United States: State AGs In The News 7 Aug 2014

Hot News

Navigating State AG Subpoenas: A Map

  • Dickstein Shapiro State AG Practice Partner Milton A. Marquis and Counsel Ann-Marie Luciano published an article in the Summer 2014 issue of the American Bar Association's State and Local Law News outlining strategies for handling a subpoena from a State Attorney General.
  • The article maps out the key areas every business should explore when navigating an AG subpoena and civil investigatory process to ensure efficiency and limit exposure.
  • To read more, please see the full article.

Recent NLRB Directive Against McDonald's Provides Fuel for Active Attorneys General

  • The general counsel of the National Labor Relations Board (NLRB) authorized 43 complaints of unfair labor practices brought by McDonald's franchise workers to proceed against the franchisor, McDonald's USA LLC.
  • Allowing the workers' cases to proceed against McDonald's is not only unprecedented, but could have far-reaching implications for the entire franchise industry, including other restaurants, hotels, car and auto services, and financial services, among other businesses.
  • By increasing corporate franchisors' potential liability, the NLRB's directive, if upheld, could overturn decades of established franchise law and jeopardize the viability of the franchise business model. To learn more, please read our blog post.

Troll Tamers: State Attorneys General's Role in the Patent Reform Debate

  • Dickstein Shapiro State AG Practice Partner Bernie Nash and Associate Christopher Allen discuss non-practicing entities (NPEs), also known as patent trolls, in their article published on July 31 in the Association of Corporate Counsel's CLO Executive Bulletin.
  • Over the past two years, State AG offices have found themselves central to dealing with allegedly frivolous patent infringement claims that threaten litigation from NPEs. As Congressional reform efforts have stalled, AGs will likely continue to lead in this area as the debate continues about not only stopping patent trolls, but also how to balance innovation with intellectual property rights and economic growth.
  • To read more, please see the full article.

2014 Election

Kansas Primary Election Results

  • Incumbent AG Derek Schmidt (R) and A.J. Kotich (D) received their respective party's nomination after both ran unopposed in the primary.

Antitrust

Proposed Apple E-Book Settlement Preliminarily Approved by Court

  • The court preliminarily approved the proposed settlement in the Apple e-book case. The case is an antitrust class action lawsuit brought against Apple Inc. by consumers and 33 AGs alleging that it conspired with publishers to fix prices.
  • As we previously blogged, the settlement proposes that Apple pay up to $450 million. The settlement is still contingent on the outcome of Apple's pending appeal of a 2013 ruling finding that Apple violated antitrust laws. Pursuant to the agreement, if the appeals court vacates the verdict or finds that Apple did not violate antitrust laws, the amount that Apple pays under the settlement could be reduced to a lesser amount or to nothing.
  • A final fairness hearing is set for November 21.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Releases Report on Bank Overdraft Fees

  • The Consumer Financial Protection Bureau (CFPB) released a report about overdraft fees and services for bank debit cards and ATM transactions. The CFPB asserts that overdraft practices continue to have an ongoing impact on consumers.
  • According to the report, the majority of debit card overdraft fees are incurred on transactions of $24 or less and  the majority of overdrafts are repaid within three days. The CFPB calculated that when analyzed in lending terms, these numbers equate to a loan with a 17,000 percent annual percentage rate.
  • In remarks regarding the report, the CFPB Director stated that banks should not be precluded from offering overdraft coverage. The CFPB Director proposed further examination of the issue as the next step in reducing any alleged consumer harm.

Consumer Protection

Arizona Attorney General Issues Opinion That State Luxury Taxes and Smoking Prohibitions Do Not Apply to E-Cigarettes

  • In response to a question from State Senator Steven Yarbrough, Arizona AG Thomas Horne issued a formal opinion that state tobacco luxury tax and smoking prohibition laws do not apply to liquid nicotine vapor products, commonly known as electronic cigarettes or e-cigarettes.
  • According to the opinion, the state tobacco luxury tax applies only to defined categories of tobacco products. The AG stated that e-cigarettes do not fall into any of these defined categories because they do not contain any tobacco. The AG acknowledged that Minnesota applies tobacco luxury tax to e-cigarettes, the Minnesota statute applies to tobacco products and products "derived from tobacco," while Arizona's statute does not include the "derived from" language or terms broad enough to apply to e-cigarettes.
  • The AG also interpreted the state smoking prohibitions as only applying to "lighted tobacco product[s]." The AG stated that since e-cigarettes are neither lit nor tobacco products for purposes of the statute, the smoking prohibitions do not apply. The AG also stated that e-cigarettes do not violate the purpose of the statute, which is to protect people from the alleged health risks associated with secondhand smoke.

Thirteen Attorneys General and the CFPB Settle With Military Consumer Lender

  • Thirteen AGs and the CFPB, led by New York AG Eric Schneiderman, settled with Colfax Capital Corporation (formerly known as Rome Finance Co., Inc.); its subsidiary, Culver Capital, LLC (formerly known as Rome Finance LLC); and the companies' owners (collectively, Rome Finance).
  • Rome Finance allegedly financed consumer debts to military servicemembers. The AGs and the CFPB alleged multiple violations of state and federal law, including failure to accurately disclose finance charges and interest rates; failure to provide required periodic disclosures; violations of state and federal laws governing unfair, deceptive, or abusive acts and practices; and violation of the Military Lending Act for excessive interest, onerous provisions, and for requiring allotment payment backed by access to a bank account.
  • The settlement requires liquidation of the companies, provides almost $92 million in debt relief to affected servicemembers, reports debt as paid to consumer finance reporting agencies, vacates any related judgment, and bans the companies and owners from consumer lending.
  • In addition to the CFPB and the New York AG, AGs from the following states participated in the settlement: Colorado, Delaware, Florida, Georgia, Indiana, Iowa, Kentucky, Massachusetts, Michigan, North Carolina, Tennessee, and Vermont.

