Digest 1.25.2018 The State AG Report Weekly Update

Cozen in the News

JB Kelly Interviewed by Natural Products Insider on FTC Guidance for Multi-Level Marketers

  • JB Kelly, member of Cozen O’Connor’s State Attorneys General practice, was interviewed by Natural Products Insider for an article examining the Federal Trade Commission’s (“FTC”) January 2018 Business Guidance Concerning Multi-Level Marketing (“MLM”).
  • The FTC business guidance is intended to help members of the MLM industry apply core consumer protection principles to their business practices, by explaining, for example, the FTC’s process for distinguishing between lawful and unlawful compensation structures and suggesting elements of a successful MLM compliance program, among other things.
  • Drawing on his experience advising Herbalife in connection with an investigation by the FTC and a state AG, Kelly noted that the guidance could also “give state attorneys general a sense of how to evaluate cases against MLMs” because states have “mini FTC laws,” and that “now is a good time for MLMs to compare the various factors cited in FTC’s guidance to their current business practices and examine where they fall on the spectrum of risks.”


Data Privacy

New York Attorney General Settles with Health Care Company for Alleged Unauthorized Disclosure of Personal Health Information

  • New York AG Eric Schneiderman announced a settlement with health care company Aetna Inc. (“Aetna”) for allegedly violating state health privacy laws and the federal Health Insurance Portability and Accountability Act (commonly known as “HIPAA”) over the unauthorized disclosure of personal health information (“PHI”).
  • According to AG Schneiderman, Aetna allegedly improperly disclosed in mass mailings the HIV statuses of 2,460 of their members and the atrial fibrillation conditions of 163 Aetna members.
  • Under the terms of the settlement, Aetna will pay $1.1 million in penalties to the state, and implement and maintain enhanced privacy protections for the PHI of its members.



23 Attorneys General and 3 State Agencies File Comments Supporting EPA’s Repeal of Clean Power Plan

  • 23 AGs and 3 state agencies, led by West Virginia AG Patrick Morrisey, submitted comments to the U.S. Environmental Protection Agency (“EPA”) in support of a proposed rule to repeal the 2015 EPA rule entitled “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units” (commonly known as the “Clean Power Plan”).
  • According to the AGs and state agencies, the Clean Power Plan—which established emission guidelines for states to follow limiting carbon dioxide emissions from existing power plants and is currently stayed pursuant to a March 28, 2017 Executive Order—is “unlawful and bad policy” because it exceeds the EPA’s rulemaking authority under the Clean Air Act.
  • In their comments, the AGs and state agencies urge the EPA to permanently rescind the Clean Power Plan and return energy resource management to the states.
  • As previously reported, AG Morrisey led a similar coalition of AGs and state agencies in a December 2016 letter to then Vice President-elect Mike Pence, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan urging congressional action to prevent similar rulemakings in the future and encouraging the newly elected administration to issue an executive order directing the EPA to rescind the rule, which the Administration did shortly after taking office.


False Claims Act

21 Attorneys General and U.S. Department of Justice Settle with Dental Care Provider to Resolve Medicaid Fraud Allegations

  • AGs from 20 states and the District of Columbia, along with the U.S. Department of Justice (“DOJ”), reached a settlement with dental management company Benevis, LLC (“Benevis”) and 133 Kool Smiles clinics, to which Benevis provides management and administrative services, to resolve five whistleblower lawsuits brought under the federal False Claims Act alleging that Benevis and Kool Smiles submitted false Medicaid claims.
  • According to reports, the AGs and DOJ alleged that Benevis and Kool Smiles knowingly submitted false claims to Medicaid seeking reimbursement for pediatric dental procedures that were either not medically necessary or could have been treated with less costly services.
  • Under the terms of the settlement, Benevis and Kool Smiles will pay a total of $23.9 million, $9.65 million of which will go to the participating states.


Financial Industry

Colorado Attorney General Reaches Agreement with Litigation Funding Companies for Allegedly Charging Predatory Interest Rates

  • Colorado AG Cynthia Coffman settled with consumer litigation funding companies Oasis Legal Finance, LLC (“Oasis”) and Plaintiff Funding Holding, Inc. d/b/a LawCash (“LawCash”) for allegedly violating state consumer lending laws.
  • According to AG Coffman, Oasis and LawCash allegedly loaned money to consumers with pending personal injury claims and then required borrowers who recovered money in their lawsuits to pay back an amount that exceeded Colorado’s interest rate limits and other state lending laws. This settlement follows the Colorado Supreme Court’s 2015 determination that litigation funding companies like Oasis and LawCash are subject to the same interest rate caps and protections as other, more traditional consumer loans.
  • Under the terms of the consent judgment, Oasis and LawCash are enjoined from future violations of the law and must pay $2.3 million in redress, which will be distributed to consumers charged excessive interest rates.


Georgia Attorney General Settles with Debt Collector over Alleged Consumer Harassment and Deception

  • Georgia AG Chris Carr announced a settlement with debt collection company Williamson and McKevie, LLC and its owner Greg Williamson (collectively “Williamson and McKevie”) for allegedly violating the Georgia Fair Business Practices Act and federal Fair Debt Collection Practices Act by employing abusive and deceptive debt collection tactics.
  • According to AG Carr, Williamson and McKevie allegedly used harassment and deception to collect debts by falsely telling consumers that failure to pay would lead to arrest and imprisonment, implying that company representatives were attorneys rather than debt collectors, and exposing debtor account information to third parties, among other things.
  • Under the terms of the settlement, Williamson and McKevie must cease collections on over ten thousand accounts, representing nearly $8.8 million in consumer debt; pay a $20,000 civil penalty; and pay an additional $230,000 civil penalty if the company violates state or federal debt collection practices laws or other settlement terms over the next five years.



Kentucky Attorney General Sues Opioid Distributor for Alleged Consumer Protection Violations and Medicaid Fraud

  • Kentucky AG Andy Beshear filed suit against pharmaceutical distributor McKesson Corporation (“McKesson”) for allegedly violating the state Consumer Protection Act (“CPA”) and engaging in common law public nuisance, negligence, and unjust enrichment.
  • According to AG Beshear, McKesson allegedly failed to report or investigate suspiciously large orders of opioids, thereby endangering the health, safety, and welfare of the public and subsequently profiting from the excessive distribution of opioids in Kentucky. Further, AG Beshear alleges that McKesson committed Medicaid fraud by causing the state to pay for prescription opioids that were improperly diverted for non-medically necessary and improper abuse.
  • The lawsuit seeks permanent and temporary injunctions against continued violations; treble damages for Medicaid fraud; civil penalties of $2,000 per CPA violation and $10,000 per CPA violation involving a person aged 60 or over; disgorgement; and attorney’s fees and costs, among other things.