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.

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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.
Posted in Uncategorized

The State AG Report Weekly Update April 21, 2016

Consumer Protection

Arizona Attorney General Latest to Sue Car Manufacturer for Deceiving Consumers with “Clean Diesel” Advertising

  • Arizona AG Mark Brnovich filed a complaint against Volkswagen AG, Volkswagen Group of America, Inc., Audi AG, Audi AG of America, LLC, Dr. Ing H.C.F. Porsche AG, Porsche Cars of North America, Inc., and Volkswagen’s former CEO Martin Winterkorn (collectively “Volkswagen”) for violating state consumer protection laws over alleged false advertising of its purported environmentally friendly, low-emission “clean diesel” cars.
  • According to the complaint, Volkswagen allegedly deceived consumers by advertising its “clean diesel” vehicles as having low-emissions, meeting stringent emission requirements, and being environmentally friendly when the vehicles had high emissions that were masked during government tests.
  • Five other AGs and the FTC have filed lawsuits against Volkswagen over similar allegations.

Kansas Attorney General Sues Florida Debt Management Company for Overcharging Consumers

  • Kansas AG Derek Schmidt filed a complaint and obtained a temporary restraining order against Financial Help Services, Inc., a Florida-based financial services company, over alleged violations of the state’s Credit Service Organization Act and Consumer Protection Act.
  • According to the AG’s office, the company allegedly advertised and provided debt management services to Kansas consumers without a license, overcharged consumers for services, and failed to timely pay creditors after withdrawing money from consumers’ bank accounts.
  • The complaint seeks civil penalties, investigative fees, and restitution for all affected Kansas consumers.

Ohio Attorney General Settles With Out-of-State Travel Companies to Resolve Consumer Protection Claims

  • Ohio AG Mike DeWine reached an agreement with A2Z Vacations LLC and related out-of-state travel companies (collectively “A2Z Vacations”) to resolve a consumer protection lawsuit filed over the companies’ advertisements and cancellation policies.
  • According to the AG’s Office, A2Z Vacations allegedly failed to honor consumers’ right to cancel travel club memberships sold at hotel sales presentations made at hotels in Cleveland, Columbus, and Toledo.
  • Under the terms of the settlement, the companies agreed to pay $42,200.97 to reimburse 11 consumers who filed complaints after buying or attending a sales presentation. The companies also agreed to pay a $7,500 civil penalty and to comply with Ohio’s consumer protection laws.

Employment

Nine Attorneys General Seek Information from Retailers on Use of On-Call Shifts

  • Nine AGs, led by New York AG Eric Schneiderman, wrote letters to retailers regarding the use of “on-call shifts,” which require employees to contact their employers one to two hours before an assigned shift to find out if they need to report to work.
  • In the letters, the AGs argue that the practice of using on-call shifts is burdensome and potentially unfair to workers.  The AGs request information and documents related to the retailers’ scheduling processes, use of on-call shifts, and payroll records to learn more about the business practice.
  • AG Schneiderman sent letters to a total of 15 companies.  The letters are joined by some or all of the remaining eight AGs depending on whether the retailers had stores in the AG’s state, and contain alleged violations of state-specific labor laws.

Health Care

New York Attorney General Sues Health Insurer for Allegedly Failing to Cover Medically Necessary Care

  • New York AG Eric Schneiderman filed a complaint against health insurer Capital District Physician’s Health Plan, Inc. (“CDPHP”) for allegedly restricting coverage of treatment for chronic Hepatitis C infection.
  • According to the complaint, CDPHP, among other things, allegedly misled consumers regarding the scope of their coverage by claiming that it covered “medically necessary” treatment of disease, but in fact required members to show advanced stages of disease before Hepatitis C treatment would be covered and factored in cost when deciding whether a treatment will be covered.

West Virginia Attorney General Targets Third Pharmacy in Prescription-Transfer Scheme

  • West Virginia AG Patrick Morrisey sued CURERX LLC, a pharmacy, for allegedly obtaining data from multiple patients and using that information to transfer prescriptions to its pharmacy without the patients’ knowledge or consent and forced patients to pay a much higher price.
  • The lawsuit, among other things, alleges that CURERX LLC used forms, surveys, and online questionnaires to obtain personal information that was used to entice patients to unknowingly transfer prescriptions to the pharmacy.
  • The suit resembles two earlier suits brought against Rock City and David Pharmacy in November 2015.