Hawaii Attorney General Reaches Settlement for $11.3 Million to Resolve Allegations of Deceptive Credit Card Marketing Practices

  • Hawaii AG David Louie settled with Bank of America, JP Morgan Chase, Discover Financial Services, and Citibank for $11.3 million to resolve allegations that they engaged in deceptive marketing practices related to credit card payment protection plans in violation of state law.
  • The AG alleged that while selling credit card payment protection plans, the companies provided misleading information, enrolled customers without their consent, distorted plan benefits, billed for services that were not provided, unfairly charged customers interest and fees, and denied plan benefits to eligible participants.
  • The settlement proceeds will go to a state fund. According to the AG, federal enforcement actions by the CFPB and U.S. Office of the Comptroller of the Currency, and private class action lawsuits, have sought and are seeking restitution for consumers.

Energy

North Carolina Attorney General Sends Cease and Desist Notice to Company Seeking "Fracking" Rights

  • North Carolina AG Roy Cooper sent a cease and desist notice to Crimson Holdings requesting that it stop soliciting leases from state landowners for "fracking," or hydraulic fracturing. The notice comes in advance of the expected legalization of fracking that is anticipated for next year.
  • The AG alleges that the company's leases violate state law because they lack cancellation rights and appropriate disclosures and are for terms that are longer than the state limit of 10 years. The AG also alleges that the company's solicitations are illegal because its land agent is not registered in the state.
  • The AG demands that the company stop doing business in the state, cancel any signed leases, and supply the AG's office with the names of all landowners who sold fracking rights to the company.

Environment

Twelve Attorneys General Petition DC Circuit to Review an EPA Settlement Agreement to Compel Withdrawal of a Proposed Regulation

  • Twelve AGs, led by West Virginia AG Patrick Morrisey, petitioned the U.S. Court of Appeals for the DC Circuit for review of a 2011 settlement agreement, in which the U.S. Environmental Protection Agency (EPA) committed to proposing and finalizing a rule that required states to regulate existing coal-fired power plants under the Clean Air Act (CAA).
  • The AGs allege that the agreement is unlawful because coal-fired power plants are already regulated under a separate section of the CAA and the law prohibits double regulation of these plants.
  • The petition for review requests that the court find that the settlement agreement is unlawful to the extent that it commits the EPA to proposing or finalizing a coal-fired power plant rule, to enjoin the EPA from complying with the settlement by continuing the ongoing comment period or finalizing its proposed rule, and to vacate the relevant parts of the settlement agreement.

Financial Industry

California Attorney General May Sue Bank for Alleged Misrepresentations Regarding Securities and Investment Vehicles

  • According to a regulatory filing and news reports, California AG Kamala Harris may file a lawsuit against Morgan Stanley for allegedly making misrepresentations about residential mortgage-backed securities and structured investment vehicles (SIV). In addition, the SIV Cheyne Finance LLC allegedly issued securities marketed to the California Public Employees Retirement System before going bankrupt in 2007.
  • According to one news report, the state retirement system purchased $1.3 billion worth of the SIV. The regulatory filing states that the AG's office has made preliminary conclusions that Morgan Stanley violated state law and that the AG may seek injunctive relief, treble damages, and penalties.

New York Attorney General Allegedly Expands "Dark Pool" Probe to Two More Banks

  • According to news reports, New York Attorney General Eric Schneiderman expanded his probe of "dark pools," which are privately owned and operated trading exchanges, to include the dark pools run by Goldman Sachs and Morgan Stanley.
  • We previously blogged about a lawsuit that AG Schneiderman brought against Barclay's Capital Inc. and Barclays PLC alleging wrongful practices related to the operation of its dark pool. Barclays has denied the charges.

Health Care

West Virginia Attorney General Sues U.S. Department of Health and Human Services for Allegedly Not Enforcing the Affordable Care Act

  • West Virginia AG Patrick Morrisey sued the U.S. Department of Health and Human Services (HHS) in the U.S. District Court for the District of Columbia. The lawsuit alleges that the President and HHS unlawfully suspended enforcement of Affordable Care Act (ACA) requirements for existing health care policies and shifted the burden and responsibility of cancellation or approval of individual health plans under the ACA to the states.
  • In the complaint, AG Morrisey claims violations of the Affordable Care and Administrative Procedure Acts, unlawful delegation of executive and legislative responsibility to the states, and violation of state sovereignty under the U.S. Constitution.
  • The AG requests declaratory relief, remand of the case to the U.S. Department of Health and Human Services "to permit the Administration promptly to work with Congress to address the fact that the ACA rendered millions of Americans' health insurance plans unlawful," costs, and fees.

State AGs in the News

Florida Attorney General Launches Mobile App

  • Florida AG Pam Bondi launched an application, or "app," for mobile devices designed to allow consumers to file complaints and gain easy mobile access to news, announcements, and other information.
  • The app provides information about the AG and her office, news releases, the AG's weekly briefing, and an online form to directly file a Medicaid Fraud Control Unit complaint or other complaint.
  • "By launching this Attorney General's Office app, we are bringing key services right to Floridians' smart phones and devices," stated AG Bondi. "It is our hope that by making interacting with my office more convenient, we can enhance the services we provide to all Floridians."

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