United States: State AGs In The News - February 19th, 2015

Last Updated: February 25 2015
Article by Bernard Nash and JB Kelly


Hospital Backs Away From Acquisition After New Massachusetts Attorney General Voices Concern

  • Partners HealthCare System, Inc. decided not to move forward with its proposed acquisition of South Shore Health and Educational Corporation. The parties filed a stipulation of voluntary dismissal with the Suffolk County Superior Court, where a consent judgment detailing the terms and conditions of the merger was pending approval.
  • Partners had reached a preliminary agreement to acquire South Shore with former Massachusetts AG Martha Coakley. After taking office, AG Maura Healey expressed her concerns about the merger and indicated that if the court declined to approve the consent judgment, she would seek to enjoin the merger.
  • AG Healey stated that she "appreciate[d] the thoughtful process that Partners engaged in while making this important decision, and believe[d] it is the right choice for Partners and the Commonwealth..." Partners' planned acquisition of Hallmark Health Corporation remains under consideration.


Judge Grants Preliminary Injunction to Prevent Disclosure of Nonprofit's Donors

  • A federal judge for the Central District of California granted a preliminary injunction preventing California AG Kamala Harris from obtaining a list of donors to the Americans for Prosperity Foundation (AFP), a nonprofit group founded by Charles and David Koch. AFP's lawsuit against AG Harris will now proceed on the merits, and AG Harris has 21 days to file her response to AFP's complaint.
  • The dispute originated when AG Harris informed AFP that in order to comply with the California Supervision of Trustees for Charitable Purposes Act, AFP was required to submit the names and addresses of all individuals who had donated more than $5,000 to the group for tax years 2011 and 2012. AFP resisted and brought this lawsuit seeking permanent injunctive relief, claiming that such information would "hinder citizens' ability to freely and anonymously associate with AFP in violation of the First Amendment" and subject donors to potentially harmful actions by individuals opposed to AFP.
  • AG Harris asserted that acquiring donor information is necessary to ensure that the charity or nonprofit is not being used to evade taxes, or for other fraudulent purposes. AG Harris also indicated that the information would only be used within the AG's office and would remain confidential.

Consumer Financial Protection Bureau

CFPB Takes Action Against Mortgage Companies for Allegedly Deceptive Ads

  • The Consumer Financial Protection Bureau (CFPB) filed suit against All Financial Services, LLC, and settled with Flagship Financial Group, LLC and American Preferred Lending, Inc., over alleged violations of the 2011 Mortgage Acts and Practices Advertising Rule. The Rule prohibits the use of misleading claims in mortgage advertising, including among other things, creating the implication of government affiliation or endorsement of a mortgage product.
  • The CFPB alleged that the mortgage companies mislead consumers through the use of terms like "FHA-insured" or "HUD-approved," or otherwise misrepresented that they were selling mortgage products affiliated with a government entity in the course of conducting direct mail promotion activities.
  • The CFPB's lawsuit against All Financial is pending in U.S. District Court for the District of Maryland. The CFPB entered into administrative consent orders with the other two lenders, requiring Flagship Financial to pay $225,000 in civil penalties, and American Preferred to pay $85,000. In addition, both settling companies must implement compliance monitoring and reporting programs.

Consumer Protection

Ohio Sues Debt-Recovery Company Said to be "Spoofing" as Government

  • Ohio AG Mike DeWine filed a lawsuit against debt collector Nationwide Recovery Group, LLC and its owner Michael McCarthy (Nationwide) for violating the Ohio Consumer Sales Practices Act and the Fair Debt Collection Practices Act.
  • The AG's complaint alleges that Nationwide impersonated local government and law enforcement—including various court clerks, sheriffs, and investigators—in its attempts to collect debts from Ohio consumers. In some cases, Nationwide is alleged to have "spoofed" consumers' caller IDs to display a government phone number and threatened consumers with arrest or legal action if they did not repay the alleged debt immediately.
  • The lawsuit is pending in the Montgomery County Court of Common Pleas, and seeks restitution as well as civil penalties.

Data Privacy

President Obama Issues Executive Order on Private Sector Information Sharing

  • President Obama signed an executive order designed to increase information sharing among private companies, nonprofit organizations and government agencies regarding threats, vulnerabilities, and attacks occurring over the internet.
  • The Order specifically directs the Department of Homeland Security to foster the creation of Information Sharing and Analysis Organizations (ISAOs). It also seeks to establish mechanisms that maintain and improve the functions of ISAOs and facilitate information dissemination and private sector partnership with the federal government—specifically through the National Cybersecurity and Communications Integration Center.

