United States: State AGs In The News - July 24th, 2014

Last Updated: July 30 2014
Article by Bernard Nash and JB Kelly

Hot News

Conference of Western Attorneys General (CWAG) Annual Meeting

  • CWAG held its annual meeting this week in Park City, Utah, which was attended by several members of Dickstein Shapiro's State Attorneys General practice. More than two dozen AGs gathered to deliberate on a variety of timely and important issues.
  • The meeting included panel discussions on patent reform, prescription drug and overdose issues, privacy and data breaches, regulation of e-cigarettes, and emerging issues related to the Internet.

Attorneys General Discuss E-Cigarettes

  • At the CWAG annual meeting, the AGs discussed e-cigarettes and whether they must regulate further in this area, including increasing advertising regulation.
  • Kentucky Chief Deputy AG Sean Riley expressed concern about the potential use of e-cigarettes by school-age children and whether e-cigarettes might be acting as a gateway to smoking rather than a way to quit. "We are at the very beginning stages of a new sort of revolutionary product here," stated the Chief Deputy AG. "We need to be prepared, to work individually and collectively, to use our consumer protection acts to raise the floor of conduct we are seeing."
  • Iowa AG Tom Miller warned his colleagues to tread carefully with new regulation of e-cigarettes. "The price of getting it wrong either way is high," said AG Miller. He argued that if e-cigarettes are not properly regulated, use among youths might increase, but if regulation is too intense, the effectiveness of e-cigarettes as a way to quit tobacco may be compromised.

Antitrust

Details of Proposed Settlement of Apple E-Book Antitrust Lawsuit Released

  • Several AGs announced further details about the proposed settlement of the antitrust class action lawsuit brought against Apple Inc. by 33 AGs and consumers alleging that it conspired with publishers to fix prices. We blogged about the preliminary settlement when it was first announced in June, before the release of any details.
  • The settlement is contingent on court approval and the outcome of Apple's pending appeal of a 2013 ruling finding that Apple violated antitrust laws. According to a recently filed motion to approve the settlement, Apple will pay $400 million to consumers and $50 million to the states if the court's ruling is affirmed on appeal. If the court vacates the verdict and orders a retrial on liability, Apple will pay $50 million to consumers and $20 million to the states. If the court finds that Apple did not violate antitrust laws, Apple will pay nothing.
  • The settlement avoids a jury trial on damages that was scheduled for August. Apple denies any wrongdoing.

Charities

Arkansas Attorney General Settles With Police Defense Fund Charity

  • Arkansas AG Dustin McDaniel sued the National Police Defense Foundation (NPDF), and USA Publishing Group Inc. and its owners (collectively, USA Publishing), alleging that the organizations misled state donors into believing that their contributions would benefit state emergency responders.
  • The AG alleged that NPDF and USA Publishing (retained by NPDF to solicit donations) raised thousands of dollars in the state, but that they only used a few hundred dollars of that amount for charitable purposes. The AG also alleged that the defendants often misrepresented themselves as first responders and misled consumers into believing that the charity was based in the state when it is not.
  • The AG settled with NPDF through a consent agreement filed with the court. Pursuant to the agreement, NPDF agreed to pay $120,000 in consumer restitution and to not engage in professional fundraising activities in the state. NPDF denied the allegations. The lawsuit against USA Publishing is still pending.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Issues Report on Consumer Complaints

  • The Consumer Financial Protection Bureau (CFPB) issued a "snapshot" report on consumer complaints from July 2011 through June 2014.
  • According to the report, the CFPB handled more than 395,000 consumer complaints during that period. The majority of the complaints related to mortgage products (34%). The remaining complaints related to debt collection (20%), credit cards (14%), credit reporting (12%), bank accounts and services (12%), consumer loans (3%), student loans (3%), payday loans (1%), money transfers (0.5%), and other products (0.5%).
  • The CFPB also recently announced that it will begin accepting consumer complaints regarding prepaid cards, including gift cards, benefit cards, and general purpose reloadable cards. It will also begin accepting consumer complaints regarding additional nonbank products such as debt settlement services, credit repair services, and pawn and title loans.

