STATE AGs IN THE NEWS

NAAG Announces Agenda for Summer Meeting in Boston

• The National Association of Attorneys General (NAAG) announced that its summer meeting will take place June 17-19 at the Westin Copley Place in Boston, Massachusetts.
• The meeting agenda includes various issues including recent U.S. Supreme Court decisions and cases, the Boston bombing and response, intellectual property crimes online, the Communications Decency Act’s Safe Harbor provision, tobacco policy/enforcement, and veterans’ issues.  NAAG will also elect a new slate of officers.
• Further information may be found on the NAAG website.

John J. Hoffman Appointed Acting New Jersey Attorney General

• New Jersey Governor Chris Christie appointed Executive Assistant Attorney General John J. Hoffman to serve as Acting Attorney General in place of Jeff Chiesa, who Christie appointed last week to fill Frank Lautenberg’s U.S. Senate seat.
• Hoffman previously served as the New Jersey Comptroller’s director of investigations. He also has served as a federal prosecutor in New Jersey and trial attorney for the Civil Division of the U.S. Department of Justice in Washington, D.C.

Virginia 2013 Democratic Primary Election Results for Attorney General Announced

• Virginia State Senator Mark Herring won the Democratic nomination for Attorney General, defeating former federal prosecutor Justin Fairfax with 52 percent of the vote.
• Senator Herring will face fellow State Senator Mark Obenshain in the general election.

New York Attorney General Announces New Electioneering Regulations for Non-Profits

• New York AG Eric Schneiderman issued new regulations requiring New York registered non-profit groups, including 501(c)(4)s, to report the percentage of their expenditures on local, state, and federal electioneering.
• The regulations require groups that spend over $10,000 on state and local elections in New York to file schedules of contributions and expenses.

CONSUMER PROTECTION

Tobacco Company Burned by Vermont Attorney General for Deceptive Advertising

• The Vermont AG’s Office was granted an order providing fines and injunctive relief  against R.J. Reynolds Tobacco Co. in a lawsuit alleging that advertisements touting the “risk reduction” properties of its Eclipse tobacco product violated state consumer protection laws.  The court imposed a civil penalty of $8.3 million based on half the dollar amount the company spent on marketing Eclipse, after declining to issue a penalty on a “per violation” basis.
• AG William Sorrell said “If you make unsubstantiated health claims about your deadly products, you will pay dearly. Any attempts to advertise alternative tobacco products with deceptive health-benefit claims will not be tolerated.”
• In addition to the civil penalty, the company is enjoined from advertising the reduced health risk of its products without sufficient scientific studies to substantiate the claim.

State Attorneys General Join in Multinational Effort to Combat Timeshare Resale and Vacation Scams

• The Federal Trade Commission (FTC) has led a law enforcement initiative joined by 28 states and 10 foreign nations against businesses offering timeshare property resale services and vacation prizes.  State AGs have filed 83 lawsuits in this effort.
• The businesses are alleged to have charged large up-front fees in exchange for help reselling timeshare properties or for discounted or no-cost prize vacations.  Typically, once the fees were paid, no buyers for the timeshares were found or no vacations were delivered to the consumers.

Alleged Counterfeit Drug Advertisements on Google Draw Ire of Mississippi Attorney General

• Mississippi AG Jim Hood, in addition to threatening legal action, has invited Google CEO Larry Page to address the attorneys general in person at the upcoming NAAG meeting over concerns about the company’s search function leading consumers to websites that sell fake drugs and other counterfeit items.  Google has told NAAG that Page will not attend.
• As co-chair of the NAAG Intellectual Property Committee, AG Hood is concerned with removing certain search content, auto-complete search results, Digital Millennium Copyright Act notices, and the role of search engines in curbing the sale of counterfeit drugs.  “On every check we have made, Google’s search engine gave us easy access to illegal goods including websites which offer dangerous drugs without a prescription, counterfeit goods of every description, and infringing copies of movies, music, software and games,” said AG Hood.
• AG Hood said that Google has reacted to the publicity surrounding these issues by starting to take down videos that give instructions on how to buy drugs without a prescription.

