United States: State AGs In The News - November 12th, 2015

AG Insights

New York AG Doubles Down on Investigation Into Daily Fantasy Sports Websites

  • See this recent blog post highlighting the New York AG's investigation by State AG Monitor Contributor and Dickstein Shapiro Counsel Aaron Lancaster.

Antitrust

Airline Antitrust Investigation: Are the Skies Too Friendly?

  • See this recent blog post on the U.S. Department of Justice's (DOJ) investigation into major U.S. airlines by Daniel Schaefer, an attorney in Dickstein Shapiro's antitrust practice.

FTC Finds Breeders Association's Code of Ethics to Be Anticompetitive

  • The Federal Trade Commission (FTC) approved a final order resolving allegations that certain membership rules and practices implemented through the National Association of Animal Breeders, Inc.'s (NAAB) Code of Ethics violated Section 5 of the FTC Act.
  • The FTC alleged that the NAAB, a nonprofit trade association of animal breeders active in the dairy and beef industries, required its members to abide by a Code of Ethics that restricted how members could advertise their artificial insemination products and services. The Code of Ethics limited members' ability to provide truthful, nondeceptive information about their bull stock and bovine semen products, and restricted comparisons of price and quality with other members' bulls. The NAAB even allegedly provided a mechanism to implement sanctions when a member violated the Code.
  • Although there is no monetary sanction imposed, the final order requires the NAAB to cease imposing the restrictions and to implement an antitrust compliance program. NAAB must also publish an announcement explaining the FTC order and the resulting changes to the Code of Ethics, and must remove any references to the restrictions from its website and official documents.

Charities

Cert Denial Paves Way for State AGs to Get Donor Lists

  • The U.S. Supreme Court denied the Center for Competitive Politics' (CCP) petition for certiorari to review the Ninth Circuit's decision denying its motion for a preliminary injunction. The CCP had sought to enjoin a new California law that requires nonprofit groups soliciting contributions in the state to provide a list of significant donor names as part of an annual registration process with California's Registry of Charitable Trusts.
  • The CCP along with numerous amici curiae, including the states of Arizona, Michigan, and South Carolina, argued that the law violates members' rights to anonymous speech and free association under the First Amendment. Supporters of CCP also argued that donor names, once under control of the state AG's office, will not be safe from disclosure, and might even be accessible to the public under state freedom of information laws.
  • The CCP alleged irreparable harm due to diminished enthusiasm among donors to contribute to controversial nonprofits if there was a risk of having their association made public. The Ninth Circuit found that plaintiffs had not demonstrated that such irreparable harm was "likely," as is required to meet the standard for a preliminary injunction. This issue will be interesting to watch in the coming years to see if organizations like the CCP can demonstrate actual harm once the law has gone into effect.

Consumer Protection

SCOTUS to Decide on Standing to Seek Statutory Damages Without Concrete Harm

  • The U.S. Supreme Court heard oral arguments in Spokeo, Inc. v. Robins, an appeal of the Ninth Circuit's decision that a plaintiff who alleges a violation of a federal statute on behalf of himself and a class has standing to sue in federal court for statutory damages without otherwise alleging that he or other class members suffered a concrete harm as a result of the alleged violation.
  • The plaintiff, Thomas Robins, claimed that Spokeo, an Internet database that gathers information from publicly available online sources, violated the Fair Credit Reporting Act (FCRA) by collecting and publishing inaccurate information about him and other consumers online. Robins' claims center on Spokeo's alleged failure to implement reasonable procedures to assure the accuracy of the information it gathers and publishes. The FCRA provides statutory damages of $1000 per violation, and what Robins is alleging would amount to one violation. However, given the scope of Spokeo's actions across the Internet, the potential class of equally "injured" consumers could be in the millions.
  • The Consumer Financial Protection Bureau and the DOJ filed an amici brief in support of Robins, arguing that the willful invasion of a legally protected interest is a sufficient injury-in-fact to give a plaintiff standing in federal court. The brief further argues that Robins' allegations that Spokeo failed to exercise due care in collecting and publishing information, and that such failure resulted in the dissemination of false information, could, if true, demonstrate a willful failure to comply with the FCRA as required by 15 U.S.C. 1681n(a).
  • In contrast, eight State AGs filed their amici brief in support of Spokeo, arguing that class actions based on statutory damages, but unrestrained by proof of a concrete harm, "endanger the judicial process by creating immense pressure to settle." The AGs argued that Congress has the power to create a new cause of action and a statutory remedy, but "it cannot confer standing on a plaintiff who is not actually harmed."

Securities

SEC Files Fraud Charges Over Transatlantic Tweets

  • The Securities and Exchange Commission (SEC) filed securities fraud charges against a trader who allegedly used Twitter accounts, designed to mimic those of well-known securities research firms, to post false tweets to manipulate stock prices.
  • The complaint claims that James Alan Craig, a resident of Dumfries, Scotland, issued false and misleading tweets, and traded on the market reaction. In the first instance, Craig allegedly tweeted that noise suppression company Audience Inc., was being investigated by the U.S. Department of Justice for fraud. Audience's stock price fell 28 percent in the hours that followed. In the second instance, Craig allegedly tweeted that Sarepta Therapeutics Inc. was facing U.S. Food and Drug Administration scrutiny for doctoring the trial results of one of its drugs. Sarepta's stock price dropped 16 percent in subsequent trading.
  • The SEC alleges that Craig's conduct amounts to fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The SEC seeks a permanent injunction, disgorgement of Craig's profits, and monetary penalties.

States v. Federal Government

Court of Appeals Affirms Injunction Over President's Executive Action on Immigration

  • The Court of Appeals for the Fifth Circuit, by a 2-1 decision, upheld the preliminary injunction against President Obama's executive orders on immigration that would have offered deferred immigration action for parents of American citizens (DAPA) and for immigrants who arrived as children (DACA).
  • The court's majority sided with Texas AG Ken Paxton, joined by AGs from 25 additional states as plaintiffs, and ruled that the district court did not abuse its discretion in finding that the injunction was proper because Texas and the other challengers were likely to succeed on the merits, which in this case were based on the argument that the President's orders failed to comply with the Administrative Procedure Act's requirements for creating agency regulations.
  • In the dissent, Judge Carolyn King indicated that the challenged orders contain only guidelines for the exercise of prosecutorial discretion and do not confer any benefits to DAPA recipients without further action, indicating that she would deem the issue to be nonjusticiable. In addition, Judge King noted the political nature of the case, which was brought by 24 states under Republican governorship, along with Republican AGs from Montana and West Virginia.
  • The DOJ has indicated that it will seek review by the Supreme Court, but will be under a tight deadline to do so in the upcoming term. If the Supreme Court does not grant cert, then the injunction will stand and the President will be unable to implement the immigration programs until after the substantive case has been decided on the merits, likely under a new President.

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