The State AG Report Weekly Update July 23, 2015

Breaking News

Health-Conscious Food Label Claims: The “Natural” Frontier for State AGs?

  • In a new blog post, Maria Colsey Heard, Ann-Marie Luciano, and Rachel Lawlor discuss the authority AGs can exercise in regulating health-conscious food labeling and advertising claims.

New Mexico Attorney General Creates Fraud Recovery Strike Force

  • New Mexico AG Hector Balderas recently announced the formation of the Fraud Recovery Strike Force, a new department within the Office of the Attorney General charged with “aggressively investigating and pursuing litigation” of false claims and deceptive business practices.
  • The new department will be comprised of three current offices; the Offices of Consumer Protection, Litigation, and Medicaid Fraud.  According to AG Balderas, the new unit will focus on “high priority risk areas” including securities, health care, and marketplace fraud.


New York Attorney General Sues Charity for Alleged State Charities Law Violations

  • New York AG Eric Schneiderman filed a lawsuit against the National Children’s Leukemia Foundation (“NCLF”) and its officers for allegedly defrauding consumers out of more than $9 million in violation of state charities laws.
  • According to AG Schneiderman, the charity allegedly spent less than 1% of the $9.7 million it raised over a four-year period directly on leukemia patients.  The company allegedly filed false audit reports and deceived consumers by claiming it operated a bone marrow registry, an umbilical cord blood banking program, and a research center, when it did none of these things.
  • The lawsuit seeks to shut down the charity, the New York registration of which has already been revoked by the AG’s office, and recover fraudulently raised funds.

Consumer Financial Protection Bureau

CFPB and OCC Settle with Bank Over Credit Card Add-On Products and Services Alleged to Violate Consumer Protection Laws

  • The Consumer Financial Protection Bureau (“CFPB”) and the Office of the Comptroller of the Currency (“OCC”) settled with Citibank, N.A., and its subsidiaries, over allegedly unfair billing practices and deceptive marketing and collections related to credit card add-on products and services sold to consumers in violation of federal consumer protection laws.
  • According to the CFPB and OCC consent orders, the company or its vendors allegedly did not, among other things, inform consumers of the costs of certain credit monitoring and debt protection services and charged consumers for services the company knew they would not be eligible for or did not receive.
  • The company must pay an estimated $700 million in restitution to eligible consumers and $35 million in penalties to the CFPB and the OCC.

Consumer Protection

Colorado Attorney General Sues Business for Alleged Consumer Lending Law Violations

  • Colorado AG Cynthia Coffman sued USA Discounters, LTD, d/b/a USA Living and Fletcher’s Jewelers, for allegedly violating state lending and consumer protection laws regarding credit offered to military members and their families.
  • According to the AG’s office, the companies allegedly engaged in a variety of conduct including, among other things, charging excess fees and improper late fees, extending additional credit on closed accounts without a proper loan agreement, and unlawfully suing Colorado consumers in Virginia courts instead of in Colorado.
  • The lawsuit seeks consumer restitution, penalties, and to permanently enjoin the company from filing suits in other states against Colorado consumers.   AG Coffman took similar actions against Freedom Stores Inc. earlier this year.

Washington Attorney General Reaches First Settlement Against Financial Planner for Violating New State Law

  • Washington AG Bob Ferguson reached a settlement with Emerald Capital Preservation, Inc. (“ECP”) and its owner for offering claims services to veterans which the AG asserted violated state consumer protection laws and the Veteran Pension Poacher Prevention Act (“VPPPA”), a law proposed by the AG and signed into law last year.
  • According to AG Ferguson, the financial planning company was allegedly not accredited by federal or state agencies to assist veterans with the preparation of veteran benefit claims, as required under the VPPPA.  Additionally, the company allegedly violated consumer protection laws by failing to disclose its fee-splitting arrangement with local estate planning attorneys and charging clients for basic services, including document notarization.
  • The company, under the consent decree, is prohibited from providing advice regarding veteran benefits, among other things, and must pay $26,564 in restitution and $17,500 in costs and fees to the state.  An additional $17,500 in civil penalties is suspended as long as the company complies with the consent decree.


