The State AG Report Weekly Update October 20, 2016

Consumer Protection

FCC Settles with Phone Service Provider Over Allegedly Misleading Data Plan Claims

  • The Federal Communications Commission (“FCC”) reached a settlement with T-Mobile USA, Inc. and two of its brands, T-Mobile and MetroPCS (collectively “T-Mobile”), to resolve allegations that the company violated the Open Internet Transparency Rule by failing to disclose restrictions on its data plan offerings.
  • According to the FCC, T-Mobile allegedly led customers to believe they subscribed to unlimited data plans while actually employing an algorithm to limit data speeds for customers who exceeded data usage thresholds, rendering certain phone applications unusable by consumers for hours out of the day.
  • Under the terms of the consent order, T-Mobile must pay $7.5 million in civil penalties, spend $35.5 million to make certain consumer benefits available to unlimited data plan customers, spend at least $5 million to provide broadband-capable devices that low-income public school students may use to complete homework, and among other things, update its unlimited data plan advertising and marketing materials.


Arizona Attorney General Files Lawsuit Against Travel Agency Over Alleged Deceptive Marketing Claims

  • Arizona AG Mark Brnovich filed a lawsuit against Arch Vacations, Inc., and its president over allegations that the travel agency violated the Arizona Consumer Fraud Act by engaging in deceptive sales tactics to sell vacation packages.
  • According to the complaint, Arch Vacations allegedly misled consumers to believe that purchasing an Arch Travel Certificate allowed them to book travel without additional costs and fees, failed to disclose the terms and conditions of the certificates, and failed to register as telemarketers with the state.
  • The lawsuit seeks consumer restitution, civil penalties, and among other things, disgorgement of profits.


Indiana Attorney General Settles with Payday Lender Over Allegedly Unlawful Loans

  • Indiana AG Greg Zoeller and the Indiana Department of Financial Institutions reached a settlement with Western Sky Financial, LLC, CashCall, Inc., its subsidiary WS Funding, LLC, affiliate Delbert Services Corporation, and their owner (collectively, “Western Sky”) for violating the Indiana Deceptive Consumer Sales Act and the Indiana Uniform Consumer Credit Code by making and servicing allegedly unlawful loans.
  • According to the AG’s office, Western Sky allegedly made, serviced, and collected on high-cost loans with annual percentage rates exceeding the maximum amount allowed in the state.
  • Under the terms of the settlement, Western Sky must pay $1 million in restitution to Indiana consumers, notify credit reporting agencies to remove credit information regarding these loans from consumers’ credit files, and among other things, end all consumer and small loan lending within the state for two years. This settlement is the latest in a string of actions taken by the CFPB and several AGs against Western Sky and other payday lenders.



Missouri Attorney General Sues Car Manufacturer Over Alleged Violation of State Environmental Law

  • Missouri AG Chris Koster filed a lawsuit against Volkswagen AG, Audi AG, Porsche AG, and their affiliates and American subsidiaries (collectively the “VW Group”) over allegations that it violated the Missouri Air Conservation Law by using software that manipulated data produced during emissions standards testing.
  • According to the AG’s office, the VW Group allegedly sold diesel vehicles equipped with “defeat device” software intended to circumvent applicable emissions standards for certain air pollutants. By doing so, the VW Group allegedly allowed pollutants to be emitted up to forty times the legal limit, posing a risk to citizens’ health and the surrounding environment.
  • The complaint seeks civil penalties against the VW Group. Missouri received consumer restitution and other relief from the VW Group as part of a June 2016 partial multi-state settlement. This suit follows a series of actions taken against the VW Group by numerous AGs.


