The State AG Report Weekly Update February 11, 2016

Breaking News

New Jersey Acting Attorney General Announces Resignation to Take University Post

  • New Jersey Acting AG John Hoffman announced that, after serving for nearly three years as Acting AG, he will resign in March to take a post at Rutgers University.
  • Acting AG Hoffman was appointed in June 2013 to fill the vacancy by Jeffrey Chiesa, who was chosen by Governor Chris Christie to fill a vacant United States Senate seat.  Acting AG Hoffman’s confirmation by the legislature was delayed, in part as a result of the “Bridge-gate” scandal in the Christie Administration.
  • According to Rutgers, effective March 14, 2016, Acting AG Hoffman will lead the University’s legal team as its senior vice president and general counsel.

Consumer Financial Protection Bureau

CFPB Urges Banks to Offer Lower-Risk Checking Accounts, Separately Issues Bulletin Regarding Processes for Reporting Information to Credit Reporting Companies

  • The Consumer Financial Protection Bureau (“CFPB”) sent letters to an undisclosed group of “the 25 largest retail banks,” urging them to offer and widely market lower-risk deposit accounts that help consumers avoid overdrafting.
  • In the letters, the CFPB urged banks to make such lower-risk accounts more available to consumers, by both offering such accounts and featuring them within their standard account offerings.
  • Separately, the CFPB also issued a bulletin warning banks and credit unions that “Bureau action” could result if they fail to establish and implement reasonable policies and procedures for providing accurate information to credit reporting companies regarding customers’ account information.

Consumer Protection

Maine Attorney General and FTC Settle with Dietary Supplement Companies for Alleged Deceptive Marketing

  • Maine AG Janet Mills and the Federal Trade Commission (“FTC”) reached a joint settlement with Direct Alternatives and Original Organics LLC, and their owners, for alleged violations of state and federal consumer protection laws in connection with their promotion and sale of weight loss supplements
  • According to the complaint, the companies allegedly made claims that weight loss from their dietary supplements had been proven when in reality they lacked scientific support, charged people for unauthorized auto-renewal plans, and made consumer cancellation and refunds difficult.
  • Under the terms of the settlement, the companies and their owners are permanently enjoined from engaging in deceptive marketing practices and must either sell or liquidate a substantial portion of their assets, or pay a suspended judgment of approximately $16.5 million.

New Jersey Acting Attorney General Sues Car Manufacturer for Emissions Test Manipulation

  • New Jersey Acting AG John Hoffman filed a complaint against Volkswagen Group of America, Inc., and its affiliates, for allegedly violating the New Jersey Air Pollution Control Act and Consumer Fraud Act.
  • According to the complaint, Volkswagen allegedly misled consumers and state regulators about the environmental impacts of its diesel vehicles by allegedly designing cars to give inaccurate results during emissions testing.
  • This is the third complaint to be filed by an AG against Volkswagen on this issue and at least 15 AGs are also investigating Volkswagen as part of a multistate investigation on the company’s alleged use of software to manipulate emissions tests.

Utah and D.C. Attorneys General Urge the FTC to Revisit Internet Search Engine's Manipulation of Search Results

  • Utah AG Sean Reyes and District of Columbia AG Karl Racine sent a joint letter to the Federal Trade Commission (“FTC”) asking the Commission to revive its investigation into Google’s alleged manipulation of search results to favor its own services and products.
  • According to the letter, new information from investigations in Europe and India and a research paper funded by Yelp allegedly show that search manipulation by Google has caused negative impacts on consumers, including unconsummated online and offline transactions, greater search costs and less informed decisions, and less competition among businesses.

For-Profit Colleges

California Attorney General Continues to Investigate For-Profit College

  • California AG Kamala Harris sent a second investigative subpoena to Apollo Education Group, Inc., the parent company of the University of Phoenix, for possible deceptive practices.
  • According to the companies’ Securities and Exchange Commission (“SEC”) filings, the subpoena seeks documents and information regarding a “broad spectrum” of its business practices, including information related to marketing, recruiting, compensation of enrollment advisors, and marketing and services provided to military members and veterans, among other things.
  • AG Harris previously sent an investigative subpoena to Apollo Education Group in August 2015.