FINANCIAL INDUSTRY

Iowa Attorney General Leads Multi-State Investigation on Debt Collection

• Iowa AG Tom Miller is reportedly leading a multi-state investigation into banks and other businesses for alleged debt collection processes based on incomplete or erroneous information about consumers or their debt.
• A spokesman for AG Miller stated “What we are hearing, in many cases, is the paperwork that the banks provided the debt buyers may be incomplete, or the paperwork that the debt buyers may have presented to court to collect on that debt, is incomplete and the result is we have spotty paperwork and it is not accurate.”

BREAKING NEWS

New Jersey Governor Chris Christie Appoints Attorney General Jeffrey Chiesa to U.S. Senate

• Governor Chris Christie has appointed AG Jeffrey Chiesa to the Senate seat made vacant by the passing of veteran Democratic Senator Frank Lautenberg.  AG Chiesa is a longtime ally of Governor Christie, serving as his chief counsel and as the executive director of his transition team before being appointed attorney general.
• AG Chiesa, a Republican, will serve until a special election is held on October 16th.  He has stated that he will not be a candidate for the seat in that election.
  

INSURANCE

Maryland Attorney General Urges for Health Insurance Rate Hike Freeze

• Maryland AG Douglas Gansler urged the Maryland Insurance Administration to freeze health insurance rate increases that are above five percent. “Some insurance executives are threatening rate hikes of 25 percent, reaching 100 to 150 percent for some consumers,” Gansler said.
• The increases are seen as a response to the Patient Protection and Affordable Care Act, which includes mandatory coverage of higher risk patients, among other industry changes.

• AG Gansler asked the Maryland Insurance Administration to cap the costs now, and then re-examine the costs in six months to determine if the additional increases sought by the insurance companies were necessary.

DATA PRIVACY

Google Glass Draws Scrutiny of Connecticut Attorney General’s Watchful Eye

• Connecticut Attorney General George Jepsen has issued a letter to Google, Inc. CEO Larry Page requesting a meeting to discuss the data privacy implications of Google’s new digital headset device Google Glass. The letter follows a May 2013 letter from the U.S. Congress Bi-Partisan Privacy Caucus to the company raising similar privacy concerns.
• Google Glass is worn like a pair of eyeglasses, and includes a small computer screen above one eye, a camera, motion sensors, and microphones. Though the device is not yet available to consumers, AG Jepsen is particularly concerned with its capabilities to deploy facial recognition of non-users and track the eyes of users.
• AG Jepsen has stated: “Despite mounting concern among privacy advocates there is very little available information regarding the types of data that will be collected through this technology from either users or non-users. Nor, to my knowledge, has Google yet publicly revealed whether or how it intends to disclose privacy risks, obtain consent for the collection of data or otherwise minimize or address issues.”

CONSUMER PROTECTION

Consumer Financial Protection Bureau Complaint Database Now Searchable by State

• The Consumer Financial Protection Bureau (CFPB) has expanded its Consumer Complaint Database to include state-by-state information. The CFPB shares with the State Attorneys General a consumer protection and enforcement focus on financial markets and consumer financial products.
• The database includes the type of consumer complaint, the date of submission, and the company that the complaint concerns. Recently, the CFPB has added complaints about money transfers and credit reporting to the database.
• The Consumer Complaint Database can be found here.

Civil Penalty Issued to Out-of State Direct Mail Advertiser by Idaho Attorney General

• Idaho AG Lawrence Wasden issued a civil penalty to resolve allegations against Corporate Records Service (CRS), a Saginaw, Michigan based company. CRS sent direct mail advertisements asking Idaho businesses to identify their shareholders, directors and officers, and stated that for $125 CRS would prepare corporate minutes.   Businesses that paid CRS the money received only a blank notebook.
• “Consumers are being bombarded with bulk mail ads disguised as government or official forms,” AG Wasden said. “Idaho law prohibits using any words, symbols, identification numbers, or other markings that may cause a reasonable consumer to believe an advertiser is associated with the government.”
• CRS is prohibited from using certain words and symbols implying a government or official capacity, and may not include inaccurate statutes or regulations, random identification numbers, or artificial deadlines.
  