Labor & Employment

New York Attorney General Settles with Contractors for Allegedly Using Misleading Claims to Win Contract Bids

  • New York AG Eric Schneiderman reached a settlement with Concord Electric Company, Inc.; Manning Squires Hennig Co., Inc.; Hewitt Young Electric, LLC; Michael A. Ferrauilo Plumbing & Heating, Inc.; and Mark Cerrone Inc., (collectively, the “contractors”), to resolve allegations that they violated state law and the Rochester Schools Modernization Program’s Diversity Plan (“RSMP”) by improperly claiming to meet diversity standards to win and retain contracts with the publicly funded program. The RSMP was created to renovate Rochester’s aging city school buildings.
  • According to the AG’s office, the contractors allegedly submitted bid proposals claiming to subcontract to Eligible Business Enterprises (“EBEs”), but failed to subcontract fifteen percent of their work to Minority Business Enterprises and five percent of their work to Women Business Enterprises, as required under the RSMP. Instead, the contractors used “labor pass-throughs” by hiring non-EBEs to complete work while submitting paperwork and payments through EBEs to create an appearance of EBE-provided labor.
  • Under the terms of the settlement, the contractors must collectively pay $825,000 to the state, and among other things, undergo compliance monitoring, remediation, and training.



Attorneys General and Federal Government Settle with Nursing Home Pharmacy Over Kickback Allegations

  • Six AGs (as of the time of this writing), plus the U.S. Department of Justice ("DOJ"), the U.S. Department of Health and Human Services’ Office of Inspector General (“OIG”), and other federal agencies announced a settlement with nursing home pharmacy Omnicare, Inc., to resolve allegations that the company violated the False Claims Act and state and federal anti-kickback statutes by participating in a kickback scheme with Abbott Laboratories to promote prescriptions of anti-epileptic drug Depakote for nursing home patients covered by Medicare, Medicaid, and other federal healthcare programs.
  • According to New York AG Eric Schneiderman, between 2001 and 2008, Omnicare, which provides nursing homes with consultant pharmacists to review residents’ medical charts and provides recommendations about drugs that should be prescribed, allegedly received kickbacks from Abbott under the guise of grants, educational funding, meetings in Florida, and tickets to sporting events to promote the drug.
  • Under the terms of the settlement, Omnicare will pay approximately $20.3 million to the federal government and $7.8 million to cover Medicaid program claims by states participating in the settlement.


State v. Federal

21 Attorneys General File for Injunction Against DOL Final Overtime Rule

  • 21 AGs, led by Nevada AG Adam Paul Laxalt, filed an Emergency Motion for Preliminary Injunction and a Request for Oral Argument and Expedited Consideration in connection with their challenge of the U.S. Department of Labor’s (“DOL”) final rule regarding overtime pay under the Fair Labor Standard Act. If implemented, the rule would double the minimum salary threshold eligible for overtime and automatically update the threshold every three years.
  • The AGs are seeking a temporary injunction until a hearing on the merits and any other necessary judicial review occurs.
  • As we previously reported, the AGs filed a complaint last month to block implementation of the rule, asserting that it would affect state and private budgets and violate the Administrative Procedures Act.


11 Attorneys General File Amicus Brief Supporting DOL’s Revised Interpretation of Persuader Rule

  • 11 AGs, led by Massachusetts AG Maura Healey, filed an amicus brief supporting the U.S. Department of Labor’s (“DOL”) revised interpretation of the Labor-Management Reporting and Disclosure Act’s Persuader Rule (“Rule”), which expands requirements for employers and consultants to file detailed public reports regarding activities affecting employees’ rights to organize and collectively bargain.
  • Under the DOL’s revised interpretation of the Rule, employers and consultants must file reports to disclose both direct and indirect “persuader activities,” including activities such as speaking directly with workers or less-obvious activities, such as providing scripts for managers and supervisors to use when speaking with employees. The AGs assert that the revised interpretation will increase transparency and allow workers to make informed decisions about unionizing efforts.
  • Although the revised interpretation of the Rule was scheduled to become effective on July 1, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction of the rule in June. As we previously reported, a group of 13 AGs submitted a comment letter to the U.S. Office of Management and Budget (“OMB”) in February 2016 before the DOL’s revised interpretation was issued, arguing it would have a “chilling effect” on a business’s right to counsel, particularly small businesses who are less likely to employ in-house counsel.