Digest 07.16.2020: EU Kills Privacy Shield | Honesty in Telecom Advertising | Big False Claims Act Settlements

2020 AG Elections

Indiana GOP Chooses AG Candidate for 2020; Virginia Looks Ahead to 2021

  • Todd Rokita, former Indiana Secretary of State and U.S. Congressman, has won the Republican nomination for Indiana AG over incumbent AG Curtis Hill and will face Democratic candidate Jonathan Weinzapfel in the general election in November.
  • Norfolk, Virginia Delegate Jay Jones announced his candidacy for the 2021 Democratic nomination for AG. He is the first candidate of either party to declare his intention to seek the AG’s office.
  • For more AG election news, insights, and polls, visit Cozen O’Connor’s State AG Election Tracker.

Consumer Financial Protection Bureau

CFPB Shuts Down Student Debt Relief Scheme

  • The Consumer Financial Protection Bureau reached a settlement with student debt relief company Timemark, Inc. and related individuals (collectively, “Timemark”) to resolve allegations that it charged illegal advance fees to consumers seeking to renegotiate their student loans in violation of the Telemarketing Act, the Telemarketing Sales Rule, and the Consumer Financial Protection Act.
  • The complaint alleged that, among other things, Timemark charged consumers hundreds of dollars to file paperwork—available for free from the federal government—to reduce or eliminate monthly student loan payments, requested up-front payment prior to performing any debt management services, and telemarketed these services through online ads prompting consumers to call the company.
  • Under the terms of the proposed stipulated judgment, Timemark will be subject to a judgment of $3.8 million that will be partially suspended due to defendants’ inability to pay, and will be permanently banned from providing debt relief services.

Consumer Protection

Municipalities, Like Individual Consumers, Are Targeted by Misleading Marketing Tactics

  • Massachusetts AG Maura Healey reached a settlement with cleaning supply companies Pioneer Products Inc. and Noble Industrial Supply Corp., and related individuals (collectively, “Pioneer Products”) to resolve allegations that Pioneer Products used high-pressure and misleading marketing tactics in sales to municipalities across the state in violation of the Massachusetts Consumer Protection Act.
  • According to the AG’s office, Pioneer Products’ salespeople falsely told municipal employees that purchase orders for cleaning supplies already had been agreed to, threatened legal and debt-collection actions, and placed onerous conditions on merchandise returns, among other high-pressure and misleading sales tactics.
  • Under the terms of the assurance of discontinuance, Pioneer Products will pay $850,000 to the state, is banned from doing business in Massachusetts for one year, and must implement policies and procedures to prevent similar conduct in the future.

Washington AG’s “Honest Fees Initiative” Adds Another Telecom Settlement to the Scoreboard

  • Washington AG Bob Ferguson reached a settlement with telecommunications company Frontier Communications Corporation and related entities (collectively, “Frontier”) to resolve allegations of hidden fees and other misleading marketing practices in violation of Washington’s Consumer Protection Act.
  • The AG’s office alleged that, among other things, Frontier’s marketing materials failed to disclose all fees and surcharges, and misrepresented the internet speeds it could offer.
  • Under the terms of the assurance of discontinuance, Frontier will pay $900,000 to the state, the majority of which will be used for consumer restitution. Frontier will also stop charging its “Internet Infrastructure Surcharge,” disclose the actual internet speed it offers and the full price of its services in its advertising and sales materials, and provide an order confirmation with a complete bill summary within three days after a consumer places an order.

Data Privacy & Security

Europe’s Top Court Issues Bombshell EU-U.S. Privacy Shield Ruling

  • The European Court of Justice ruled today that the Privacy Shield data-sharing agreement between the U.S. and many European countries is invalid, causing uncertainty for the more than 5,300 businesses that utilize the framework to transfer data between the U.S. and EU.
  • In its ruling, the Court held that the Privacy Shield agreement—a data privacy arrangement allowing companies to transfer data to the U.S. while adhering to the EU’s distinct data privacy laws—did not sufficiently protect European citizens’ data from U.S. surveillance activities. The Privacy Shield agreement had replaced the previous Safe Harbor agreement, which the Court also ruled invalid in 2015.
  • S. Secretary of Commerce Wilbur Ross said in a statement today that the Department of Commerce is “still studying the decision fully to understand the practical impacts,” but assured that the Department “will remain in close contact with the European Commission and European Data Protection Board on this matter and hope to be able to limit the negative consequences to the $7.1 trillion transatlantic economic relationship.”

FTC Settles EU-U.S. Privacy Shield Allegations Against Diagnostics Company

  • The Federal Trade Commission (“FTC”) finalized its settlement with medical diagnostics company Ortho-Clinical Diagnostics, Inc. (“Ortho-Clinical”) to resolve allegations that it misled consumers about its participation in and compliance with the now-defunct EU-U.S. Privacy Shield framework (“Privacy Shield”) in violation of the FTC Act.
  • The FTC’s complaint alleged that Ortho-Clinical claimed that it participated in Privacy Shield even though it had allowed its certification to lapse in 2018.
  • Under the terms of the consent order, Ortho-Clinical is precluded from misrepresenting its participation in Privacy Shield or any other data privacy or security program sponsored by the government or any other standard-setting organization, and is required to comply with the requirements of Privacy Shield, among other things.

False Claims Act

False Claims Act Settlements Lead to Big Paydays for U.S. DOJ and State AGs

  • California AG Xavier Becerra reached a settlement with skilled nursing facility San Bernardino Convalescent Operations, Inc. d/b/a Legacy Post-Acute Rehabilitation Center and its owner and operator Legacy Standard, Inc. (collectively, “Legacy”) to resolve allegations that it wrongfully billed Medi-Cal for patients receiving subacute care by failing to provide the minimum number of nursing hours required for subacute care. Under the terms of the settlement agreement, Legacy will pay $1 million to the state.
  • Separately, The U.S. Department of Justice (“DOJ”) and a number of states settled with psychiatric and behavioral care services providers Universal Health Services, Inc. and UHS of Delaware, Inc. (collectively, “UHS”) to resolve allegations that UHS knowingly submitted false claims for payment by Medicare, Medicaid, and other healthcare benefits programs for services patients were ineligible for, in violation of the False Claims Act.
  • Under the terms of the DOJ-led settlement, which will resolve 18 qui tam cases, UHS will pay $117 million, of which approximately $88 million will go to the federal government and $29 million will go to participating states. UHS also agreed to retain an independent monitor to assess its patient care protections, among other things.
  • In addition to participating in the DOJ-led UHS settlement, Massachusetts AG Maura Healey reached an additional settlement with Universal Health Services, Inc. and its affiliates UHS of Delaware, Inc, and HRI Clinics, Inc. d/b/a Arbour Counseling Services (collectively, “UHS”) to resolve allegations that UHS improperly billed the state Medicaid program for services provided by unlicensed, unsupervised, and unqualified staff, among other things. Under the terms of the settlement, UHS will pay $10 million to the state and institute a multiyear compliance program in its Massachusetts clinics.