ENVIRONMENT

NOAA Sued by Massachusetts Attorney General Over Fishing Regulations

• Massachusetts AG Martha Coakley filed suit against the National Oceanic and Atmospheric Administration (NOAA) and the U.S. Commerce Department stating that recent enforcement and regulation of the fish stock, by reducing the amount of certain fish that can be caught by 77 percent, over-restricts the state’s fishing industry. NOAA oversees the Northeast Fishery Management Council (NEFMC) that is in charge of regulating the fishing industry for several New England states.
• The complaint, filed in the U.S. District Court, alleges that restrictive NEFMC fishing allotments that took effect on May 1 were not based on the best science available and stock assessments were based on antiquated criteria. The complaint also alleges that NEFMC did not meaningfully consider the economic impact on the fishing industry, as required by federal law.
• A NOAA spokesman stated that the regulations were severe, but necessary due to the diminishing fish population in New England.

STATE AGs IN THE NEWS

Maryland Attorney General Victorious in Supreme Court Ruling on Post-Arrest DNA Collections

• Maryland AG Douglas Gansler secured a significant victory in a closely-followed criminal procedure case when the Supreme Court upheld the constitutionality of a Maryland Law authorizing DNA tests for persons arrested for “serious offenses.”
• The Court, in a 5-4 decision, held that officers taking and analyzing a cheek swab of the arrestee’s DNA is, like fingerprinting or photographing, a legitimate police booking procedure under the Fourth Amendment. Justice Anthony Kennedy wrote, “DNA identification is an advanced technique superior to fingerprinting in many ways, so much so that to insist on fingerprints as the norm would make little sense to either the forensic expert or a layperson.”
• The ruling reversed a Maryland Court of Appeals ruling that had nullified a conviction and life sentence in a 2003 rape case based on DNA evidence collected at an arrest for an unrelated assault charge.

HOT NEWS

U.S. Supreme Court to Resolve Circuit Split Over Class Action Fairness Act

• The U.S. Supreme Court granted certiorari in Mississippi ex rel Hood v. AU Optronics Corp. (No. 12-1036) to resolve a circuit split over the applicability of the Class Action Fairness Act (CAFA) to parens patrie suits brought by AGs seeking relief on behalf of the citizens of their state.
• The Court will address whether a suit by Mississippi AG Jim Hood that seeks restitution on behalf of consumers for alleged price-fixing in the LCD display panel market is a “mass action” subject to removal to federal court.
• The federal Circuits Courts of Appeals are split on the issue, with the Fifth Circuit’s decision in Mississippi ex rel Hood v. AU Optronics Corp. holding that such AG actions are subject to CAFA removal and the Fourth Circuit’s decision in AU Optronics Corp. v. South Carolina (No. 11-254) holding that they are not.  The Seventh and Ninth Circuits also have held that AG suits are not subject to CAFA removal.
• Please visit our blog for more details and analysis of this case.

CONSUMER PROTECTION

Colorado Court Rules Lawsuit Lenders are Subject to State’s Lending Laws

• The Colorado Court of Appeals has ruled that lawsuit lenders are subject to Colorado’s Uniform Consumer Credit Code (UCCC) in a decision that was a victory for defendant Colorado AG John Suthers.
• Lawsuit lenders provide money to litigants during the pendency of their case with the plaintiff’s agreement that the loans will be paid back after judgment or settlement with interest, often alleged to be at significantly high rates.
• AG Suthers notified the lawsuit lender plaintiffs in 2010 that their financial transactions were subject to the UCCC.  The Court of Appeals decision resolved a lawsuit filed thereafter by plaintiff Oasis Legal Finance seeking declaratory judgment that they were not lending money or creating debt, but instead purchasing a contingent right in the outcome of a suit.
  

