The State AG Report Weekly Update October 18, 2018

2018 State AG Elections

Cozen O’Connor’s State AG Election Tracker Updates 2018 Election Prediction for Nevada Attorney General Race

  • With 19 days to go before election day, Cozen O’Connor’s State AG Election Tracker has updated its 2018 AG race prediction in Nevada’s open race from Toss-up to Lean Republican.
  • For further daily coverage of AG election news, insights, and polls, visit Cozen O’Connor’s State AG Election Tracker.

Antitrust

Bipartisan Coalition of 5 Attorneys General and the U.S. Department of Justice Impose Conditions on Proposed Merger between Pharmacy Chain and Health Insurer

  • A bipartisan coalition of 5 AGs and the U.S. Department of Justice reached a settlement that imposes conditions on the proposed merger between pharmacy chain CVS Health Corporation (“CVS”) and health insurer Aetna Inc. (“Aetna”) in order to satisfy alleged concerns that the merger would reduce competition in the market for individual prescription drug plans.
  • According to the complaint, the proposed merger between CVS and Aetna—two of the leading sellers of individual prescription drug plans nationwide—would reduce or eliminate competition in the sale of prescription drug plans, increase costs, reduce quality of service, and result in less innovation across as many as 22 states.
  • Under the terms of the proposed settlement, Aetna is required, among other things, to divest its Medicare individual Part D prescription drug plan business to health insurer WellCare Health Plans, Inc..

Bureau of Consumer Financial Protection

Coalition of 12 Democratic Attorneys General Sends Letter to BCFP Urging Withdrawal of Its “Disclosure Sandbox” Proposal for FinTech Companies

  • A coalition of 12 Democratic AGs led by Illinois AG Lisa Madigan submitted a comment to the Bureau of Consumer Financial Protection (“BCFP”) urging the Bureau to withdraw or substantially modify its proposed “Disclosure Sandbox,” a program intended to encourage financial services companies to test new disclosure systems by exempting them from compliance with certain federal disclosure laws.
  • In the comment, the AGs warn that the proposed Disclosure Sandbox would decrease transparency, potentially enable financial services companies to evade compliance with important consumer protections, and enable the BCFP to issue open-ended disclosure waivers with minimal consumer safeguards.
  • As previously reported, the BCFP’s Office of Innovation, led by former Arizona AG’s Civil Litigation Division Chief Counsel Paul Watkins, announced its proposed Disclosure Sandbox policy last month.

Consumer Protection

Washington Attorney General Files Lawsuit Against Fast Food Franchisor Over Alleged “No Poach” Provisions in Franchise Agreements

  • Washington AG Bob Ferguson filed a lawsuit against fast food franchisor Jersey Mike’s Franchise Systems, Inc. and several affiliated entities (collectively, “Jersey Mike’s”) over their alleged use of “no-poach” provisions—franchise agreement terms that prevent franchisees within the same chain from hiring away each other’s employees—in violation of the antitrust provisions of the state’s Consumer Protection Act (“CPA”).
  • According to the complaint, Jersey Mike’s allegedly previously agreed to remove no-poach provisions from its standard franchise agreements and not to include such provisions in future franchise agreements, but refused to remove no-poach clauses from existing franchise agreements nationwide, creating a risk that Jersey Mike’s may continue to enforce these provisions.
  • The complaint seeks a judicial declaration that Jersey Mike’s violated the CPA, injunctive relief, civil penalties, costs, and attorney’s fees, among other things.
  • As previously reported, AG Ferguson reached a related settlement with Jersey Mike’s and several other fast food franchisors in July

Data Privacy

New Jersey Attorney General Reaches Settlement with Health Insurer to Resolve Alleged Health Privacy Violations

  • New Jersey AG Gurbir Grewal reached a settlement with Aetna Inc. (“Aetna”) to resolve allegations that it violated the New Jersey Consumer Fraud Act and the federal Health Insurance Portability and Accountability Act (“HIPAA”) by allegedly improperly disclosing personal health information (“PHI”).
  • According to the AG’s office, Aetna allegedly inadvertently disclosed the HIV status and the atrial fibrillation conditions of New Jersey residents by including that information on the envelopes of two mailings sent to consumers in July and September 2017, thus exposing this PHI to public view.
  • Under the terms of the assurance of voluntary compliance, Aetna will pay a $365,000 civil penalty, implement training reforms, ensure confidentiality of mailings containing PHI consistent with HIPAA standards, and hire an independent auditor to evaluate and monitor Aetna’s future compliance.
  • As previously reported, Aetna entered into an assurance of discontinuance in January 2018 with former New York AG Eric Schneiderman arising from similar allegations.

