United States: State AGs In The News - February 6th, 2014

HOT NEWS

Missouri Attorney General Challenges California Legislation That Allegedly Encroaches on Missouri Sovereignty

• Missouri AG Chris Koster filed a lawsuit in the U.S. District Court for the Eastern District of California arguing that a California farming law violates the Commerce Clause of the U.S. Constitution and infringes on Missouri sovereignty.
• In 2010, the California State Assembly passed new legislation (AB1437) requiring egg producers in other states to comply with Proposition 2—a 2008 California voter-approved ballot initiative that prohibits California farmers from employing certain agricultural production methods, including new regulations on enclosures that house egg-laying hens—in order to continue selling their eggs in California.
• AG Koster argued that "[a]t stake is whether elected officials in one state may regulate the practices of another state's citizens who cannot vote them out of office," which here will allegedly force Missourians to spend approximately $120 million to remodel their cages or potentially face a half-billion egg surplus.

CONSUMER PROTECTION

Florida Attorney General Announces up to $6 Million Settlement With Book Publishers Over Automatic Subscription Renewals

• Florida AG Pam Bondi settled with West Publishing Corporation and Thomson Reuters Tax Accounting Inc. for automatic subscription renewals and automatic product shipments that sent legal books, newsletters, and other publications to customers.
• The settlement resolves allegations that the publishers failed to adequately disclose the terms of the plans and provide consumers with an opportunity to agree to them in violation of Florida's Deceptive and Unfair Trade Practices Act.
• In addition to modifying their business practices, the publishers have agreed to provide up to $6 million in consumer restitution. This is AG Bondi's third settlement with large publishers after an April 2009 settlement with Matthew Bender and Company, Inc., and a February 2013 settlement with CCH.

Maine Attorney General Starts Task Force to Combat Financial Exploitation and Other Crimes Against Elderly Residents

• Maine AG Janet Mills and Legal Services for the Elderly formed a task force to address barriers to the prosecution of financial exploitation and other serious crimes against the elderly.
• AG Mills stated that "we need to encourage older citizens to report crimes and to assure them that their personal and financial security is paramount, that their input is valuable and that the criminal justice system will treat them fairly."
• The task force will address the following primary issues: (1) the barriers to the prosecution of financial exploitation and other serious crimes against the elderly and (2) how to enhance the ability of law enforcement personnel and prosecutors to pursue cases of financial exploitation and other serious crimes against the elderly.

Massachusetts Attorney General Settles With Real Estate Developer for Failing to Deliver Homes

• Massachusetts AG Martha Coakley reached a consent judgment with Michael Intoccia of Foxborro, and his former companies Bella Estates Realty Trust, MTI Realty, Intoccia Builders Corporation and Intoccia Development Corp., for taking large deposits from consumers upon contracting for the construction and sale of new homes, failing to deliver the promised homes by the contractual deadlines and then refusing to return consumer deposits.
• As a precondition of the judgment, Intoccia has settled all consumer claims against him, which have totaled over $525,000 in payments to more than a dozen individuals from whom he took deposits for new homes.
• As part of the settlement, Intoccia also consented to a $100,000 judgment to the Commonwealth, all but $30,000 of which is suspended.

Missouri Attorney General Investigates Complaints Related to Propane Gas Price Spikes

• Missouri AG Chris Koster announced an investigation into the cause of the recent rise in the price of propane after receiving 40 complaints about increased costs and a request from state Senator Mike Parson to conduct an investigation.
• The investigation follows the price increase of propane gas from approximately $1.94 in December 2013 to approximately $5.00 in recent days.
• Other AGs, including Kansas AG Derek Schmidt, Michigan AG Bill Schuette, Ohio AG Mike DeWine, are monitoring complaints related to price-hikes and possible anti-competitive actions related to propane sales.