Kentucky Attorney General Files Suit Against Johnson & Johnson over Alleged Marketing Practices

• Kentucky AG Jack Conway announced a lawsuit against Johnson & Johnson, Inc. (J&J) for alleging misleading or deceptive labeling and promotion of the antipsychotic drug Risperdal.  Several AGs have also filed actions against J&J over Risperdal.
• Risperdal was approved by the FDA as an antipsychotic drug for the treatment of schizophrenia, but was allegedly promoted by J&J for other indications. The lawsuit alleges that the company knew of increased risks of side effects, and that it instructed its sales force to downplay their importance.
• The suit seeks civil penalties of up to $2,000 per violation and up to $10,000 per violation directed at consumers over age 60, and injunctive relief barring J&J from deception in the promotion or marketing of drugs within the state.

EMPLOYMENT

New York Attorney General investigating Fast Food Restaurants for Possible Wage Violations

• The New York AG’s office has launched an investigation of fast food companies and franchisees for a number of alleged wage law violations, including allegedly paying employees less than minimum wage, not paying overtime, and not reimbursing work expenses, among other violations.  The office has issued at least one subpoena to a fast food parent company.
• The investigation was announced the same day a New York group organizing fast food workers released a study reporting that 84 percent of workers surveyed experienced some form of wage theft in their jobs.
• An AG spokesman declined to identify the companies under investigation, but stated that “New Yorkers expect companies doing business in our state to follow laws set up to protect working families.”  New York’s AG office has been among the most active in alleging and investigating employee misclassification and other employment law issues.

SECURITIES

New York’s Martin Act Before State’s Highest Court on Federal Preemption Issue

• The New York Court of Appeals, the state’s highest court, heard arguments in People by Cuomo v. Greenberg addressing whether New York’s sweeping state securities statute, or “blue sky law,” known as the Martin Act, permits the New York AG to bring a private suit to enforce securities fraud laws, or is preempted by federal securities laws.
• The Great Depression-era Martin Act, regarded as the most expansive of the blue sky laws in the country, grants the New York AG expansive authority to prosecute alleged financial fraud with lower standards of proof and scienter than the federal laws require, and wide latitude in permissible discovery.  The use of the Martin Act by former AGs, including Eliot Spitzer and Andrew Cuomo, earned the New York AG the nickname “Sheriff of Wall Street.”
• In 2012, the New York appellate court held that the Martin Act was not preempted by the federal law.  Connecticut and Vermont have supported AG Schneiderman in the dispute.  The court’s ruling is expected in June.

MORTGAGES/FORECLOSURES

NY Attorney General Ready to Sue Banks in Alleged Violation of Mortgage Practices Settlement Agreement

• NY AG Eric Schneiderman has indicated that he intends to file suit against Wells Fargo and Bank of America for mounting evidence of a failure to abide by the February 2012 mortgage servicing settlement agreement.  Forty-nine State AGs and the federal government entered into the historic $25 billion settlement with five of the nation’s largest banks to provide financial assistance to distressed mortgage borrowers and to deter certain foreclosure practices.
• In a letter dated May 23 to the settlement monitor, AG Schneiderman stated that “several other states have identified similar recurring deficiencies by the participating servicers.”  Previously North Carolina AG Roy Cooper and Illinois AG Lisa Madigan have expressed concerns that banks were not complying with the settlement.
• AG Schneiderman’s letter to the settlement monitor triggers a waiting period during which the banks can work to correct potential violations.   After the waiting period expires, the AG can file suit to enforce the terms of the settlement.

ENERGY

Attorneys General File Amicus Brief over EPA Rules on Greenhouse Gas Regulation

• West Virginia AG Patrick Morrisey joined Kansas AG Derek Schmidt and Montana AG Tim Fox in filing an amicus brief seeking review of a U.S. Court of Appeals for the District of Columbia decision in favor of the Environmental Protection Agency over the Clean Air Act in Association of Battery Recyclers Inc. et al. v. U.S. Environmental Protection Agency, (No. 12-1129).
• The States contend that the EPA’s tailoring rule runs contrary to the Clean Air Act and establishes greenhouse gas emission levels above those permitted by statute.
• AG Morrisey said the EPA’s rules were an example of federal agency overreach beyond the plain language of the statute.  “The EPA’s decision to regulate greenhouse gas emissions in this way will have a devastating impact on the industries that must comply with these rules as well as consumers.”