Marijuana

Oklahoma and Nebraska Attorneys General Seek to Intervene in Marijuana Pre-Emption Case

  • According to reports, Oklahoma AG Scott Pruitt and Nebraska AG Doug Peterson asked the Tenth Circuit Court of Appeals for permission to intervene in a case, Safe Sts. Alliance v. Alternative Holistic Healing, LLC, which could determine whether federal law preempts Colorado’s legalization of marijuana.
  • In the case, opponents of Colorado legislation to legalize marijuana, Safe Streets Alliance and owners of land adjacent to a marijuana grow site, sued the grow site owners and Colorado government officials alleging, in part, that the Colorado law is preempted by federal law.  The lower court dismissed the complaint, ruling that the plaintiffs did not have a right to bring such a claim because they did not allege sufficient facts to substantiate the claim that their property values declined as a result of the marijuana cultivation activities. The AGs, in their petition for intervention in the case, argue that marijuana from Colorado has burdened law enforcement efforts in their respective states, where marijuana is illegal.
  • Last month, the U.S. Supreme Court refused to allow the AGs to directly sue Colorado to challenge the state’s law that permits recreational marijuana use.

State vs. Federal

EPA Withdraws Proposed Regulation of Competitive Racing Vehicles

  • The U.S. Environmental Protection Agency (“EPA”) announced that it has withdrawn language from a proposed rule that would have expanded the EPA’s jurisdiction under the Clean Air Act to cover vehicles modified for racing or hobbyist competition.
  • The proposed language would have required certified motor vehicles, motor vehicle engines, and their emission control devices to remain in their certified configuration, even if they were used exclusively for competition or were non-road vehicles or engines.
  • According to the EPA, the intent of the proposed rule was not to regulate vehicles built or used exclusively for racing, but rather companies that make and sell products that disable pollution controls on motor vehicles used on public roads.
  • The EPA’s announcement came after seven AGs, led by West Virginia AG Patrick Morrisey and Ohio AG Mike DeWine, urged the EPA to retract the proposed regulation.
Posted in Uncategorized

The State AG Report Weekly Update April 14, 2016

Breaking News

Court Upholds Mississippi Attorney General’s Authority to Investigate for Possible Violations of State Law

  • The U.S. Court of Appeals for the Fifth Circuit vacated a preliminary injunction granted by a federal District Court in Mississippi that blocked Mississippi AG Jim Hood’s investigation of Google, Inc., finding that the internet search engine’s request for an injunction was premature because irreparable injury was not imminent.
  • AG Hood previously sent a subpoena to Google to investigate, in part, internet search results that revealed links to websites that sell drugs without prescriptions and websites that improperly linked to copyrighted music, videos, and other material.  Last year, a federal District Court in Mississippi granted Google’s request for a preliminary injunction blocking AG Hood’s investigation after Google filed a complaint against the AG alleging that the investigation was preempted by federal law.
  • 40 AGs filed an amicus brief in the case urging the court to uphold AG Hood’s authority to investigate for possible violations of law on behalf of consumers, warning, in part, that Google’s lawsuit was a “premature attempt to short-circuit Mississippi’s valid administrative subpoena enforcement process.”

Oil Company Seeks to Block U.S. Virgin Islands Attorney General, Outside Counsel from Enforcing Climate Change Subpoena

  • Exxon Mobil Corp. (“Exxon”) filed a petition in state court in Texas against U.S. Virgin Islands AG Claude Earl Walker, the law firm Cohen Milstein Sellers & Toll, PLLC, and the law firm attorney handling the matter, Linda Singer, to block a subpoena issued in March by AG Walker, which sought internal company documents regarding climate change to be produced directly to Cohen Milstein.
  • Exxon’s petition alleges that the subpoena violates its constitutionally protected rights of freedom of speech, freedom from unreasonable searches and seizures, and due process of law. Exxon further alleges that AG Walker improperly delegated authority to Cohen Milstein, in part because the firm also represents private litigants in other litigation against Exxon and therefore cannot serve as the neutral, disinterested prosecutor required by the principles of due process.
  • AG Walker, who is represented by Cohen Milstein and Linda Singer in this matter, alleges in the subpoena that the company violated the laws of the U.S. Virgin Islands by obtaining money under false pretenses and conspiring to obtain money under such circumstances.
  • AG Walker was one of 18 AGs who recently announced the formation of a coalition that would work together on various state-based climate change “initiatives,” including some coalition members engaging in investigations into whether fossil fuel companies misled investors and the public of the risks of climate change on their businesses.