Consumer Protection

Vermont Attorney General Releases Results of Questionnaire Regarding Genetically Engineered Food Labeling

  • Vermont AG Bill Sorrell released the preliminary results of a questionnaire that solicited public input on genetically engineered food labeling. The AG is in the process of developing rules to implement a new state genetically engineered food labeling law. Act 120 is the first law in the nation that will require the labeling and disclosure of foods produced with genetic engineering. The AG is responsible for promulgating the associated rules and enforcing the law.
  • According to a preliminary report, the majority of respondents favored placing the required disclosure near a product's nutrition facts label or ingredient list in a font size that is equivalent to the words "servings per container" and "calories."
  • Official comments on a proposed draft rule will be solicited later this year. The AG plans to promulgate rules by July 2015 and the rules should go into effect on July 1, 2016.

Illinois and New York Attorneys General Encourage Federal Communications Commission to Strengthen Internet Neutrality Protections

  • Illinois AG Lisa Madigan and New York AG Eric Schneiderman submitted comments to the Federal Communications Commission (FCC) and wrote a letter to its Chairman urging it to strengthen rules to preserve what is known as "net neutrality" – the concept of an open Internet providing equal treatment for all content providers.
  • The AGs argue that net neutrality and nondiscrimination are critical to furthering competition and innovation on the Internet because these protections enable startup businesses to have an equal platform to provide new content to consumers at the same speed as established providers. The AGs also state that without net neutrality, providers could charge for priority treatment or faster access to the Internet.
  • The AGs encouraged the FCC to change its classification of Internet access from an "information service" to a "telecommunications service that provides information" to enable it to apply common carrier obligations to broadband providers. They argued that this would protect net neutrality principles by obligating providers to deliver traffic "indifferently" without compromising their ability to efficiently manage their network operations.
  • "The Internet is the public square of the 21st Century, and the voices of the 'digital haves' will drown out the 'digital have-nots'... In effect, the Information Superhighway will become a toll road. Those who pay will rapidly reach their audiences, while newcomers, startups and others with limited resources will be left behind," the AGs wrote.

Iowa Attorney General Takes Action Against Health Marketing Efficacy Claims

  • Iowa AG Tom Miller asked for an injunction against health supplement company Au Naturale Health Solutions, its chief executive officer, and two employees (collectively, Au Naturale), to halt any sales in the state and force compliance with the AG's consumer fraud investigation.
  • Au Naturale allegedly telemarketed phytoplankton (microscopic underwater organisms) capsules, falsely claiming that the capsules would help or reverse several health conditions or afflictions, including cancer. Au Naturale allegedly had not responded to a civil investigative demand served by the AG.
  • In a similar matter handled by AG Miller, a state court issued an injunction against Americare Inc., doing business as Americare Health, its owner, and two of its telemarketers (collectively, Americare), barring them from telemarketing health- and nutrition-related products in the state, prohibiting them from collecting any payments for past sales, and requiring them to provide refunds.
  • Americare allegedly telemarketed a human growth hormone spray, falsely claiming that the spray was effective against several serious diseases and health conditions, including cancer. According to the U.S. Drug Enforcement Administration, spray forms of human growth hormone are not effective because the hormone molecules are too large to be absorbed across tissue linings.

New York Attorney General Announces $2.2 Million Restitution Fund Related to Alleged Immigration Services Fraud

  • New York AG Eric Schneiderman announced a $2.2 million restitution fund that was created as part of a settlement with two immigration services organizations, the International Immigrants Foundation, Inc., and the International Professional Association, Inc., to resolve allegations that the organizations made fraudulent promises of citizenship while engaging in the unauthorized practice of law.
  • The organizations allegedly misled clients about their legal credentials and their ability to obtain guaranteed immigration results. They also allegedly charged excessive fees that were inconsistent with the charitable purpose for which they were formed.
  • The settlement prohibits the organizations from providing immigration-related legal services.

