Digest 10.25.2018 The State AG Report Weekly Update

Cozen in the News

Cozen O’Connor’s State Attorneys General Practice Issues Alert Regarding IRS Rule Change Affecting Attorney General Settlements

  • State Attorneys General Practice Member Maria Colsey Heard has analyzed a recent amendment to the Internal Revenue Code affecting how government entities—including AGs—report settlement amounts and how businesses submit relevant tax deductions.
  • As described in the article, the amendment will restrict the types of settlement costs that businesses may deduct, and require government entities to report detailed information regarding settlement amounts. These changes have the potential to complicate settlement negotiations between AGs and the targets of their investigations and litigations.
  • The Internal Revenue Service is seeking public comment on the amendment and potential regulations published thereunder, which must be submitted by November 13, 2018.


Arizona Attorney General Sues Dental Supply Company Over Allegedly Anticompetitive and Deceptive Practices

  • Arizona AG Mark Brnovich filed a lawsuit against Benco Dental Supply Company (“Benco”) alleging that Benco took collective, coordinated action with two competitors to force a third competitor—SourceOne Dental—out of the state dental supply market and made misrepresentations regarding SourceOne Dental to manufacturers and dentists in violation of state antitrust and consumer fraud laws.
  • According to the complaint, Benco coordinated with two competitors to boycott the Arizona Dental Association (“AZDA”) after the AZDA partnered with SourceOne Dental to offer lower cost products through an online platform, and knowingly made false statements to dentists and manufacturers that SourceOne Dental was selling gray market products, among other things.
  • The complaint seeks civil penalties under both the antitrust and consumer fraud statutes, a permanent injunction against further anticompetitive or deceptive practices, restitution, disgorgement, and costs and fees.

Bureau of Consumer Financial Protection

BCFP Releases 50 State Report on Consumer Complaint Trends

  • The Bureau of Consumer Financial Protection (“BCFP”) released its “Complaint Snapshot: 50 State Report,” which provides an overview of state-by-state trends in consumer complaints about financial products and services between January 1, 2015 and June 30, 2018.
  • According to the Report, the BCFP received the most complaints from consumers in California, followed by Florida, Texas, New York, and Georgia.
  • The Report indicated that, nationally, consumers filed the most complaints about attempts to collect debt not owed, incorrect information on credit or consumer reports, trouble encountered in the process of making mortgage payments, problems with credit card purchases shown on statements, and issues managing checking or savings accounts.

Consumer Protection

New York Attorney General Reaches Settlement with Eight Manufactured Home Companies Over Alleged Lack of Contractual Protections for Consumers

  • New York AG Barbara Underwood reached a settlement with national manufactured home park companies Garden Homes Management, Inc., Harper Homes, Inc., Hoffman Homes, Inc., Horizon Land Company, JKLM Communities, Inc., Kingsley Management Corporation, Inc., Sun Communities, Inc., and UMH Properties, Inc. (collectively, “park owners”) over allegations that the park owners marketed “rent-to-own” and “lease-option” contracts as home sales and treated the optionees—consumers who agreed to such contracts—as home owners rather than tenants, in violation of state property and lessor and tenant protection laws.
  • According to the AG’s office, the park owners allegedly used rent-to-own contracts that did not guarantee ownership of the home at the end of the rental period yet required the optionees to make non-refundable down payments and pay for repair and maintenance expenses, often leading to default, eviction, or total financial loss for optionees.
  • According to the AG’s office, the park owners have entered into an assurance of voluntary compliance requiring the park owners to allow existing optionees to rescind any such agreement and reimburse any down payment paid, revise rent-to-own contracts to comply with the law going forward, and pay penalties to the state.


New York Attorney General Files Lawsuit Against Oil and Gas Corporation Over Allegedly Deceiving Shareholders on Climate Change

  • New York AG Barbara Underwood filed a lawsuit against Exxon Mobil Corporation (“Exxon”) alleging that Exxon misled investors regarding the risks that climate change regulations posed to its business in violation of state securities and consumer fraud laws.
  • According to the complaint, Exxon allegedly misrepresented to investors that it was accounting for the escalating costs of doing business under increasingly stringent climate change mitigation regulations with “proxy costs,” yet failed to adequately incorporate proxy costs into investment decisions, business planning, and assessing company oil and gas reserves.
  • The complaint seeks injunctive relief, damages, disgorgement, restitution, costs and fees, and a court-ordered review of the economic and financial consequences of Exxon’s failure to apply a proxy cost consistent with its representations.