Consumer Protection

Washington Attorney General Settles With Six Student Loan Debt Adjustors That Allegedly Overcharged Students

  • Washington AG Bob Ferguson reached a settlement with six student loan debt adjustors to resolve allegations that the companies overcharged Washington state students and collected unlawful fees, and obtained a default judgment against a seventh student loan debt adjustor under similar allegations.
  • According to the AG’s office, the companies allegedly charged up-front fees for their debt adjusting services of between 4 and 27 times the legal limit, collected monthly payments in excess of the legal limit, debited customers’ bank accounts for payments on void contracts, and failed to make legally required disclosures in their contracts with consumers.
  • The settlement requires the companies to pay a total of $162,000 in restitution and $56,000 in costs and attorney’s fees, and to agree not to, among other things, charge an initial fee for debt adjusting services of more than $25 or charge a fee in excess of 15 percent of the consumer’s payment.

West Virginia Attorney General Settles with Major Retail Pharmacy Over Alleged Consumer Protection Violations

  • West Virginia AG Patrick Morrisey reached a settlement with Rite Aid for alleged violations of the state’s Consumer Credit and Protection Act and Pharmacy Act, which requires pharmacies to pass retail savings from generic prescription drug sales onto consumers.
  • According to the AG’s Office, Rite Aid allegedly failed to accurately calculate and pass along retail savings from its sale of generic prescription drugs to consumers.
  • According to the settlement agreement, Rite Aid will pay $4.9 million and implement a compliance program in accordance with the Pharmacy Act.

Environment

New York Attorney General Settles with Oil Company Over Oil Spill Costs

  • New York AG Eric Schneiderman and New York State Comptroller Thomas DiNapoli reached a $10.75 million agreement with Exxon Mobil Corporation (“ExxonMobil”) for claims brought under the state’s Oil Spill Law for cleanup and contamination costs at former gas stations owned by the company.
  • According to the AG’s office, the action was taken by the Comptroller in his capacity as Administrator of the state’s Environmental Protection and Spill Compensation Fund (the “Fund”) and his authority to recover costs incurred by the Fund associated with the cleanup and removal of petroleum spills.
  • In addition to the settlement payment, the agreement also requires ExxonMobil to assume the costs of all future remediation activities at four of the eight sites where cleanup is still occurring and reimburse the Fund if additional remediation costs are incurred.

For-Profit Colleges

13 Attorneys General Urge the Department of Education to Revoke For-Profit School Accreditor’s Accreditation Status

  • 13 AGs, led by Massachusetts AG Maura Healey, submitted a comment letter to the U.S. Department of Education urging the agency to reject the Accrediting Council for Independent Colleges and Schools’ (“ACICS”) application for renewal as a recognized accreditor. Without its accreditation status, for-profit institutions accredited by ACICS would no longer be eligible for federal student aid.
  • According to the AG’s letter, ACICS systematically failed to ensure program quality at for-profit institutions it accredits, accredited schools that had the lowest rate of graduation of any accreditor, failed to take action against schools in response to state and federal enforcement actions, and had a fundamental lack of substantive oversight for student outcomes.

Securities

Three Attorneys General and the Federal Government Settle with Investment Bank over Residential Mortgage-Backed Securities

  • The U.S. Department of Justice (“DOJ”), together with several federal entities, and the Attorneys General of California, Illinois, and New York reached a $5.06 billion settlement with Goldman Sachs over alleged violations of federal and state laws in connection with its packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities (“RMBS”).
  • According to the DOJ, between 2005 and 2007, Goldman Sachs allegedly made false and misleading statements to potential investors regarding quality of the loans it securitized and its due diligence practices. For example, the DOJ alleged that Goldman Sachs had information that large percentages of the loans it reviewed in its securitized pools did not conform to the representations that the bank had made to potential investors.
  • Under the terms of the settlement, Goldman Sachs will pay $2.385 billion as a civil monetary penalty to resolve claims under the Financial Institutions Reform, Recovery, and Enforcement Act and an additional $875 million to settle claims brought by other federal and state entities, including $190 million to settle claims brought by New York, $25 million to settle claims by Illinois, and $10 million to settle claims by California. The remaining $1.8 billion will be paid in the form of consumer relief, such as loan modifications and financing for affordable rental and for-sale housing.

State AGs in the News

Kentucky Attorney General Files Lawsuit Challenging Governor’s Authority to Make Budget Cuts

  • Kentucky AG Andy Beshear filed a lawsuit challenging the authority of Governor Matt Bevin to order 4.5 percent cuts in the current fiscal year to Kentucky’s public colleges and universities.
  • According to the complaint, the Governor’s reduction of public university allotments allegedly violates Kentucky’s constitutional provision on the separation of powers, the governor’s constitutional duty to faithfully execute the law, and other Kentucky statutes that govern budget reductions.

