children’s toys containing high lead levels in violation of state and federal law.
  • In the letters, AG Schneiderman called on the retailers to immediately halt selling the products, as well as participate in future recalls, if any. He also sent letters to product suppliers, calling on them to undertake similar actions, and began an investigation into how the products reached store shelves. In addition, AG Schneiderman called on the Consumer Product Safety Commission to initiate an immediate nation-wide recall of the products.
  • In November of 2014, AG Schneiderman sent letters to retailers reminding them of their responsibilities to only sell items intended for use by children that are safe and free of toxic chemicals.

West Virginia Attorney General Settles With Insurance Company Over Alleged Antitrust and Consumer Protection Violations

  • West Virginia AG Patrick Morrisey reached a settlement with Wells Fargo Insurance Services of West Virginia, Inc. and Wells Fargo Insurance Services USA, Inc., f/k/a Acordia of West Virginia, Inc. and Acordia, Inc., (collectively “Wells Fargo Insurance”) to resolve an investigation over alleged violations of the state’s antitrust and consumer protection laws. Acordia was acquired by Wells Fargo & Co. in 2001.
  • According to reports, Wells Fargo Insurance allegedly steered clients toward insurers that paid the most money in contingent commissions, profit sharing, and kickbacks, regardless whether the recommended insurers were in the best interest of the client.
  • According to the settlement, Wells Fargo Insurance must pay $8 million to the state.

Health Care

New York Attorney General Reaches an Agreement With Seven Health Insurers to Expand Hepatitis C Coverage

  • New York AG Eric Schneiderman reached an agreement with seven health insurance companies, including Affinity Health Plan, Empire BlueCross BlueShield, Excellus Health Plan, HealthNow, Independent Health, United Healthcare/Oxford, and MVP Health Plan, to expand coverage of treatment for chronic Hepatitis C infection.
  • Under the agreement, the insurers will now cover treatment for chronic Hepatitis C prior to members developing advanced stages of disease, such as liver scarring, and will not deny coverage due to alcohol or drug use or when the doctor authorizing treatment for the infection is not a specialist.
  • The agreements come shortly after AG Schneiderman filed a lawsuit against a separate health insurer for allegedly violating state laws where, among other things, the company required members to show advanced stages of disease before Hepatitis C treatment was covered.
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