New York Attorney General and U.S. DOL Take Action Against Restaurant Owners for Alleged Wage & Hour Violations

  • New York AG Eric Schneiderman and the U.S. Department of Labor (“DOL”) filed criminal charges and reached a civil settlement with Abdul Jamil Khokhar and BMY Foods, Inc., which together own and operate nine Papa John’s franchises, for alleged violations of state and federal wage and hour laws.
  • According to AG Schneiderman, the restaurant owner allegedly failed to pay minimum wage and overtime to approximately 300 employees, and allegedly concealed their actions by creating fictitious names for employees and filing fraudulent tax returns.
  • Under the civil settlement, filed by DOL, the restaurant owner must pay $230,000 in damages, $50,000 in penalties, and maintain an internal compliance officer.
  • The AG’s office separately filed criminal charges against the restaurant owner seeking jail time and $230,000 in back wages.

State AGs in the News

Eight Attorneys General File Amicus Brief Urging Supreme Court to Preserve Standing Requirements in Class Actions

  • Eight Republican AGs filed an amicus brief, led by Alabama AG Luther Strange, urging the U.S. Supreme Court to reverse the U.S. Court of Appeals for the Ninth Circuit decision, in Spokeo v. Robins, alleging it weakens the injury-in-fact requirement and opens the door to “firm-killing class actions.”
  • In the brief, the AGs argue the plaintiff failed to show actual harm where the harm alleged was technical violations of the Fair Credit Reporting Act (“FCRA”).  Equating a statutory injury-in-law as satisfaction of the Article III injury-in-fact standing requirement, according to the AGs, upsets the balance reached by the states and Congress in the Class Action Fairness Act, which sought to limit abusive and frivolous lawsuits.
  • In the case, the plaintiff alleged that Spokeo, a people search engine, violated the FCRA by allegedly publishing false information and sharing that information with prospective employers.  The Ninth Circuit found that the plaintiff established standing, without proof of actual damages, merely by pleading that Spokeo had violated his statutory rights under the FCRA.

New Jersey Acting Attorney General and State Officials File First Eminent Domain Actions Against Beachfront Property Owners

  • New Jersey Acting AG John Hoffman and the New Jersey Department of Environmental Protection  filed the State’s first eminent domain actions against beachfront property owners to complete a comprehensive coastal protection system to safeguard New Jersey’s shoreline from severe storms and flooding in the wake of Superstorm Sandy.
  • The eminent domain actions are for properties in Ship Bottom and Ocean City, New Jersey.  According to the joint press release, the state has secured 90 percent of the 4,279 easements required for the project, with 388 easements from 244 property owners still needed.

State v. Federal

Arkansas Attorney General Urges EPA to Withdraw Proposed Regional Haze Plan for State

  • Arkansas AG Leslie Rutledge submitted a comment letter to the Environmental Protection Agency’s (“EPA”) urging the agency to withdraw its proposed Regional Haze Federal Implementation Plan, which the agency issued after rejecting the State’s plan.
  • The letter alleges that the EPA acted in an arbitrary and capricious manner by creating a plan, to improve visibility in parks and wilderness areas and using criteria to support the plan that is outside the scope of the law and agency authority and fails to justify the costs of compliance given the plan’s limited improvement of visibility.
  • AG Rutledge, in the letter, urges the EPA to withdraw the proposed plan and consult with the State in developing a State Implementation Plan.

Missouri Attorney General Sues USDA Over Filing Deadlines for Crop Insurance

  • Missouri AG Chris Koster filed a lawsuit against the United States Department of Agriculture (“USDA”), seeking to compel the agency to accept acreage reports from Missouri farmers, a prerequisite for obtaining crop insurance, even though the normal deadline had passed.
  • According to the complaint, heavy rainfall and storms delayed planting for farmers in the state, which made the set deadline for filing acreage reports difficult to meet for many farmers.
  • The complaint seeks an extension of the deadline and an injunction to prevent the agency from denying Missouri farmer’s crop insurance for not timely filing their acreage reports.