United States: State AGs In The News - April 16th, 2015

Last Updated: April 21 2015
Article by Bernard Nash and JB Kelly

Texas Attorney General Settles With Alleged Anticompetitive Dental Supplier

  • Texas AG Ken Paxton filed a lawsuit against Benco Dental Supply Company (Benco) alleging that it engaged in anticompetitive conduct to prevent lower-cost dental suppliers from entering the market and simultaneously entered into a consent order with Benco settling the claims.
  • The petition, which followed a year-long investigation, alleges that Benco shared information with established participants in the dental supply market and colluded with distributors and manufacturers to discourage them from forming working relationships with new market entrants. The new market entrants sought to bypass traditional distributors like Benco, and sell products without sales representatives through an online platform developed by the Texas Dental Association.
  • In the consent order, Benco denied the AG's allegations and did not admit liability; however, it agreed to pay $300,000 to the State for investigative costs and attorney's fees. In addition, the consent order prohibits Benco from participating in agreements, or coercing other suppliers, to limit supply of dental supplies to any third party. It also precludes Benco from soliciting information from dental supply manufacturers and distributors related to their sales to third parties. Benco also agreed to provide the State with records of all communications between Benco officers and third parties regarding sales for a period of three years.

Consumer Financial Protection Bureau

CFPB Settles With Lender Over Use of Government Logos

  • The Consumer Financial Protection Bureau (CFPB) settled with RMK Financial Corporation, resolving allegations that the mortgage lender engaged in deceptive mortgage advertising practices in violation of the Consumer Financial Protection Act, the Mortgage Acts and Practices Rules, and the Truth in Lending Act (TILA).
  • The CFPB alleged that RMK used the names and logos of the Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA) in print advertisements sent to more than 100,000 consumers—including thousands of U.S. military service members and veterans—across several states. The CFPB claimed that RMK used the logos to falsely and deceptively imply that the RMK and its mortgage products were sent, endorsed, or sponsored by the VA or FHA. In addition, the advertisements failed to adequately disclose certain information required under TILA, such as the type of mortgage product offered and whether the interest rates were variable.
  • The consent order requires RMK to pay $250,000 in civil penalties and precludes RMK from seeking tax deductions in accordance therewith. It also requires RMK to develop and submit a compliance plan to the CFPB Enforcement Director demonstrating how RMK will implement the order and ensure that all future advertisements comply with federal law, and to keep detailed records on RMK's advertising practices for five years.

CFPB Joins With Navajo Nation to Stop Alleged Predatory Lender

  • The CFPB, together with the Navajo Nation, brought a lawsuit against S/W Tax Loans, Inc.; J Thomas Development of NM, Inc.; owner Jeffrey Scott Thomas; and the president of S/W, Dennis Gonzales, (defendants), for alleged violations of the Truth in Lending Act and the Consumer Financial Protection Act.
  • The complaint alleged that defendants operated an illegal tax refund scheme through which employees of Thomas' tax advisory practices were given bonuses to direct low-income Navajo customers seeking tax advice to "short-term, triple-digit-APR loans secured by the consumer's anticipated tax refund" offered by S/W Tax Loans, when significantly lower interest rates were available at other businesses. The complaint alleges that Thomas and his employees also made deceptive statements regarding the loans offered, and failed to disclose that Thomas had a financial interest in S/W.
  • The proposed consent order, which must be approved by a court, requires defendants to pay $254,267 in consumer redress in addition to $183,733 already paid in remediation, and $438,000 in civil penalties. It also enjoins defendants from providing tax refund anticipation loans, as well as assisting or receiving compensation from any person engaged in similar loans. Finally, the order precludes defendants from disclosing or using consumer information and mandates recordkeeping and reporting.

Consumer Protection

Massachusetts Attorney General Settles Claim Against Solar Power Developer

  • Massachusetts AG Maura Healey settled with Soltas Energy Corporation over allegations that the solar power developer violated the state False Claims and Consumer Protection Acts by improperly allocating certain electricity credits related to the generation of solar power multiple times.
  • Soltas had entered into power purchase agreements (PPAs) with two Central Massachusetts towns and two nonprofit organizations which required Soltas to allocate "net metering credits" for solar energy generated at a nearby location to the towns and nonprofits in return for fixed price electricity. Soltas, however, allegedly allocated the same credits to other customers through a public bidding process, negating the benefit to the parties to the PPAs.
  • Pursuant to the terms of the assurance of discontinuance, Soltas has agreed to pay $330,000 in damages and restitution: $175,000 to Athol Memorial Hospital, $40,000 to the town of Petersham, $38,000 to the Athol YMCA, $22,000 to the town of Warwick, and $55,000 to the Commonwealth.