In a move that could significantly impact how State Attorneys General exercise their consumer protection and antitrust authority, the U.S. Supreme Court today granted review of whether suits brought by AGs seeking relief on behalf of state consumers are subject to removal to federal court under the Class Action Fairness Act (CAFA). The Court granted certiorari in Mississippi ex rel Hood v. AU Optronics Corp. (No. 12-1036) to settle a split between the Fifth Circuit’s decision in that case holding that such AG actions are subject to CAFA removal and the Fourth Circuit decision AU Optronics Corp. v. South Carolina, holding that they are not. Argument will be held in the 2013 Fall Term.

Congress enacted CAFA in 2005 to institute procedural safeguards to limit perceived abuses of the class action device. These include permitting certain class and “mass” actions—defined as actions involving the claims of 100 or more persons for monetary relief that involve common questions of law or fact—to be removed to federal court if they meet diversity and amount-in-controversy requirements.

State consumer protection and antitrust laws empower AGs to file suit seeking damages for alleged violations on behalf of all citizens in their state, a doctrine sometimes referred to as parens patriae after the common law power of the state to protect a quasi-sovereign interest for the public good. As AGs have filed such suits under state laws post-2005, some defendants have attempted to remove those cases (which are almost always filed in state court) to federal courts under CAFA.

Federal courts have split on whether AGs cases represent the kind of mass actions governed by CAFA. In Mississippi ex rel Hood v. AU Optronics Corp., the Mississippi AG sued makers of LCD screens in state court under both the state consumer protection and antitrust statutes on behalf of all consumers allegedly harmed by the defendants’ conduct. The Fifth Circuit held the action to be removable under CAFA, adopting a “claim-by-claim” approach that examines each basis for relief to determine whether the state or consumers are the real party in interest. The Court concluded that the “real parties in interest in this suit include both the State and individual consumers… [as neither] statutory bases of the State’s suit give the State sole authority to recover for particularized injuries suffered by consumers… Mississippi is acting, not in its parens patriae capacity, but essentially as a class representative… Because it is undisputed that there are more than 100 customers, we find that there are more than 100 claims at issue in this case. The suit therefore meets the CAFA definition of a ‘mass action.’”

In direct contrast, the Fourth Circuit in AU Optronics Corp. v. South Carolina, facing almost identical facts in a case brought against several of the same defendants by the South Carolina AG under that state’s consumer protection and antitrust laws, held that the action was not removable.  Adopting a “whole-case” approach, the Court held that a parens patriae action brought by AGs pursuant to state statutory authority is not a mass actions subject to CAFA because the state possesses an interest in the nature and substance of the lawsuit as a whole. The Court noted that “South Carolina’s Attorney General is plainly authorized [by state law] to pursue a parens patriae action in state court… [and] seeks substantial relief that is available to it alone [in the form of penalties, forfeitures, and injunctive relief]… [W]e conclude that the nature and effect of these actions demonstrate that South Carolina is the real party in interest, a fact that is unencumbered by the restitution claims” made on behalf of its citizens.  Both the Seventh Circuit in LG Display Co., Ltd. v. Madigan and Ninth Circuit in Nevada v. Bank of America Corp. also adopted the “whole-case” approach and determined AG suits are not mass actions subject to CAFA removal.

It is now up to the Supreme Court to resolve this split, and the result has the potential to substantially impact AGs’ ability to enforce state laws in their own state courts. Knowing such cases can be removed to federal court may require AGs to alter their tactical and strategic calculations in deciding whether and how to bring and prosecute consumer protection and antitrust cases. It also will impact how companies should react to such lawsuits, particularly multistate actions and litigations brought by multiple AGs acting in coordination. Accordingly, the eyes of every AG will be on the High Court this Fall, as should be those of every company that may someday find themselves subject to AG enforcement under such laws.