New York Attorney General Hires New Executive Deputy Attorney General for Economic Justice

  • New York AG Eric Schneiderman recently announced the appointment of Manisha M. Sheth to replace Karla Sanchez as Executive Deputy Attorney General for Economic Justice.
  • As Executive Deputy AG, Ms. Sheth will oversee the Office’s investor protection, antitrust, internet and technology, consumer fraud, and real estate finance litigation bureaus. Ms. Sheth is currently a partner at the law firm of Quinn Emanuel Urquhart & Sullivan, LLP and begins in the new post on May 9, 2016.
  • The announcement comes shortly after AG Schneiderman’s chief of staff Micah Lasher resigned to run for state Senate.

State v. Federal

33 Attorneys General Urge HHS to Amend Regulation Regarding the Confidentiality of Substance Use Disorder Patient Records

  • 33 AGs sent a comment letter to the Secretary of the U.S. Department of Health and Human Services (“HHS”) to comment on a proposed regulation regarding the confidentiality of substance use disorder patient records.
  • In the letter, the AGs urge HHS to amend the regulation to permit opioid treatment programs to provide dispensing data to state prescription drug monitoring programs (“PDMPs”), which collect data on certain controlled prescription medications that are accessed by prescribers, pharmacists, regulatory boards and, in certain states, law enforcement agencies.
  • According to the AGs, prescribers underutilize PDMPs, in large part because current regulations prevent physicians from providing data to the programs, which prevent interested parties from appropriately monitoring drug seekers.
Posted in Uncategorized

The State AG Report Weekly Update April 7, 2016

Antitrust

California Attorney General Settles with Television and Computer Monitor Manufacturers for Alleged Price Fixing

  • California AG Kamala Harris announced that a court preliminarily approved the AG’s settlements with LG, Hitachi, Panasonic, Toshiba, and Samsung (the “Companies”) to resolve allegations that they violated the state’s antitrust and consumer protection laws by fixing prices on certain electronics components.
  • According to the complaint, which was filed in 2011, the Companies allegedly fixed prices on cathode ray tubes (“CRTs”), which were key components of televisions and computer monitors manufactured between 1995 and 2007. Specifically, the complaint alleged that the companies exchanged competitively sensitive information regarding CRTs and regularly met to fix prices of CRTs, causing consumers to pay inflated prices for products containing CRTs.
  • Under the terms of the settlements, the Companies will pay a total of $4.95 million in damages, as well as civil penalties. California consumers and sole proprietorships that purchased televisions or monitors between 1995 and 2007 also are eligible for reimbursement for the alleged overcharges.

Consumer Financial Protection Bureau

CFPB Shuts Down Student Debt Relief Services Company for Allegedly Operating a Scam

  • The Consumer Financial Protection Bureau (“CFPB”) filed an enforcement action against student debt relief services company Student Aid Institute, Inc. (“SAI”) and its chief executive officer over alleged violations of federal consumer protection laws and regulations.
  • According to the consent order, SAI allegedly charged illegal upfront fees, misrepresented to borrowers how much they would save through the company’s services and whether they were eligible for loan forgiveness, failed to provide required privacy notices, and misrepresented to consumers that the company was affiliated or endorsed by the federal government.
  • Under the terms of the consent order, SAI and its chief executive officer must permanently cease operations as a debt relief service, cancel all contracts, stop charging customers any fees for its services, and pay a penalty of $50,000.

Consumer Protection

California Attorney General Sues Investment Bank for Alleged Violations of State False Claims Act and Securities Law

  • California AG Kamala Harris filed a complaint against Morgan Stanley alleging the company violated the state False Claims Act, the California Securities Law, and other state laws by misrepresenting the risks associated with certain investments.
  • According to the complaint, Morgan Stanley packaged and sold residential and other types of mortgage-backed securities from subprime lenders without properly disclosing the risks associated with the loans. In addition, Morgan Stanley’s offering documents allegedly misrepresented the quality of the loans in the investment packages and used inflated appraisal values for the properties that secured the loans.
  • AG Harris seeks, among other things, three times the damages suffered by California government pension funds as a result of the acts, as well as injunctive relief, restitution, and the costs of the investigation.
  • Earlier this year, the U.S. Department of Justice and the AGs from New York and Illinois reached separate settlements with Morgan Stanley over similar allegations; Morgan Stanley also participated in an 11-bank settlement with Virginia AG Mark Herring which resolved allegations that the company misrepresented the quality of residential mortgage-backed securities sold to state entities.

