United States: State AGs In The News - July 9th, 2015


State AGs and FTC Approve Dollar Store Merger, Subject to Divestitures

  • Dollar Tree, Inc., and Family Dollar Stores, Inc., have reached an agreement with federal regulators and seventeen State AGs, allowing the discount retail chains to move forward with the $9.2 billion merger proposed last summer.
  • The AGs and the Federal Trade Commission (FTC) separately challenged the merger as anticompetitive in local markets, asserting that the relevant geographic market was as narrow as half a mile in some cases, but included both discount general merchandise retail stores and discounted general merchandise in retail stores (thus including larger retailers).
  • The AGs' consent order adopts the actions required by the FTC order, including Dollar Tree's sale of more than 330 stores nationwide to Sycamore Partners, a private equity firm, within 150 days after consummating the merger. The AGs' order also requires notification with respect to certain transactions or store closures for five years and requires the merging entities to pay $865,181 in attorneys' fees to the AGs.

DOJ Investigation Into Alleged Airline Coordination Triggers Class Actions

  • The Department of Justice (DOJ) has opened an investigation into whether American Airlines Group Inc., Southwest Airlines Co., United Continental Holdings, Inc., and Delta Airlines, Inc.—together more than 80 percent of the domestic market—violated U.S. antitrust laws by coordinating to limit both the number of seats available for purchase, and the number of flights and routes offered. The DOJ allegedly is asking the airlines for, among other things, documents that reference the "need for, or the desirability of, capacity reductions or growth limitations by the company or any other airline."
  • Senator Richard Blumenthal, previously the AG for Connecticut, urged the DOJ to investigate what he called "anticompetitive, anti-consumer conduct and misuse of market power in the airline industry." Senator Blumenthal—referencing a 2013 complaint by the DOJ and a group of State AGs to block the merger between American and U.S. Airways—indicated that the airlines appeared to be using certain terminology ("capacity discipline") in public statements, and otherwise coordinating a strategy to limit expansion. The airlines and some industry analysts do not necessarily agree, with some pointing to seating capacity growth of five percent in 2014.
  • There is a growing queue of follow-on consumer class action lawsuits, based in large part on the claims from the investigation. These classes have the potential to be quite broad: in one complaint filed in Illinois, the plaintiffs are seeking class status for "all consumers who flew domestically from October 1, 2012 to present," and alleging that the airlines, "in tandem, raised fares, imposed new and higher fees on travelers and reduced their capacity and service." The case is Bidgoli v. American Airlines Group Inc., 15-cv-5903, (N.D. Ill). In total, there are at least 15 class actions that have been filed against the airlines, making a future Multidistrict Litigation likely.

Consumer Financial Protection Bureau

CFPB and 47 States Settle With Chase for $216 Million, Mandate Reforms to Debt Collection Practices

  • The Consumer Financial Protection Bureau (CFPB) and AGs from 47 states reached an agreement to resolve claims that Chase Bank USA N.A. and Chase Bankcard Services Inc. (together, "Chase") violated the Consumer Financial Protection Act (CFPA) by engaging in unlawful debt collection and sale practices.
  • The CFPB and the AGs alleged that Chase violated Section 1036 of the CFPA for unfair, deceptive, or abusive acts or practices by:
    • Submitting consumers to collections for accounts that were not theirs, in amounts that were incorrect or uncollectable;
    • Making inaccurate credit reporting and entering unlawful judgments that may affect consumers' ability to obtain credit, employment, and housing;
    • Filing lawsuits and obtaining judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures ("robo-signing"); and
    • Selling accounts to debt buyers that were already settled, discharged in bankruptcy, not owed by the consumer, or incorrect in some other fashion, with knowledge that debt buyers would file collection lawsuits based on the invalid information.
  • The consent order requires Chase to pay consumer redress of not less than $50 million, a civil penalty of $30 million to the CFPB, a separate $30 million civil penalty to the Office of the Comptroller of the Currency, and $106 million in payments to the states. It also requires Chase, within 60 days of the effective date, to withdraw, dismiss, or terminate all pre-judgment collections litigation, and all post-judgment enforcement actions pending at any time.
  • In addition, as a result of this joint action, Chase must reform its debt collection and sale practices, including the creation of safeguards to ensure that debt information is accurate, that consumers receive notice and information on the new debt holder when their debt is sold to a third party, and that debt buyers are restricted from reselling Chase's consumer debts to other purchasers.