Missouri Attorney General Settles With Seller of Extended Auto Service Contracts

• Missouri AG Chris Koster announced a settlement with a seller of vehicle extended service contracts resolving allegations that it engaged in unfair consumer sales and insurance practices.
• AG Koster had alleged that Dealer Warranty Services, LLC, also known as Certus and Certus Assurance Group, misled consumers regarding the scope of coverage they were promised during sales calls over the telephone, and further attempted to circumvent Missouri insurance and service contract regulations by disguising the coverage contracts as product warranties for an engine care product provided by the company.
• The settlement requires the company to reform its business practices, pay $60,000 in refunds, penalties, and investigative costs, and halt any attempts to circumvent Missouri insurance and service contract laws.

DATA PRIVACY

California Attorney General Sues Kaiser Foundation Health Plan, Inc. for Delay in Data Breach Notification

• California AG Kamala Harris has filed a consumer protection lawsuit against Kaiser Foundation Health Plan for its alleged delay in notifying residents of a data breach.
• According to the AG, in December 2011, Kaiser learned that an unencrypted hard drive containing personal identifying information of current and former employees and their families accidentally became public, but the company took until March 2012 to notify potentially affected California residents.
• The AG alleged that the delay in providing notice constituted an unreasonable delay in violation of California's consumer protection laws.

ENVIRONMENT

Oklahoma Attorney General Petitions Supreme Court to Review Air Pollution Ruling

• Oklahoma AG Scott Pruitt petitioned the U.S. Supreme Court to review a ruling upholding an EPA air pollution rule on the basis that EPA exceeded its authority and usurped Oklahoma's right to create its own air pollution regulation.
• AG Pruitt filed the case in 2012 after the EPA rejected Oklahoma's plan to address regional haze and instituted a federal plan instead, which the AG claims targets energy generation and will lead to rate increases for consumers.
• The Tenth Circuit ruled in the EPA's favor in 2013 and declined to grant an en banc review; a link to Oklahoma's certiorari petition can be found here.

Illinois Attorney General Obtains Injunction Against Landfill Operator for Release of Noxious Gases

• Illinois AG Lisa Madigan announced that the DeKalb County Circuit Court ordered an injunction requiring the DeKalb County landfill operator, Waste Management of Illinois, Inc., to take extra precautions to prevent the release of noxious gases and to notify the Illinois Environmental Protection Agency before digging into the solid waste at the landfill.
• The lawsuit follows the January 14 noxious release of gas and odors that drifted into a nearby elementary school's ventilation system, which allegedly sickened students and teachers and required 71 people to seek medical treatment at the local hospital for carbon monoxide exposure.
• In addition to the injunction, AG Madigan seeks the statutory maximum penalty of $50,000 per violation and $10,000 for each day each violation continues.

FINANCIAL SERVICES INDUSTRY

Washington Attorney General Recovers $31.3 Million From Lehman Investment Losses

• Washington AG Bob Ferguson announced a $31.3 million settlement with former executives and directors of Lehman Brothers, as well as underwriters for several Lehman offerings and Ernst and Young, Lehman's outside auditor, resolving claims related to bonds purchased by the Washington State Investment Board.
• The state alleged that Lehman failed to disclosure the true value and risk of its mortgage-related investments and engaged in accounting to make the company appear more financially stable than it was prior to its 2008 collapse and bankruptcy.
• Washington had sued after the investment bank's collapse, which the AG claimed caused losses of more than $92 million on Lehman bonds owned by the state.

FOR-PROFIT COLLEGES

Thirteen State Attorneys General Investigate Business Practices of For-Profit Colleges

• For-profit colleges ITT Educations Services Inc., Corinthian Colleges Inc., Career Education Corp. and Education Management Corp. disclosed last week that they received subpoenas or civil investigative demands from thirteen AGs.
• According to the companies' filings with the Securities and Exchange Commission, the inquiries cover student lending, advertising and recruitment, graduate certification and licensing, and graduation and job placement rates, among other matters.
• Participating in the investigation are AGs from Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, Tennessee, and Washington.