Florida Attorney General Settles with Legal Publishing Company Over Negative Option Marketing

  • Florida AG Pam Bondi reached a settlement with Juris Publishing, Inc. and Jurisnet, LLC (collectively “Juris”) to resolve allegations that the companies used “negative option marketing” in violation of the Florida Deceptive and Unfair Trade Practices Act.
  • According to the AG’s office, Juris allegedly placed consumers in automatic shipment and subscription renewal plans without their consent or without clearly and conspicuously disclosing the terms of these plans.
  • Under the terms of the Assurance of Voluntary Compliance, Juris must offer a refund to certain Florida consumers and must make changes to how it discloses negative option plans to consumers, as well as obtain consumers’ express informed consent to the terms and conditions of such plans.

Illinois Attorney General and FTC Obtain Injunction Against Payday Loan Debt Operation

  • Illinois AG Lisa Madigan and the Federal Trade Commission (“FTC”) obtained a preliminary injunction and filed a complaint seeking permanent relief against a debt collection operation doing business as, among other names, Stark Law, Stark Recovery, and Capital Harris Miller & Associates (collectively “Stark”), for alleged violations of state and federal consumer protection and debt collection laws.
  • According to the complaint, Stark allegedly called, harassed, and threatened consumers demanding immediate payment for payday or other short-term loans that the consumers either did not owe or that Stark was not authorized to collect. The operation also allegedly sold fake payday loan debt portfolios to other debt buyers who then tried to collect on the alleged fake debts.
  • The action against Stark is part of “Operation Collection Protection,” a coordinated initiative among federal, state, and local authorities announced late last year to stop deceptive and abusive debt collection practices nationwide.

For-Profit Colleges

Massachusetts Attorney General Sues For-Profit School for Allegedly Deceiving Students

  • Massachusetts AG Maura Healey filed a complaint against ITT Educational Services, Inc. (“ITT”), for alleged violations of state consumer protection laws by utilizing unfair and deceptive acts and practices in order to enroll students in its educational programs.
  • According to AG Healey, ITT allegedly gave prospective students inflated statistics on the percentage of graduates who obtained jobs in or related to their fields of study and used high pressure tactics to enroll students.
  • According to the AG’s press release, AG Healy seeks, among other things, civil penalties, injunctive relief, and restitution for students.

State v. Federal

Georgia and Wisconsin Attorneys General Lead Panel Discussion to Reduce Opioid Abuse at National Summit

  • Georgia AG Sam Olens and Wisconsin AG Brad Schimel led a panel discussion at the National Rx Drug Abuse and Heroin Summit on the importance of collaboration between state leaders and the medical community to reduce opioid trafficking and addiction. The summit is the largest national collaboration of business, academia, and health professionals, state and national leaders, and advocates to address prescription drug abuse and heroin use.
  • According to the National Association of Attorneys General (“NAAG”), the panel focused on innovative policies and strategies, prescriber education initiatives, the expansion of drug monitoring programs, and the need to reduce the stigma associated with addiction.
  • AG Olens and AG Schimel are both members of the NAAG Substance Abuse Committee, which works with law enforcement, prosecutors, community leaders and other stakeholders to identify developing trends and combat substance abuse through coordinated efforts.

Seven Attorneys General Urge the EPA to Retract Proposed Regulation of Competitive Racing Vehicles

  • Seven AGs wrote a letter to the U.S. Environmental Protection Agency (“EPA”), urging the EPA to remove language in a Clean Air Act proposed rule that would expand the EPA’s jurisdiction under the Clean Air Act to cover vehicles modified solely for racing or competition.
  • The proposed rule would prohibit the modification of certified motor vehicles and motor vehicle engines and their emission control devices even if they are used solely for competition.
  • In the letter, the AGs write that statutory language and the EPA’s historic practices with respect to vehicles modified solely for racing or competition make it clear that such vehicles, which are not used on public roads, are not regulated under the Clean Air Act. The letter further states that the proposed rule would be harmful to the economy because it would allegedly render many products made, sold, and installed by businesses in the automotive industry illegal.
  • This letter follows a similar letter sent to the EPA by Ohio AG Mike DeWine last month.
Posted in Uncategorized

The State AG Report Weekly Update April 1, 2016

Breaking News

FTC, 50 States, and DC Settle with Two Cancer Charities for Deceptive Practices

  • The Federal Trade Commission and Attorneys General, as well as other law enforcement personnel from 50 states and the District of Columbia, reached a settlement with two cancer charities, Cancer Fund of America, Inc., and Cancer Support Services, Inc., and their president after filing a lawsuit last year against the charities, along with two other charities that settled previously, for allegedly defrauding consumers out of more than $187 million.
  • According to the complaint, the charities allegedly used false and deceptive claims to solicit donations, including, among other things, representing that donations would be used to provide direct support to cancer patients, when the vast majority of donors’ contributions allegedly did not directly assist cancer patients or otherwise benefit any charitable purpose.
  • Under the terms of the settlement, the charities must be permanently dissolved, and, along with their president, they must jointly pay over $75 million, which is the amount consumers donated between 2008 and 2012. The monetary judgment will be partially satisfied by the charities’ liquidation of assets and the president’s surrender of certain personal assets. The settlement funds will go to cancer charities and be used to cover the costs of the investigation.