Hot News

NAAG Holds Annual Spring Consumer Protection Conference, Focuses on Data Privacy

• The National Associations of Attorneys General (NAAG) held its annual Spring Consumer Protection Conference in Washington, DC, earlier this week. The event brings consumer protection staff from AG offices across the country together to share information and discuss current and future enforcement priorities.
• This year feature a panel on “cloud” computing technology, on which speakers Justin Brookman, Director of the Project on Consumer Privacy of the Center for Democracy and Technology; Maneesha Mithal, Associate Director of the FTC’s Division of Privacy and Identity Protection; and John Morris, the Director of Internet Policy in the Department of Commerce’s National Telecommunications and Information Agency urged consumer protection staff to be vigilant regarding the potential risk such technology poses to consumer privacy and data security.  Our blog post from earlier this week describes that panel in detail.

Vermont AG Brings Consumer Protection Suit Against Alleged Patent Troll

• Vermont Attorney General Bill Sorrell has filed a consumer protection lawsuit against MPHJ Technology Investments, LLC, alleged to be a so-called “patent troll,” for unfair and deceptive trade practices targeting small businesses and non-profits in the state.
• AG Sorrell’s complaint asserts that MPHJ violated Vermont’s Consumer Protection Act by sending multiple letters and draft complaints threatening patent litigation if the recipients did not agree to pay licensing fees for document management and copying processes that MPHJ claimed it owned.  The complaint alleges that no court has actually ruled on those patents’ validity.
• AG Sorrell alleges that MPHJ violated the law through numerous false statements and unfair practices, include falsely asserting that its subsidiaries were exclusive patent holders and that other businesses were interested in purchasing a license; stating that it would file litigation when it had no plans or preparations to do so; and preemptively issuing burdensome information demands intended to cow companies into paying fees to avoid the burden of responding.  AG Sorrell has sought an injunction requiring MPHJ to stop threating patent-infringement lawsuits, as well as full restitution for businesses harmed by its conduct and penalties of $10,000 per violation.
• Please visit our blog for more details and analysis of this case.

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Antitrust

33 AGs Settle E-Book Price-Fixing Claims with Penguin Group

• AGs from 31 States, Puerto Rico, and the District of Columbia reached a settlement with Penguin Group (USA) resolving allegations that Penguin colluded with other major publishers and Apple Inc. to manipulate prices in the e-book market.
• Under the settlement, filed in the U.S. District Court for the Southern District of New York, Penguin will pay $75 million and agree to an injunction barring it from entering such agreements and requiring it to terminate any existing agreements that impede e-book retailers’ ability to set or reduce prices or offer discounts.
• AGs have already reached similar settlements with Hachette Book Group (USA), HarperCollins Publishers LLC, Simon & Schuster Inc., and Holtzbrinck Publishers LLC d/b/a Macmillan, which yielded more than $164 million in total recoveries.

California Attorney General Enters Agreement with Teroso Regarding Acquisition of BP Assets

• California Attorney General Kamala Harris announced that her office has reached an agreement with Tesoro that resolved a joint inquiry by her office and the Federal Trade Commission into the company’s proposed acquisition of BP’s refining and marketing assets in Southern California.
• The investigation stems from Tesoro’s August 2012 acquisition of BP’s Carson refinery, which triggered an antitrust investigation into the potential impact of the deal on energy competition in California.
• Under the agreement, described in a letter from AG Harris to the California Energy Commission, Tesoro agreed to preserve more than 1,000 jobs at the Wilmington refinery in the next two years, allow monitoring of gasoline prices and refinery capacity, implement safeguards against fuel price spikes, and refit the Wilmington and Carson refineries to reduce greenhouse gas emissions.

Data Privacy

California AG to Appeal Dismissal of Privacy Suit Against Delta Airlines, Prepare New Suits

• California Attorney General Kamala Harris’s office is preparing to appeal the dismissal of its lawsuit against Delta Airlines under the state’s new data privacy law and is considering new suits related to alleged corporate data breaches.
• Earlier this month, a California judge cited federal preemption in dismissing the state’s first lawsuit under the state’s new data privacy statute alleging that Delta violated a requirement that app manufacturers to clearly post privacy policies.
• AG Harris has made privacy enforcement and protection a cornerstone of her office and launched a privacy unit within her office focused on such issues. AG Harris also favors backing legislation that establishes requirements for data privacy and authorizing AG enforcement of those laws, including a new bill that just passed the state Senate that would greatly enhance companies’ responsibility to inform consumers of security breaches for their computerized data.