HEALTH CARE

Thirty-seven Attorneys General File Opposing SCOTUS Amicus Briefs in Cases Reviewing Religious Exemptions for Contraception Under the Patient Protection and Affordable Care Act's Coverage Mandate

• Thirty-seven Attorneys General have filed amicus briefs in the U.S. Supreme Court seeking to resolve whether for-profit businesses can claim a religious exemption from the Patient Protection and Affordable Care Act's (ACA) mandate that employee health plans cover contraception. Kathleen Sebelius et al. v. Hobby Lobby Stores Inc. et al., No. 13-354.
• Fifteen states and the District of Columbia, led by co-authors California AG Kamala Harris and Massachusetts AG Martha Coakley, submitted a brief asking the Court to overturn the Tenth Circuit's decision that held for-profit businesses can be exempt from the ACA contraception requirement on religious grounds by arguing that, under such a rule, employee health care would turn on a company owner's beliefs.
• Twenty AGs, led by Michigan AG Bill Schuette and Ohio AG Michael DeWine, submitted a brief asking the Court to affirm the Tenth Circuit Hobby Lobby decision.
• Oklahoma AG Scott Pruitt submitted a separate amicus brief on behalf of respondents, who are residents of Oklahoma. The brief asks the Court to affirm the Tenth Circuit decision, stating that the religious freedom of for-profit corporations should be protected under the federal Religious Freedom Restoration Act and the Free Exercise Clause contained in the First Amendment to the U.S. Constitution.

MEDICAID FRAUD

Kentucky Attorney General Reaches $16.5 Million Medicaid False Claims Against Hospital

• Kentucky AG Jack Conway announced a $16.5 False Claims Act settlement with St. Joseph Health System Inc. over allegations that doctors at the hospital fraudulently billed Medicaid and Medicare for procedures.
• The lawsuit, originally brought by three doctors as a qui tam action under the federal False Claims Act, alleged that doctors subjected patients to unnecessary heart procedures, including catheterizations and bypasses, in order to inflate bills paid by the federal and Kentucky governments.
• The settlement resolves allegations as to the hospital, but claims against the physicians remain pending.

Louisiana Supreme Court Reverses $330 Million Judgment Against Janssen, J&J

• The Louisiana Supreme Court reversed a verdict obtained by Louisiana AG Buddy Caldwell against Johnson & Johnson under the state's Medicaid false claims act over the marketing of Risperdal by Janssen, which J&J later acquired.
• A jury found for the state on its claims, filed by Louisiana using outside counsel in 2004 before AG Caldwell took office, that the company misrepresented the potential risks of side-effects of Risperdal and thus caused the state's Medicaid program to pay for drugs that otherwise would not have been prescribed. While the state did not prove actual damages, the judge awarded more than $257 million in penalties, $70 million in attorney's fees, and $3 million in costs.
• The Louisiana Supreme Court reversed the entire verdict and award, holding that the AG failed to prove a causal link between the allegedly misleading marketing statements and a false claim for payment under Medicaid.

MORTGAGES/FORECLOSURES

Indiana Attorney General Sues Foreclosure Consultants for Fraud

• Indiana AG Greg Zoeller filed three lawsuits against foreclosure consultants accused of taking upfront payments from homeowners while failing to render promised services or provide refunds.
• The lawsuits were against (1) Mortgage Auditing Solutions of California for allegedly violating the Credit Services Organization Act, Mortgage Rescue Protection Fraud Act (MRPFA), Deceptive Consumer Sales Act and the Home Loan Practices Act (HLPA), (2) Mortgage Solutions Clearing House, Inc. of Florida for allegedly violating the MRPFA and HLPA and (3) Federal Loan Modification Law Center, LLP, of California for allegedly violating the MRPFA and HLPA.
• AG Zoeller seeks injunctions against the companies, restitution for the victims, civil penalties and investigation costs.

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