The State AG Report

Editor-in-Chief: Christopher Allen
Contributing Editors: Hannah Land, Keturah Taylor, Emily Yu

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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.