Florida Attorney General Sues Business Directory Companies

  • Following an investigation with the New York AG's office, Florida AG Pam Bondi and the FTC sued several business directory companies alleging that the companies charged consumers for business directory or advertising services they did not order.
  • The companies sued are Your Yellow Pages, Inc.; Rapid Pages, Inc.; City Pages, Inc.; 7051620 Canada, Inc.; National Business Advertising; National Biz Ads; and Yellow Business Ads.
  • The lawsuit seeks injunctive relief, restitution, civil penalties of $10,000 per violation of the state Unfair and Deceptive Trade Practices Act and $15,000 for each violation involving a senior citizen, costs, and fees.

Data Privacy

Illinois Attorney General Calls for Federal Data Breach Law

Employment

Massachusetts Attorney General Settles Alleged Violations of State Prevailing Wage Laws

  • Following an investigation, Massachusetts AG Martha Coakley settled with R&R Window Contractors, Inc., to resolve allegations that it failed to pay the proper prevailing wage and submit accurate payroll records.
  • The AG alleges that R&R did not properly pay workers performing carpentry and glazier work. Employees classified and paid as "Carpenter-Tenders" were allegedly performing work in other trade classifications that required a higher prevailing wage rate.
  • Pursuant to the settlement, the company agreed to pay more than $109,000 in restitution and penalties.

For-Profit Colleges

New York Attorney General Requests Information From For-Profit College

  • According to a regulatory filing, New York AG Eric Schneiderman has begun an investigation into whether DeVry Educational Group, Inc.'s television advertisements and website marketing violated any federal or state laws prohibiting false advertising or deceptive practices.
  • The filing indicates that DeVry received a letter from the AG requesting information from January 2011 to date. DeVry stated that it intends to fully cooperate with the AG with "a view toward demonstrating the compliant nature of its practices."

Health Care

New York Legislation Proposed in Response to U.S. Supreme Court Hobby Lobby Decision

  • New York AG Eric Schneiderman and State Senate Democratic Conference Leader Andrea Stewart-Cousins announced that they would propose legislation in response to the U.S. Supreme Court's decision in Burwell v. Hobby Lobby Stores, Inc.
  • As we previously blogged, in that case the Court held that as applied to closely held corporations, U.S. Department of Health and Human Services regulations promulgated under the Patient Protection and Affordable Care Act, which imposes a mandate for employers' group health plans to cover contraceptives, violated the Religious Freedom Restoration Act. AG Schneiderman stated that the opinion is misguided and limits women's healthcare choices.
  • In response, the AG and State Senate Democratic Conference Leader will propose the Reproductive Rights Disclosure Act, which would create one notice standard for all employers, require employers to give current employees 90 days notice before changing contraceptive coverage, and require employers to notify prospective employees of the scope of contraceptive coverage that they offer to their employees.
  • The act will also provide civil penalties of up to $5,000 for each violation of the new notice provision.

Mortgages/Foreclosures

Colorado Attorney General Charges Foreclosure Law Firms With Alleged Fraud

  • Colorado AG John Suthers announced the filing of civil law enforcement actions against two foreclosure law firms for alleged fraudulent billing practices, including inflating charges for foreclosure-related services and charging additional costs for already compensated tasks.
  • In separate filings, the AG charged the Castle Law Group, its principals, and affiliated foreclosure-related businesses (collectively, Castle) and Aronowitz & Mecklenburg, its principals, and affiliated foreclosure-related businesses (collectively, Aronowitz) for alleged violations of the Colorado Consumer Protection Act, the Colorado Antitrust Act, and the Colorado Fair Debt Collection Practices Act. The AG simultaneously filed a proposed final consent judgment settling the case against Aronowitz.
  • Pursuant to the settlement, which must be approved by the court, Aronowitz agrees to pay the state $10 million in unjust enrichment, civil penalties, costs, and fees; operate at competitive market rates (with some exception); and have no ownership interest in any law firm or business engaged in foreclosure-related work in the state.
  • According to the AG, investigations of other foreclosure law firms and related businesses are ongoing.

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