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

Last Updated: March 14 2014
Article by Bernard Nash

2014 Election

District of Columbia Dismisses Lawsuit Seeking to Place Attorney General on April Ballots 

  • The District of Columbia Superior Court granted a motion to dismiss in Paul Zukerberg v. District of Columbia Board of Elections and Ethics, et al., 2103 CA 8004 (D.C. Super. Ct. Feb. 26, 2014).
  • Zukerberg, a potential candidate for Attorney General, alleged that the D.C. Council violated the D.C. Charter by passing campaign procedure legislation providing that the election for the first AG shall not be before January 1, 2018. The D.C. Charter reads, "[t]he first election for the position of Attorney General shall be after January 1, 2014." The Superior Court dismissed the suit, holding that based on the ordinary meaning of the words the language does not conflict.
  • Zukerberg has appealed the decision to the D.C. Court of Appeals, which recently upheld the Superior Court's decision to deny Zukerberg's request for an injunction. The Court of Appeals stated that the Superior Court had "considered the appropriate factors."


Thirty-Four Attorneys General Settle Multistate DRAM Price-Fixing Case for $310 Million

  • Thirty-four AGs settled a price-fixing case against 12 companies that allegedly conspired to fix prices for Dynamic Random Memory Access (DRAM). As part of the settlement, a $310 million dollar fund was established to pay claims to consumers.
  • The lawsuits alleged that these companies fixed the prices of DRAM between 1998 and 2002 resulting in overcharges to people and businesses that bought DRAM or devices containing DRAM.
  • The U.S. District Court for the Northern District of California preliminarily approved the proposed settlements pending a fairness hearing scheduled for June. In the meantime, consumers are being notified and may file claims.

Consumer Financial Protection Bureau/For-Profit Colleges

CFPB Sues For-Profit College Chain for Student Loan Practices

  • The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against ITT Educational Services, Inc., a for-profit college chain, for its alleged predatory student lending practices. The lawsuit is CFPB's first public enforcement action against a company in the for-profit college industry.
  • The complaint alleges violations of the Consumer Financial Protection Act and the Truth in Lending Act. "We believe that ITT used high-pressure tactics to push many students into expensive private student loans that were likely to end in default," according to CFPB Director Richard Cordray. The complaint states that ITT itself had projected that more than 60 percent of the students who had received private loans would default.
  • A broader investigation of student-lending practices seems to be underway. Recently, Discover Bank, a subsidiary of Discover Financial Services, disclosed in its annual filing that CFPB issued a civil investigative demand seeking documents and information regarding its student loan servicing practices. According to the filing, if CFPB brings an enforcement action, it could include demands for monetary penalties, changes to business practices, and customer restitution.
  • Illinois AG Lisa Madigan also recently confirmed a multistate investigation of student lending practices. The investigation focuses on debt collection and loan servicing practices. According to the AG's office, "We're looking into the increasing reports of abusive servicing practices involving customers who have taken on considerable student loan debts."

Consumer Protection

Michigan Attorney General Settles Claims With Fundraiser for Alleged Deceptive Practices

  • Michigan AG Bill Schuette settled with Associated Community Services (ACS) for $45,000 related to allegations that it misled senior citizens during fundraising calls to convince them to provide credit card information.
  • ACS allegedly used a telemarketing script to mislead donors who were uncertain about providing credit card information to believe that the Attorney General's office had approved or endorsed its credit card payment systems.
  • As part of the settlement, ACS must also revise its script for future solicitations. "Michigan law requires honesty of our professional fundraisers. We will not tolerate those that abuse the name of this office to deceive donors," stated AG Schuette.

Data Privacy

California Attorney General Releases Cybersecurity Guide for Small Businesses

  • California AG Kamala Harris issued recommendations to California small businesses to help protect against and respond to the increasing threat of malware, data breaches, and other cyber risks.
  • The recommendations include having businesses implement an incident response plan and review data that they store or share with third parties, with the goal of eliminating what is not necessary and encrypting any remaining, necessary data.
  • "Technology has created new opportunities and new risks for California businesses, including cyber attacks. This guide offers specific, straightforward recommendations to help businesses continue to thrive by reducing cybersecurity risks to employees and customers," stated AG Harris.