Consumer Protection

FTC Continues to Work With Florida AG to Address Deceptive Practices

  • The Federal Trade Commission (FTC) and Florida AG Pam Bondi filed a joint lawsuit against E.M. Systems & Services, LLC, and a network of related companies operating under fictitious names (together, "Defendants"), for allegedly running a fraudulent and deceptive credit card payment reduction scam.
  • The complaint alleges that Defendants called consumers, identifying themselves as "card services," or "card member services," or by one of the Defendants' businesses and claimed to have a business relationship with the consumer's lender. Defendants offered debt relief through interest rate reductions, but after securing an upfront fee ranging from $500 to $1500, failed to fulfill their claims.
  • AG Bondi and the FTC secured a preliminary injunction and asset freeze, and are seeking a permanent injunction and restitution for consumers. In addition, as this action is the second joint federal-state action in as many weeks in Florida, it serves as a reminder of the increasingly collaborative efforts of federal and state enforcement for consumer protection.

FTC Notches More Settlements Against Payday Lenders

  • The Federal Trade Commission (FTC) settled claims against Frampton Rowland III and Timothy Coppinger, and the network of companies they owned or controlled (together, "Defendants"), alleging violations of the FTC Act, the Truth in Lending Act, and the Electronic Fund Transfer Act.
  • According to the complaint, Defendants operated a series of payday lending operations, through which they would purchase sensitive consumer financial information from lead generators, and then make unauthorized loans, followed by unauthorized withdrawals of "finance charges" from consumers' bank accounts every two weeks. If consumers contested that the loan was not authorized, Defendants would produce false or misleading documentation; if consumers closed their bank account, Defendants would sell the "loans" to debt buyers who then harassed consumers for payment.
  • The consent orders require that Defendants pay approximately $44 million ($32.1 from Coppinger defendants and $22.9 from Rowland defendants) as equitable money relief, although the orders are suspended upon Defendants' permanent transfer of bank account assets to a court-appointed Receiver. The Orders also extinguish any related consumer debt obligations, and enjoin Defendants from reporting borrowers to credit reporting bureaus.

Data Privacy

Forty-seven States Ask Congress to Preserve State Authority in Data Security and Privacy

  • Forty-seven State AGs, coordinated under the auspices of the National Association of Attorneys General (NAAG), urged Congress to preserve state authority to enforce state laws that address data security and data breach notification.
  • In a letter addressed to Congressional leadership, the AGs ask Congress not to preempt state law on data security and privacy through passage of federal legislation. The AGs argue that states are quicker to adopt legislation, more willing to try innovative approaches to addressing evolving threats, and better able to respond to identity theft and consumer fraud as it affects their constituents. Some AGs also wrote separate letters on the issue to their individual state senators.
  • The AGs indicate that many state laws provide greater protection to residents than would the current federal bill under consideration. According to some estimates, as many as 38 states would have reduced protections under the federal bill. The AGs also highlight the significant role they play in enforcing data privacy, including a growing number of states where a data-breached company must report to and coordinate with the AG. Moreover, for companies that do business in multiple states, the current structure creates an incentive to comply with the strictest requirements. Most parties involved in the debate recognize the benefit of a uniform national standard, but as the AGs indicate, the best approach might be one where a federal law created a minimum standard with joint state/federal enforcement, and states remained empowered to create greater protections.

False Claims Act

DOJ Settles With Company Claiming Benefits for "Disadvantaged" Owners

  • The U.S. Department of Justice (DOJ) reached an agreement with LB&B Associates Inc. and its principals resolving allegations that the government support services company violated the False Claims Act in order to obtain set aside contracts through a government program designed to support small, disadvantaged businesses.
  • The 8(a) Program, offered by the U.S. Small Business Administration (SBA) provides preferential procurement options for companies that are primarily owned and controlled by a person that is "socially and economically disadvantaged." The government claimed that in seeking certification under the 8(a) Program, LB&B falsely represented that Lily Brandon—who satisfied the 8(a) requirements—controlled the operations of LB&B, when in fact she did not.
  • The settlement, which requires LB&B to pay the government $7.8 million, arises out of the government's intervention in a lawsuit filed by former employees of LB&B. Under the whistleblower provision of the False Claims Act, the former employees will receive $1.5 million of the settlement.

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