E – Cigarettes

North Carolina Attorney General Initiates Investigation of E-Cigarette Manufacturer

  • North Carolina AG Josh Stein initiated an investigation of e-cigarette manufacturer JUUL Labs, Inc. (“JUUL”) over concerns about its alleged marketing of e-cigarettes and related products to under-aged individuals.
  • According to the civil investigative demand (“CID”), AG Stein requested information related to JUUL’s advertising, sales and age verification practices, safety disclosures, and social media presence.
  • As previously reported, Massachusetts AG Maura Healey recently opened an investigation of JUUL and two internet e-cigarette retailers regarding their age verification practices in internet e-cigarette sales.

Environment

Oregon Attorney General Reaches Settlement with Solar Developer and Accounting Firm to Resolve Allegations of False Claims for Solar Tax Credits

  • Oregon AG Ellen Rosenblum reached a settlement with solar developer Tesla Energy Solutions (formerly known as “SolarCity”) and its accounting firm, Novogradac & Company LLP (“Novogradac”), to resolve allegations that they violated a state energy tax credit program by falsely submitting and certifying applications for commercial solar tax credits to the Oregon Department of Energy (“ODOE”).
  • According to the AG’s office, SolarCity allegedly inflated its commercial solar project building costs in order to justify claiming over $10 million in unjustified tax credits for commercial solar projects that Novogradac allegedly certified to the ODOE.
  • According to the AG’s announcement, SolarCity and Novogradac paid $13 million to the state to settle AG Rosenblum’s claims.

For-Profit Colleges

8 Democratic Attorneys General File Amicus Brief Urging Ninth Circuit to Uphold Preliminary Injunction Against Department of Education’s Partial Relief Policy for Student Borrowers

  • 8 Democratic AGs led by California AG Xavier Becerra filed an amicus brief in U.S. Court of Appeals for the Ninth Circuit in the matter of Calvillo Manriquez v. DeVos, No. 18-16375, urging the court to affirm a lower court’s order granting a preliminary injunction barring the Department of Education (“DOE”) from implementing a new borrower-defense rule applicable to claims by former students against for-profit college Corinthian Colleges, Inc. (“Corinthian”).
  • In their brief, the AGs argue that federal law incorporates a state law standard in its borrower-defense rule and the DOE’s attempt to grant only partial relief to defrauded student borrowers is inconsistent with California law. The AGs also argue that the DOE’s partial relief process will irreparably harm borrowers whom the DOE had already determined were eligible for complete cancellation of their federal student loans.
  • As previously reported, a coalition of 19 Democratic AGs led by Massachusetts AG Healey recently secured summary judgment against the DOE from the U.S. District Court for the District of Columbia over the DOE’s allegedly delayed implementation of a Borrower Defense Rule enacted under the Obama administration.

Pharmaceuticals

Minnesota Attorney General Files Lawsuit Against Insulin Manufacturers Over Allegedly Artificially-Inflated Prices

  • Minnesota AG Lori Swanson filed a lawsuit against insulin manufacturers Sanofi-Aventis U.S. LLC, Novo Nordisk, Inc., and Eli Lilly and Co. (collectively, “pharmaceutical companies”) for allegedly violating the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), state laws against consumer fraud, deceptive trade practices, and false advertising, and the common law by allegedly conspiring to inflate the prices of their insulin products.
  • According to the complaint, the pharmaceutical companies allegedly artificially inflated the list prices for their insulin products, but negotiated lower net prices with pharmacy benefit managers (“PBMs”) in order to obtain favorable placement on PBMs’ health-plan-approved drug lists, resulting in the doubling and tripling of insulin prices since 2011 and 2002, respectively, and causing the drugs to be much more expensive for consumers in high-deductible health plans, the uninsured, and Medicare beneficiaries.
  • The complaint seeks injunctive relief, damages, restitution, disgorgement, civil penalties, attorneys’ fees, and costs, among other things.

Utilities

Illinois Attorney General Reaches Settlement with Alternative Retail Electricity Supplier to Resolve Allegations of Deceptive Marketing Practices

  • Illinois AG Lisa Madigan announced a settlement with alternative retail electricity supplier Sperian Energy Corp. (“Sperian”) to resolve allegations that it used aggressive and deceptive tactics to enroll consumers into expensive electricity contracts.
  • According to the AG’s office, Sperian’s sales agents allegedly failed to disclose required information to consumers, including the price and duration of contracts and the fact that enrolled consumers would be charged a monthly fee, and allegedly gave consumers the false impression that they would receive cost savings by switching to Sperian from its competitor, the Commonwealth Edison Company.
  • According to the AG’s office, Sperian will provide refunds to consumers totaling $2.65 million, will give consumers the option to cancel their contracts at no charge, will be banned from marketing to Illinois consumers for two years, and will not be allowed to charge existing or new customers monthly service fees for five years.
  • As previously reported, AG Madigan originally filed suit against Sperian over these allegations in August 2018.
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