Massachusetts Attorney General Settles With Shell Oil for $4 Million for Hazardous Cleanup Funds Fraud Allegations

  • Massachusetts AG Martha Coakley settled with Shell Oil Company for $4 million to resolve allegations that the company falsely received reimbursement payments from a state fund for hazardous waste cleanup.
  • The settlement resolved claims similar to those settled by AG Coakley with Sunoco and those involved in a lawsuit brought by AG Coakley against Hess. In those matters, the companies allegedly sought reimbursement from the state fund for claims that they also had submitted to their private insurers related to their cleanup of leaks from underground fuel storage tanks.
  • "This program exists to help station operators clean up harm done to the environment, not for big oil companies to profit by double dipping," commented AG Coakley.

Financial Industry

New York Attorney General Announces Agreements With Wall Street Firms to Stop Cooperation With Analyst Surveys

  • New York AG Eric Schneiderman, following a previously reported agreement with the world's largest asset manager, BlackRock, to end its analyst survey program, has entered into interim agreements with 18 financial firms to discontinue or continue refraining from cooperating with analyst surveys. The analyst survey program allegedly captured non-public industry-leading analyst information on companies that could be used for trading before that information hit the market.
  • "At my request, these firms have agreed to stop a practice that can offer an advantage to powerful clients at the expense of others. Our markets will only be fair and healthy if everyone plays by the same rules," said AG Schneiderman.


Massachusetts Attorney General Testifies in Support of Flood Insurance Legislation

  • Massachusetts AG Martha Coakley testified in front of the state Joint Committee on Financial Services in support of proposed flood insurance legislation that would reduce flood insurance costs for homeowners by tying the amount of insurance to mortgage balances.
  • The proposed legislation, Bill H. 3783, titled An Act Relative to Flood Insurance, filed by AG Coakley and Speaker Robert DeLeo, would prohibit creditors from requiring homeowners to purchase flood insurance in an amount that exceeds the outstanding balance of their mortgage, requires coverage for contents, or includes a deductible of less than $5,000.
  • AG Coakley was concerned that new flood zone maps released by the Federal Emergency Management Agency would increase insurance rates. "We believe that dramatically increased flood insurance rates will tip the balance for many homeowners who weathered the economic downturn, but are still feeling the residual effects of the housing crisis. Without this help, we are gravely concerned that many additional homeowners will face foreclosure," said AG Coakley.

Intellectual Property

Oregon Enacts Anti-"Patent Troll" Legislation

  • Oregon, with the support of AG Ellen Rosenblum, passed Senate Bill 1540, sponsored by Senator Jackie Winters, which makes "patent trolling" a violation of the state's Unlawful Trade Practice Act.
  • The law allows an enforcement action against those who make a demand for patent infringement in bad faith. The law includes a list of conditions for a court to consider in determining whether the demand was made in bad faith, including whether:
    • The demand requires a response or payment within an "unreasonably short" time;
    • The demand provides the patent number, a statement of facts, or current contact information for the patentee, assignee, or licensee; and
    • The person making the demand knew or should have known that the demand was without merit or was deceptive.
  • Oregon is the second state to pass this type of legislation. Vermont, with the support of AG Bill Sorrell, passed a similar law in 2013. Nebraska, with the support of AG Jon Bruning, is currently considering a similar bill.

Pharmaceuticals/ Medicaid Fraud/ False Claims Act

Several Attorneys General and the Federal Government Settle With Omnicare for $4 Million

  • Several AGs and the federal government settled with Omnicare, Inc. for $4 million to resolve state and federal Medicaid fraud and false claim allegations related to the prescription drug Aranesp.
  • The settlement stems from a qui tam action that was filed in the U.S. District Court for the District of South Carolina.

State AGs in the News

Massachusetts Attorney General Encourages Stronger Standards for MBTA Retirement Fund Board

  • Massachusetts AG Martha Coakley sent a letter to the Massachusetts Bay Transportation Authority (MBTA) Retirement Fund Board asking it to increase transparency by adopting standards for conflicts of interest, financial disclosures, and public records. The letter cites to a recent loss of $25 million in investment funds and the board's alleged failure to disclose the loss in a timely manner as a catalyst for this change.
  • The MBTA Retirement Fund Board operates as a private trust, but because MBTA receives a significant portion of its revenue from fares paid by transit riders and dedicated sales tax revenue, AG Coakley argues that the same ethical standards applied to other public institutions should apply to the board.
  • AG Coakley recommends a cooling-off period for former employees, greater disclosure of employees and former employees' financial interests, and application of public records disclosure laws to the board. "We feel strongly that taking action to increase transparency is in the best interest of current and retired MBTA employees, as well as the public," states AG Coakley.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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