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.


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.


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.