FTC Issues Final Order Barring App That Claims to Detect Melanomas

  • In a 4 to 1 decision, the Federal Trade Commission (FTC) voted to approve a final consent order barring Health Discovery Corporation (HDC) from making claims that its smartphone app "MelApp" can detect or diagnose melanomas without HDC having proper scientific evidence to substantiate its claims.
  • In the consent order, the FTC indicated that scientific testing must be accomplished in order to make claims of health efficacy for a product like MelApp. The FTC also identified the type of documentation that will be required, including those describing the testing methods and results, the recruitment and identification of participants, any statistical analysis of participants, and the sponsorship of such tests. HDC admits no fault, but agreed to pay $17,693 to the FTC.

Data Privacy

State Attorneys General Go Back to Court to Prevent RadioShack Data Sale

  • RadioShack has asked a bankruptcy court for approval to sell data on as many as 117 million customers as part of a second asset auction that includes various intellectual property, including the rights to the name RadioShack.
  • Texas AG Ken Paxton, leading the group of AGs objecting to the sale of any consumer data that contains personally identifiable information (PII), asked the court to require RadioShack to specify whether the data being offered is limited to contact information, such as name, address, phone number, and email address, or whether it also includes other information such as credit card numbers or account history.

Employment

New York Attorney General Investigates "On-Call" Staffing Practices

  • New York AG Eric Schneiderman has opened an investigation to determine whether certain retailers' "on-call" scheduling practices violate New York labor laws. On April 10, the AG sent letters to 13 major retailers inquiring about their scheduling practices, giving them until May 4 to respond.
  • According to AG Schneiderman, the practice in question involves requiring employees to check in by telephone, text message, or email before a scheduled shift to see if their services are still needed, allowing retailers to adjust staffing levels to meet customer traffic. AG Schneiderman claims, however, that New York law requires employers to pay employees who report for a scheduled shift at least four hours' wages, even if they are sent home.

For-Profit Colleges

Attorneys General Back Students in Pursuit of Loan Forgiveness

  • Nine State AGs, led by Massachusetts AG Maura Healey, have asked the U.S. Department of Education (DoE) to relieve student borrowers of the obligation to repay federal student loan debt that was originated to enroll in classes at Corinthian Colleges, Inc., in connection to Corinthian's alleged violations of state law.
  • In a letter to Secretary of Education Arne Duncan, the AGs argue that the Higher Education Act and DoE Regulations permit students to assert legal claims against schools as a defense to loan payment obligations.
  • The AGs also urge the DoE to outline the formal process through which students can assert claims to have their loans discharged, including guidance on how students can request relief from loan servicers. Finally, the AGs suggest that the DoE accept findings from State AG investigations as sufficient evidence upon which students can assert their rights under the law.
  • Corinthian objected to the "mischaracterization of our job placement efforts and the suggestion that we misrepresented these efforts" and drew a distinction between AG investigations and violations of law, stating that "[i]t is important to note the difference between findings and allegations—a number of state AGs have made allegations but as these cases are still in progress, it would be inappropriate to presume guilt without due process."

Intellectual Property

Washington Legislature Passes Attorney General's Bill to Prevent Patent Misuse

  • The Washington House of Representatives passed AG Bob Ferguson's Patent Troll Prevention Act (PTPA), designed to protect "small businesses from predatory and bad faith patent infringement claims and demands." The bill overwhelmingly passed House and Senate votes, and is expected to be signed by the Governor.
  • The PTPA prohibits alleged patent owners from asserting patent rights in bad faith, including: sending demand letters that contain false or deceptive information, threatening litigation if the demanded fee is not paid, and failing to identify the alleged infringement and/or the individual asserting ownership of the patent. It also precludes letters sent by parties who do not have the legal right to enforce the indicated patent.
  • The PTPA provides the AG with enforcement authority under the Washington Consumer Protection Act to bring an action in the name of the state, or as parens patriae on behalf of persons residing in the state, and allows the AG to recover damages and attorneys' fees, as well as to seek injunctive relief.

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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