Indiana Attorney General Proposes Stronger Data Privacy Legislation

  • Data privacy legislation proposed by Indiana AG Greg Zoeller passed a key hurdle as it was approved by the Indiana Senate Committee on Homeland Security and Transportation and will now be considered by the entire Senate.
  • Indiana Senate Bill 413 would expand data breach notification obligations to breaches involving non-computerized data, and would apply to data collectors and users. The current law applies only to data owners.
  • The bill would also require companies to employ reasonable procedures to ensure that no personal information is retained "beyond what is necessary for business purposes or compliance with applicable law." It would also require online entities that collect personal or financial information from Indiana residents to conspicuously post their privacy policies, identifying the types of personal information collected from site visitors, and to whom the information is shared or sold.


Missouri Collects $43.9 Million for Environmental Remediation in National Settlement

  • Missouri AG Chris Koster announced that the state will receive $43.9 million from Anadarko Petroleum Corporation as part of a nationwide $5.15 billion settlement regarding the 2006 acquisition of Kerr-McGee Corporation.
  • The environmental claims settled by Anadarko stem from the 2009 bankruptcy of Tronox Ltd. Tronox's creditors together with the U.S. Department of Justice claimed that Kerr-McGee fraudulently saddled Tronox with most of its environmental liabilities and then divested the company to make Kerr-McGee a more attractive acquisition for Anadarko.
  • The majority of Missouri's portion of the settlement—$38.2 million—will go toward remediating two sites formerly owned by Kerr-McGee, and used for creosote wood treatment. The remaining $5.7 million will be applied to the state's Natural Resource Damages program to remediate contaminated sites for public use.

States vs Federal Government

Round One Goes to Texas in Lawsuit Challenging President's Executive Action on Immigration

  • Andrew Hanen, a federal judge for the Southern District of Texas, ruled in favor of Texas and 25 other state plaintiffs, enjoining the implementation of certain aspects of President Obama's executive action on immigration. The U.S. Department of Justice has indicated it will appeal the decision.
  • Judge Hanen's decision turned on his interpretation of the requirements of the Administrative Procedure Act (APA). Judge Hanen found that the proposed executive action, effectuated through changes in Department of Homeland Security operations, created a "substantive change to immigration policy" and thus was properly classified as a rule or regulation that must comply with the APA's requirement of being first published in the Federal Register for a period of notice and comment.
  • Texas AG Ken Paxton, who is lead plaintiff along with 25 other states, called the decision "a victory for the rule of law in America." In contrast, Washington AG Bob Ferguson, who led a group of AGs from twelve states and the District of Columbia in filing an amici brief in support of the President's actions, indicated that this ruling was only the beginning.

Eleven Attorneys General Argue Mississippi Has Authority to Investigate Google

  • Eleven AGs, led by Kentucky AG Jack Conway, filed an amici brief in federal court in support of Mississippi AG Jim Hood's attempt to investigate Google, Inc. for alleged violations of the Mississippi Consumer Protection Act through the issuance of an administrative subpoena. Kentucky AG Jack Conway was lead AG on the brief.
  • The subpoena demanded that Google produce information related to AG Hood's allegations that the company does not take appropriate measures to limit illegal activity on the internet, and derives revenue from such activities, including the exchange of pirated materials and the promotion of illegal drugs. Google objected to the subpoena and filed a lawsuit in federal court seeking an injunction to block the subpoena and the investigation.
  • Google argues that the 1996 Communications Decency Act shields online companies like Google from liability arising out of materials posted by third parties, essentially providing immunity from the AG's investigation. In their brief, the eleven amici AGs respond that even if Google is ultimately immune, that would be a defense to a lawsuit, and not to an AG investigation. Moreover, the AGs argue that the proper response when objecting to an administrative subpoena is through the state court system, not a federal lawsuit.
  • The case is Google, Inc. v. Hood, 3:14-CV-00981. The parties are scheduled to argue their positions on AG Hood's Motion to Dismiss on February 20 in front of Judge Henry T. Wingate for the Southern District of Mississippi.

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