Digest 11.1.2018 The State AG Report Weekly Update

Cozen in the News

Cozen O’Connor’s State Attorneys General Practice Featured in Beltway Briefing Podcast’s Special State AG Election Edition Episode


FTC Reaches Settlement with Petroleum Company Over Allegedly Anticompetitive Impact of Proposed Acquisition of Retail Fuel Stations

  • The Federal Trade Commission (“FTC”), following an investigation by New York AG Barbara Underwood’s office, has reached a settlement with petroleum company Marathon Petroleum Corporation (“Marathon”) to resolve allegations that its proposed acquisition of Express Mart Franchising Corp., Petr-All Petroleum Consulting Corporation, and REROB, LLC’s (collectively, “Express Mart”) retail fuel stations would stifle competition among local fuel retailers.
  • According to the complaint, Marathon’s acquisition of Express Mart’s retail outlets and other interests would have resulted in a substantial decrease of competition in retail gasoline and retail diesel in five local markets in upstate New York and likely lead to higher consumer retail prices.
  • Under the proposed decision and order, Marathon must, among other things, divest its retail fuel assets in the five local markets to Sunoco LP.

Bureau of Consumer Financial Protection

Bipartisan Coalition of 33 Attorneys General Sends Letter to BCFP Over Military Lending Act Compliance Monitoring Concerns

  • A bi-partisan coalition of 33 AGs co-led by North Carolina AG Josh Stein and Nebraska AG Doug Peterson sent a letter to the Bureau of Consumer Financial Protection (“BCFP”) expressing concern over reports that the BCFP is considering ceasing its regular monitoring of consumer lenders’ compliance with the federal Military Lending Act (“MLA”), which seeks to prevent exploitative lending practices targeting military servicemembers.
  • In the letter, the AGs warn that discontinuing the practice of regular MLA compliance monitoring would harm servicemembers and violate the BCFP’s statutory mandate to monitor lenders’ MLA compliance.
  • The AGs offered to cooperate with the BCFP to conduct joint investigations related to the MLA and other alleged financial exploitation of servicemembers.

Consumer Protection

New York Attorney General Files Lawsuit Against Jewelry Retailer Following 14-State Multistate Investigation of Allegedly Deceptive Lending and Financing Practices Targeting Military Servicemembers

  • New York AG Underwood filed a lawsuit against jewelry retailer Harris Originals of NY, Inc. and various affiliated entities (collectively, “Harris”) for allegedly violating state civil and criminal usury laws, military law, business laws, and committing alleged common law fraud by engaging in deceptive marketing practices and operating as unlicensed lenders, a lawsuit that follows a bipartisan 14-state investigation co-led by AG Underwood and Tennessee AG Herbert Slatery III.
  • According to the complaint, Harris allegedly targeted military servicemembers with a deceptive marketing campaign designed to induce them to enter high-priced, illegal in-house financing contracts; offered credit repair services without disclosing in advance that the services were dependent on the purchase of jewelry or other goods; marked up the cost of jewelry far in excess of industry standard pricing; and charged servicemembers for protection plans without the servicemembers’ knowledge.
  • The complaint seeks injunctive relief, disgorgement, rescission, civil penalties, and costs, among other things.


Illinois Attorney General Files Lawsuit Against Waste Sterilization Company Over Alleged Air Pollution

  • Illinois AG Lisa Madigan filed a lawsuit against waste sterilization company Sterigenics U.S., LLC (“Sterigenics”) for allegedly violating the Illinois Environmental Protection Act and creating a common law public nuisance by discharging ethylene oxide (“EtO”) gas into the atmosphere.
  • According to the complaint, Sterigenics allegedly uses EtO—a compound classified as a known carcinogen by the U.S. Environmental Protection Agency (“EPA”) in 2016—in the sterilization of medical waste and other waste products at its plant, and it also has discharged varying levels of EtO into the air surrounding its plant in the past, exposing the surrounding community to unsafe levels of EtO.
  • The complaint seeks injunctive relief, civil penalties, and attorneys’ fees and costs, among other things.

Labor & Employment

New York Attorney General Announces Settlement with Payment Processing Firm Over Allegedly Unlawful Use of Non-Compete Agreements

  • New York AG Underwood reached a settlement with payment processing firm Reliance Star Payment Services, Inc. (“Reliance Star”) over allegations that it required employees to sign illegal non-compete agreements.
  • According to the AG’s office, Reliance Star allegedly required employees, many of whom had limited English proficiency, to sign English-language non-compete agreements that prohibited employees from working in competing businesses for up to three years and across 16 states, regardless of the employees’ positions, job duties, exposure to confidential information, or compensation.
  • According to the AG’s announcement, Reliance Star will stop using and enforcing non-compete agreements against former, current, and future employees, notify current and former employees from the last three years that their non-compete agreements are no longer in effect, and discontinue pending litigation seeking enforcement of non-compete agreements.


Illinois Attorney General Reaches Settlement with Residential Mortgage Company Over Alleged Mortgage Fraud

  • Illinois AG Lisa Madigan reached a settlement with residential mortgage company Diamond Residential Mortgage Corporation (“Diamond”) over allegations that one of the company’s branch managers engaged in mortgage fraud.
  • According to the AG’s office, one of Diamond’s branch managers allegedly defrauded individuals seeking mortgage loans by inducing them to enter risky transactions instead of the mortgages they were seeking, failing to provide consumers with signed copies of their mortgage agreements, and engaging in fraudulent loan origination activities.
  • According to the AG’s office, Diamond will pay $1.2 million to the AG’s office, which will be distributed to affected consumers as restitution.


Kentucky Attorney General Files Lawsuit Against Opioid Manufacturer for Allegedly Off-Label Marketing and Misrepresenting Risks of Prescription Opioids

  • Kentucky AG Andy Beshear filed a lawsuit against opioid manufacturer Teva Pharmaceutical Industries, USA, Inc., Teva Branded Pharmaceutical Products R&D Inc., and Cephalon, Inc. (collectively, “Teva”) for allegedly violating the state’s Consumer Protection Act, Medicaid Fraud Statute, and Assistance Program Fraud Statute, as well as committing various alleged violations of the common law by engaging in deceptive off-label marketing and misrepresenting the risks of prescription opioid products.
  • According to the complaint, Teva allegedly deceptively marketed its opioid products to doctors in order to encourage them to prescribe opioids for long-term treatment of chronic pain conditions—even though its prescription opioids were only approved for treatment of cancer pain—and submitted false or fraudulent claims for payment or approval from the state Medicaid program.
  • The complaint seeks injunctive relief, civil penalties, repayment of Medicaid and other state funds, pecuniary and punitive damages, disgorgement, attorneys’ fees and costs, among other things.