West Virginia Attorney General Settles with Pharmaceutical Distributor

  • West Virginia AG Patrick Morrisey reached a settlement with Miami-Luken Inc., a regional pharmaceutical distributor, resolving alleged violations of state consumer protection laws and the West Virginia Controlled Substances Act, a law that requires companies to provide effective controls and procedures to protect against the diversion of controlled substances for illegal purposes.
  • According to AG Morrisey, Miami-Luken allegedly failed to detect, report, and stop suspicious orders of prescription pain medications such as oxycodone to pharmacies for non-medical purposes, contributing to an epidemic of painkiller abuse in the state.
  • Under the settlement, Miami-Luken will pay $2.5 million to the state and must alert state police and the AG’s office within 72 hours of discovering suspicious orders.
  • Miami-Luken is the first company named in a lawsuit filed against multiple pharmaceutical distributors by AG Morrisey in 2012 to settle with the state.  That suit continues against the remaining defendants.  Earlier this year, AG Morrisey filed a lawsuit against McKesson regarding similar allegations.


50 Attorneys General and Three Federal Agencies Settle with Mortgage Lender for Alleged Mortgage Servicing Abuses

  • 49 state AGs, the District of Columbia AG, the U.S. Department of Justice (“DOJ”), the U.S. Department of Housing and Urban Development, and the Consumer Financial Protection Bureau reached a joint settlement with HSBC Bank USA NA and its affiliates over alleged violations of state and federal consumer protection laws, the federal False Claims Act, the Financial Institutions Reform, Recovery, and Enforcement Act, and federal bankruptcy laws.
  • According to the DOJ, HSBC allegedly engaged in improper loan servicing, foreclosure processing, and loan origination practices by using, among other things, robo-signing and improper documentation.
  • Under the consent judgment, HSBC will provide $370 million in creditable consumer relief directly to borrowers and homeowners, $40.5 million to the federal government, and $59.5 million to the states to be used as restitution for borrowers who lost their homes to foreclosure and to pay the government investigative costs. HCBC will also reform its mortgage servicing and be subject to the oversight of an independent monitor, who will oversee compliance with the implementation of servicing standards required under the agreement

State v. Federal

13 Attorneys General Urge OMB to Reject Proposed Rule Requiring Disclosure of Certain Labor Relations Communications

  • A coalition of 13 attorneys general, led by Alabama AG Luther Strange, submitted a comment letter to the U.S. Office of Management and Budget (“OMB”) opposing a proposed rule issued by the U.S. Department of Labor and currently under review by OMB that would limit the confidentiality protections for certain attorney-client communications.
  • In the letter, the AGs write that the Persuader Advice Exemption Rule, which would require companies to publicly disclose communications with outside counsel regarding certain labor relations issues, would undermine federal laws that provide for confidentiality of such attorney-client communications and would have a “chilling effect” on a business’s right to counsel, particularly small businesses who are less likely to employ in-house counsel.

U.S. Supreme Court Grants States’ Request for a Stay of the EPA’s Clean Power Plan

  • The U.S. Supreme Court granted a request by a coalition of 25 AGs and four state agencies from 29 states, led by Texas AG Ken Paxton and West Virginia AG Patrick Morrisey, for an immediate stay pending judicial review of the Environmental Protection Agency’s (“EPA”) new regulations limiting carbon emissions, known as the “Clean Power Plan,” after the D.C. Circuit rejected the states’ request.
  • The Supreme Court voted along ideological lines without elaboration, ordering the EPA to halt efforts to carry out its Clean Power Plan until the D.C. Circuit enters its judgment on the substance of the states’ challenge.
  • According to the states’ Petition, the Clean Power Plan unlawfully expands the federal government’s regulatory power by directing states to shift electricity generation from fossil fuels to other sources like wind and solar power.  The states sought an immediate stay to prevent “irreversible changes and harms” in implementing the Plan while they await judicial review by the D.C. Circuit, which will likely take until 2017 even under expedited consideration.