18 Attorneys General Form Coalition to Address Climate Change

  • 16 State AGs and the AGs from the District of Columbia and the U.S. Virgin Islands announced their intent to form a coalition to protect and build upon the recent progress the United States has made in combating climate change.
  • The coalition was announced at a press conference during a one-day AG climate change conference in New York attended by 7 AGs.  The conference was hosted by New York AG Eric Schneiderman and Vermont AG William Sorrell.  According to the AGs, the coalition will work together on various climate-change related “initiatives,” including some AGs pushing for and defending federal limits on pollution and others engaging in investigations into whether fossil fuel companies misled investors and the public of the risks of climate change on their businesses.
  • This announcement comes after AG Schneiderman settled with Peabody Energy Corporation late last year alleging that the company misled the public and investors about the negative impact climate change and regulations addressing climate change may have on their business.  AG Schneiderman is also investigating Exxon Mobil Corp. over similar alleged conduct.

Consumer Protection

FTC Sues Car Manufacturer for Deceiving Consumers with “Clean Diesel” Advertising After Admitting Vehicle Emissions Test Manipulation

  • The Federal Trade Commission (“FTC”) filed a complaint against Volkswagen Group of America, Inc. d/b/a Volkswagen of America, Inc., and Audi of America, Inc., for allegedly violating the FTC Act’s prohibition on deceptive advertising practices, stemming from revelations last year that the company had designed certain cars to give inaccurate results during emissions testing.
  • According to the complaint, Volkswagen allegedly deceived consumers by advertising its “clean diesel” vehicles as having low-emissions, meeting stringent emission requirements, and being environmentally friendly when the vehicles actually had high emissions that were masked during government tests.
  • The FTC’s complaint seeks restitution for consumers who bought or leased these vehicles and a permanent injunction to stop the company from engaging in the alleged conduct again. Five AGs have also filed suit against Volkswagen on allegations similar to the FTC’s, including most recently Kentucky.

Massachusetts Attorney General Finalizes Regulations for Daily Fantasy Sports Operations

  • Massachusetts AG Maura Healey filed final consumer protection regulations for daily fantasy sports operators in Massachusetts with the secretary of state’s office.
  • The final regulations, which according to AG Healey go into effect in two weeks, require daily fantasy sports operators to comply with the regulations by July 1, 2016 that, among other things, prohibit play by persons under the age of 21, impose requirements for fair and truthful advertising, and implement protections for problem gamers and to ensure game fairness.
  • The release of AG Healey’s regulations follow legislation in Virginia and Indiana that provides a statutory framework for continued operation by daily fantasy sports operators, and New York AG Eric Schneiderman’s agreement with daily fantasy sports sites, FanDuel, Inc. and DraftKings, Inc., to require the companies to, among other things, not operate paid daily fantasy sports contests in New York, unless the state expressly legalizes these contests by June 30, 2016 or the New York appellate court finds in favor of DraftKings and FanDuel in their appeal of the trial court’s order in favor of AG Schneiderman.

Massachusetts Attorney General Settles with Lender for Allegedly Charging Excessive Interest Rates

  • Massachusetts AG Maura Healey reached an agreement with Future Income Payments LLC (“FIP”), formerly known as Pensions, Annuities and Settlements LLC, to resolve allegations that FIP charged interest rates above the statutory limit on pension advances.
  • According to the AG’s Office, FIP’s loans were allegedly above the interest rates allowable under state usury laws, which cap interest rates on loans of $6,000 or less at 12 percent, with larger loans capped at 20 percent.
  • Under the terms of the settlement, FIP will provide at least $2 million in relief to consumers. The settlement also prohibits FIP from entering into any transactions with or advertising services to Massachusetts residents in the future.

New York Attorney General Settles with Taxicab Company for Overcharging Taxi Drivers

  • New York AG Eric Schneiderman reached a settlement with Style Management Corp. (“Style”), a taxicab management company, and its owner Andrew Rosenberg, for allegedly overcharging taxi drivers on cab leasing fees in violation of city regulations.
  • According to the AG’s Office, Style allegedly charged taxi drivers in excess of amounts allowed under regulations imposed by the New York City Taxi and Limousine Commission (“TLC”) by charging drivers leasing fees above the limit and unfairly rounding drivers’ credit care fare earnings to even dollar amounts.
  • Under the settlement, Style and Andrew Rosenberg will pay $750,000 in restitution to drivers, as well as $47,500 in penalties. Under a separate agreement with the TLC, Style will also pay an additional $47,500 in penalties.

