The State AG Report Weekly Update October 24, 2019

Cozen in the News

Cozen O’Connor’s State Attorneys General Practice Co-Chair Quoted in Article on Oil Company Climate Change Securities Trial

  • Bernie Nash, Co-Chair of Cozen O’Connor’s State Attorneys General Practice, is quoted in a The Wall Street Journal article (paywall) regarding the courtroom showdown between Exxon Mobil Corporation and the New York AG’s office over its climate change impact accounting methods and whether such methods misled shareholders and the public.
  • Nash weighed in on the AG office’s use of the Martin Act, the state’s securities fraud law, and noted that while courts have allowed for broad uses of the statute,“[p]hilosophically, no statute is limitless and you don’t know when you’ve exceeded it until the court says so.”
  • As previously reported, former New York AG Barbara Underwood filed suit against the company last year for its accounting methods.

 Cannabis / Marijuana

FTC and FDA Issue Joint Warning Letter to CBD Retailer About Allegedly Unsubstantiated Health Claims

  • The Federal Trade Commission (“FTC”) and the Food and Drug Administration (“FDA”) issued a joint warning letter to Rooted Apothecary, LLC (“Rooted Apothecary”) for allegedly violating the FTC Act by advertising its cannabidiol (“CBD”) products with unsubstantiated health claims and for allegedly violating the federal Food, Drug & Cosmetic Act by misbranding the same products.
  • The letter alleges that Rooted Apothecary’s website, online store, and social media accounts made multiple unsubstantiated health and efficacy claims about its CBD products, including claims relating to infant teething, anxiety, autism, Parkinson’s disease, Alzheimer’s disease, acne, and cancer, among other items.
  • The letter requests that Rooted Apothecary respond with an explanation of how it plans to address the alleged violations within 15 working days.

 Consumer Protection

42 Attorneys General Reach Settlement with Medical Device Company Over Allegedly Deceptive Advertising of Transvaginal Mesh Devices

  • Forty-two AGs, including Pennsylvania AG Josh Shapiro, reached a settlement with Johnson & Johnson and its subsidiary Ethicon, Inc. (collectively “Ethicon”) to resolve allegations that they engaged in deceptive marketing regarding its transvaginal surgical mesh devices in violation of state consumer protection laws.
  • According to the AGs, Ethicon misrepresented the safety and effectiveness of its transvaginal mesh products and failed to sufficiently disclose risks and side effects.
  • Under the terms of the consent decree, Ethicon must pay $116.86 million to the participating states and the District of Columbia; is prohibited from referring to the mesh as “FDA approved” or representing that risks associated with the mesh can be eliminated by surgical experience or technique alone; and must disclose certain specified risks associated with the product, among other things.
  • As previously reported, Washington AG Bob Ferguson reached a settlement with Ethicon in April to resolve allegations that it deceptively marketed a surgical mesh product in violation of the state’s Consumer Protection Act, following the filing of suits by AG Ferguson and former California AG Kamala Harris in 2016.

30 Attorneys General Pen Letter to Secretary of Education Urging Relief for Student Borrowers of Closed Schools

  • A bipartisan coalition of 30 AGs, led by Oregon AG Ellen Rosenblum and Minnesota AG Keith Ellison, sent a letter to Secretary of Education Betsy DeVos to request that she take immediate action to extend the time available for student borrowers who were enrolled in schools operated by Dream Center Education Holdings, LLC (“DCEH”) to discharge their federal student loans under the “closed school discharge” rule, which allows student borrowers to discharge 100% of certain federal student loans if they were unable to complete their programs because their schools closed.
  • Unless extended, the closed school discharge rule only applies to students who were enrolled in programs at the time the schools were closed, on an approved leave, or withdrew from classes within 120 days of the schools’ closure. The AGs urged the Secretary of Education to extend the time available to student borrowers beyond the 120 days.
  • The AGs argued that the extension is appropriate in this case in view of the multiple methods by which DCEH allegedly violated federal and state law and mismanaged its schools, including failing to inform students of the loss of their school’s accreditations and failing to distribute over $16 million in federal loan credit balance refunds to students, among other things.

FTC Settles with Marketing and Cosmetics Companies Over Allegedly Deceptive Online Marketing Practices

  • The FTC reached separate settlements with Devumi LLC and its owner (collectively, “Devumi”) and Sunday Riley Modern Skincare, LLC and its CEO (collectively, “Sunday Riley”) relating to the alleged use of deceptive and untrue information in online marketing.
  • In its complaint against Devumi, the FTC alleged that the company sold fake followers, subscribers, views, and likes to users of various social media platforms. In its complaint against Sunday Riley, the FTC alleged that Sunday Riley’s employees and its CEO posted fake reviews of the company’s products on the website of cosmetics retailer Sephora.
  • Under the terms of the Devumi stipulated order, the FTC imposed a $2.5 million monetary judgment on the company, suspended upon payment of $250,000, and banned the company from selling or assisting others in selling social media influence and from making misrepresentations about the social media influence of any person or entity, among other things. Under the terms of the Sunday Riley agreement and consent order, the company is prohibited from misrepresenting the status of any product endorser or reviewer, and must instruct its employees and agents about clearly and conspicuously disclosing their relationships with Sunday Riley’s products in any endorsements, among other things. 

Data Privacy & Security

FTC Reaches Agreement with Developer of “Stalker” Applications

  • The FTC entered into an agreement with application developer Retina-X Studios, LLC and its owner (collectively, “Retina-X”) to resolve allegations that it violated the FTC Act and the Children’s Online Privacy Protection Act by developing and marketing three mobile device “stalking” applications that allowed purchasers to monitor the mobile devices on which they were installed, without the knowledge or permission of the device’s users.
  • The FTC complaint alleged that Retina-X’s applications allowed purchasers to access sensitive information from mobile device users, such as the purchasers’ children and employees, without their knowledge or permission, including the devices’ physical locations and the users’ online activities.
  • Under the terms of the agreement, Retina-X must delete the data it had collected from its applications and must take steps to ensure that its applications are used for legitimate purposes only, among other things.

State v. Federal

California Attorney General Sues U.S. Postal Service for Allegedly Accepting and Delivering Foreign Cigarettes

  • California AG Xavier Becerra and New York City brought a lawsuit against the U.S. Postal Service and the Postmaster General in her official capacity (collectively “USPS”) for allegedly violating the Prevent All Cigarettes Trafficking Act (“PACT Act”), which prohibits USPS from accepting and transmitting packages through the mails that it knows or reasonably believes contain cigarettes.
  • The complaint alleges that USPS delivered thousands of such packages, with the knowledge that they contained contraband cigarettes and smokeless tobacco products.
  • The complaint seeks monetary damages, declaratory relief, and injunctive relief to prohibit the USPS from knowingly accepting or transmitting any packaging containing illegal cigarettes and from returning such packages to their senders, among other things.
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