Labor & Employment

Washington Attorney General Settles with Agricultural Company Over Alleged Sexual Harassment and Gender-Based Discrimination

  • Washington AG Bob Ferguson reached a settlement with agricultural company Horning Brothers, L.L.C. and an individual supervisor (collectively, “Horning Brothers”) to resolve allegations that Horning Brothers employed discriminatory hiring practices, subjected female employees to sexual harassment, and retaliated against employees who complained, in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), as amended, and the Washington Law Against Discrimination.
  • According to the complaint, Horning Brothers allegedly hired only female employees to certain positions and knowingly subjected those employees to unlawful discrimination on the basis of sex by their direct supervisor, including quid pro quo sexual harassment and unwelcome sexual conduct giving rise to a hostile work environment, and took adverse employment actions against employees who complained.
  • Under the terms of the consent decree, Horning Brothers must pay $525,000 to the state for compensation of the affected employees and fees and costs; implement employee complaint procedures for reporting harassment, discrimination, and retaliation; establish investigative procedures to address such complaints; and distribute such policies to employees in both English and Spanish, among other things.

Massachusetts Attorney General Reaches Settlement with Home Care Company Over Alleged Failure to Pay Employees for Travel Time

  • Massachusetts AG Maura Healey reached a settlement with home care company Ace Medical Services Inc. and its owners (collectively, “AMS”) for allegedly failing to pay employees for travel time in violation of state wage and labor laws.
  • According to the AG’s office, AMS allegedly failed to pay employees for all hours worked, including time spent traveling between patient visits, and failed to track all hours worked and wages paid.
  • According to the AG’s office, under the terms of the settlement, AMS will pay over $272,000 in penalties and restitution to 240 current and former employees.


Wyoming Attorney General Files Lawsuit Against Opioid Manufacturers for Allegedly Misrepresenting Risks of Prescription Opioids

  • Wyoming AG Peter Michael filed a lawsuit against opioid manufacturers Purdue Pharma L.P., Purdue Pharma Inc., and The Purdue Frederick Company (collectively, “Purdue Pharma”) for allegedly violating the Wyoming Consumer Protection Act and the state Medicaid False Claims Act by allegedly engaging in deceptive marketing and misrepresenting the risks of prescription opioid use.
  • According to the complaint, Purdue Pharma allegedly used deceptive promotional campaigns and aggressive sales tactics to convince healthcare providers to prescribe opioids at higher doses and for longer periods of time than medically necessary and these tactics caused submission of false or fraudulent claims for payment or approval from Medicaid, among other things.
  • The complaint seeks declaratory and injunctive relief, civil penalties, treble damages, costs, and attorneys’ fees, among other things.
  • As previously reported, a number of AGs have recently filed similar lawsuits against Purdue Pharma, including the AGs of Oregon, Arizona, Colorado, Vermont, New York, and Utah.

State v. Federal

3 Republican AGs Urge D.C. Circuit Not to Review Federal Communication Commission’s Repeal of Net Neutrality

  • Three Republican AGs, led by Texas AG Ken Paxton, filed an amici curiae brief in the U.S. Court of Appeals for the D.C. Circuit in the matter of Mozilla Corporation, et al. v. Federal Communications Commission, No. 18-1051, urging the court to deny a petition for review of the Federal Communications Commission’s (“FCC”) 2017 order repealing its 2015 net neutrality rule—a rule intended to prevent internet service providers from imposing content-based restrictions or pricing on internet traffic.
  • According to the AGs’ brief, the FCC has the authority to reverse prior policy determinations, and the order satisfies the procedural requirements of the Administrative Procedure Act.
  • As previously reported, a coalition of 22 Democratic AGs filed the petition for review of the order in January, and a coalition of 23 Democratic AGs filed a brief in support of the petition in August.