West Virginia Attorney General Settles with Company for Allegedly Unlawful Debt Collection Practices

  • West Virginia AG Patrick Morrisey reached a settlement with a debt collection company known, among other names, as Cavalry Investments and Cavalry Portfolio Systems (collectively “Cavalry”), resolving allegations that Cavalry violated state debt collection and consumer financial protection laws.
  • According to AG Morrisey, Cavalry allegedly engaged in debt collection practices without a West Virginia license and surety bond, made abusive and harassing phone calls to consumers, and failed to identify the account owner in collection letters and in reporting alleged debts to consumer reporting agencies.
  • Under the terms of the settlement, Cavalry will cease efforts to collect $19.7 million in debt and pay the state of West Virginia $350,000. The settlement also states that Cavalry will delete all account information from the affected consumers’ credit reports and release all liens against the consumers’ property.

Data Privacy

California Attorney General Settles with Wells Fargo Bank Over Alleged Privacy Violations

  • California AG Kamala Harris and five district attorneys settled claims against Wells Fargo Bank (“Wells Fargo”) for allegedly violating state consumer protection and privacy laws by failing to timely and adequately disclose its automatic recording of phone calls with members of the public.
  • According to the AG’s Office, Wells Fargo allegedly violated consumer protection and privacy laws by recording consumers’ phone calls without timely telling consumers they were being recorded, as required by California law.
  • Under the terms of the Stipulated Final Judgment, Wells Fargo will pay $7,616,000 in civil penalties and will reimburse prosecutors’ investigative costs of $384,000. In addition, Wells Fargo will contribute $500,000 to two statewide organizations dedicated to advancing consumer protection and privacy rights.

E-Cigarettes & Vaping

Washington Attorney General’s Requested Regulations of e-Cigarettes Pass Legislature

  • The Washington State Legislature overwhelmingly passed legislation that would regulate e-cigarettes and vapor products, combining multiple proposals including ones submitted by Washington AG Bob Ferguson and Governor Jay Inslee.  The bill is now pending signature by the Governor.
  • According to AG Ferguson, the legislation would establish a set of statewide rules for the sale of e-cigarettes and vapor products similar to the state’s youth access laws for tobacco. Specifically, the new law will require retail, among other things, distribution, and delivery licenses, child-resistant packaging, warning labels, and verification of the age of the prospective buyer.

False Claims Act

New York Attorney General Settles with State Government Contractor for Allegedly Outsourcing Work Overseas

  • New York AG Eric Schneiderman and New York State Inspector General Catherine Leahy Scott reach a settlement with Focused Technologies Imaging Services, LLC, its owner, and former co-owner (collectively “FTIS”) for violating the New York False Claims Act.
  • According to the Assurance of Discontinuance (“AOD”), FTIS outsourced to a business in Mumbai, India, approximately 37.5 percent of the work they were obligated to perform at their Albany, New York, facility as part of a contract between the New York State Industries for the Disabled (a non-profit) and the New York State Division of Criminal Justice Services to digitize and index fingerprint cards into a searchable database.  FTIS also allegedly failed to utilize over 50 percent of individuals with disabilities to complete the project, as required by companies that secure contracts through the state’s no-bid program to support businesses who employ such individuals.
  • Under the terms of the AOD, FTIS admits to the violations, will pay $3.1 million in penalties, fees, and costs, will perform 69 percent of the work of certain new preferred source contracts it obtains within two years with individuals with disabilities, and will pay for an independent monitor for five years to ensure compliance.
Posted in Uncategorized

The State AG Report Weekly Update March 24, 2016

Breaking News

New Hampshire Attorney General’s Contingency Fee Agreement Ruled Invalid

  • The New Hampshire AG’s contingency fee agreement with law firm Cohen Milstein Sellers & Toll was invalidated by a State Superior Court on the basis that the AG had exceeded his authority by hiring outside counsel to investigate and pursue claims on behalf of the state without legislative approval.
  • As we reported in October, the AG’s office hired the law firm to investigate whether drug companies engaged in fraudulent marketing of opioids to doctors and patients.
  • According to Judge Diane Nicolosi, who denied the state’s motion to enforce subpoenas against several pharmaceutical companies and granted the companies’ motion for a protective order, New Hampshire’s statutory scheme requires the AG to obtain approval from the legislature before hiring outside counsel who will be compensated with funds outside the AG Office’s appropriated budget, including contingency fees from settlements or judgments.  The court did not conclude, however, that the agreement violated the companies’ due process rights, holding that the agreement provided the AG adequate supervisory and control authority over Cohen Milstein and that the case, at present, does not involve criminal liability that may require greater due process protection.

Consumer Financial Protection Bureau

CFPB Secures Final Judgment Against Company for Debt Relief Scheme

  • The Consumer Financial Protection Bureau (“CFPB”) obtained a final judgment against Morgan Drexen, a nationwide debt relief company, after a protracted battle in which the company sought unsuccessfully to dismiss the CFPB’s complaint, arguing in part that the CFPB’s structure violated the Constitution’s separation of powers principles.
  • According to the CFPB’s lawsuit, filed in August 2013, Morgan Drexen allegedly violated the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act by allegedly charging illegal upfront fees for debt relief work and misrepresenting their services to consumers.
  • Under the court judgment, the now bankrupt company must pay $132,882,488 in restitution and $40 million in civil penalties.

Consumer Protection

Massachusetts Attorney General Settles with Two Auto Lenders for Allegedly Charging Excessive Interest Rates

  • Massachusetts AG Maura Healey reached settlements with two auto lenders, American Credit Acceptance, LLC (“ACA”) and Westlake Services, LLC (“Westlake”) for allegedly charging interest rates above the allowable amount under state usury laws on its subprime auto loans.
  • According to the AG’s Office, ACA and Westlake’s loans were allegedly above the 21 percent state interest cap after the fees for “GAP coverage” were added to the consumers’ loans.  GAP coverage is an add-on product sold by car dealers, and often financed in the auto loan, that is intended to limit the shortfall between the payment on an auto insurance claim and the amount the borrower owes on their loan if the vehicle is totaled.
  • Under the terms of the settlements, ACA and Westlake will provide at least $1.7 million and $5.7 million, respectively, in relief to consumers and will also pay $225,000 to cover implementation costs of the agreements, which include audits to determine if additional loans may be subject to refunds.
  • The settlements are part of an “ongoing subprime loan review initiative” by the AG’s office, and come shortly after AG Healey settled with another auto lender late last year over similar allegations.

Washington Attorney General Obtains Judgment Against Company for Allegedly Scamming Homeowners

  • Washington AG Bob Ferguson obtained a court judgment against LA Investors, LLC, d/b/a “Local Records Office” for alleged violations of the Washington Consumer Protection Act.
  • According to the complaint, which was filed in November of 2013, the company allegedly mailed official-looking notices to solicit consumers to purchase overpriced copies of their residential real property deeds.
  • Under the court decision, the company will pay $856,981 in consumer restitution, $2,569,980 in civil penalties, and $176,806 in costs.

State AGs in the News

Louisiana Attorney General Seeks to Intervene in Parish Coastal Damage Suits

  • Louisiana AG Jeff Landry filed motions to intervene in 39 state court lawsuits filed by three parishes that claim oil and gas companies violated their permits and caused damage to coastal wetlands.
  • According to the AG’s office, the motions to intervene were filed under the Louisiana Constitution, which states that the AG “as necessary for the assertion or protection of any right or interest of the state” has the “authority to institute, prosecute, or intervene in any civil action or proceeding.”
  • According to AG Landry, the motions were filed to prevent continuous and fragmented lawsuits from derailing the collaborative restoration efforts of the state and parishes, and to ensure that issues involving coastal restoration are resolved in a fair, consistent manner.

State v. Federal

21 Attorneys General Advise Senate Leaders to Not Consider Supreme Court Justice Nominee

  • 21 AGs sent a letter to the U.S. Senate Judiciary Committee Chairman and the Senate Majority Leader supporting the Senate majority leadership in their decision to not consider President Barack Obama’s nomination of Merrick Garland to the Supreme Court.
  • As we reported earlier, this letter follows a prior letter to Senate leaders by 21 other AGs urging the Senate to promptly consider President Obama’s nominee.
  • In the letter, the AGs write that by exercising the Senate’s constitutional right to “advise and consent,” Republican Senators are ensuring that the American people have a voice in the selection of the next U.S. Supreme Court Justice.
Posted in Uncategorized
About The State AG Report
We report on AG stories and trends that matter, providing insight and analysis based on decades of experience representing clients in every industry and state. The State AG Report will spotlight AGs’ multiple roles as law enforcers, regulators, and policymakers impacting legal and policy issues affecting businesses throughout the country.
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