Energy

Massachusetts AG Hosts Energy Summit, Focuses on Energy Costs and Green Technology

• Massachusetts Attorney General Martha Coakley hosted an Energy Summit in Boston gathering 200 leaders, state officials, environmentalists, and energy experts to discuss energy costs and other issues related to green technology in the state.
• The Summit is part of an initiative announced by AG Coakley last month to address the high costs of energy in the state and its impact on competitiveness; discuss utilization of energy efficiency and renewable resources; and look at ideas and technologies that could help Massachusetts’ businesses reduce consumption and control costs.
• AG Coakley has been a supporter of Massachusetts’s Green Communities Act, a 2008 state law that, among other things, requires utilities to increase investment in energy efficiency measures, and mandates that 15 percent of electricity be supplied by new renewable power facilities by 2020. She has stated that the short-term costs of the law will be significantly outweighed by long-term efficiency savings.

AGs Urge Nuclear Regulatory Commission to Overrule Waste Storage Study Findings

• Attorneys General George Jepsen of Connecticut, Martha Coakley of Massachusetts, Eric Schneiderman of New York, and Bill Sorrell of Vermont filed a petition urging the Nuclear Regulatory Commission to reverse staff findings that they allege did not consider all available options for addressing nuclear waste storage.
• The petition asserts that NRC staff failed to consider requiring dry cask storage as an alternative to spent fuel pools or ordering plants closed until a long term solution – such as a permanent waste repository – is developed. It also states that the staff report failed to address guidance for storage issues arising after plants cease operations.
• The petition is the latest in a series of NRC proceedings in which these AGs have sought review of nuclear waste storage in the aftermath of the 2011 Fukushima Daiichi disaster in Japan.

In a potentially-groundbreaking case, Vermont Attorney General Bill Sorrell has filed a consumer protection lawsuit against MPHJ Technology Investments, LLC, alleged to be a so-called “patent troll.” This marks the first action by an AG in an area that has long been of concern to the business community.

“Patent troll” is the term for an individual or company that files or threatens frivolous litigation against companies over alleged violations of intellectual property rights.

The number of lawsuits filed by such entities has increased dramatically over recent years.  According to a 2012 study by professors at Boston University Law School, cases by firms that own or claim to own patents and use them exclusively as the basis for claims against companies have increased from affecting approximately 1,500 defendants in 2006 to almost 6,000 in 2011, imposing direct costs of about $29 billion on such defendants.  While some patent trolls bring nuisance suits seeking relatively small settlements from small and medium-size businesses, others seek and get settlements worth tens or hundreds of millions of dollars from large companies.

AG Sorrell’s complaint asserts that MPHJ violated Vermont’s Consumer Protection Act by sending multiple letters and draft complaints to small business and non-profit organizations threatening patent litigation if they do not pay licensing fees for document management and copying processes.  The complaint alleges that MPHJ conducted its activities from behind more than 40 shell companies that it claimed were exclusive licensees capable of enforcing the patents, while in fact no court has ruled on their validity.

As in many states, the Vermont AG can enforce the Consumer Protection Act to protect businesses as well as individual consumers.  AG Sorrell alleges that MPHJ violated the law through numerous false statements and unfair practices typical of patent troll litigation.  These include falsely asserting that its subsidiaries were exclusive patent holders and that other businesses were interested in purchasing a license; stating that it would file litigation and using legal counsel to imply such litigation was imminent when it had no plans or preparations to do so; targeting small businesses and non-profits unlikely to have resources to contest patent litigation or retain patent counsel; and preemptively issuing burdensome information demands intended to cow companies into paying fees to avoid the burden of responding.  AG Sorrell has sought an injunction requiring MPHJ to stop threating patent-infringement lawsuits, as well as full restitution for businesses harmed by its conduct and penalties of $10,000 per violation.

AG Sorrell’s case marks a potential watershed moment and the opening of a new front in ongoing efforts to combat frivolous patent troll suits while preserving the important function of the patent system.  His use of the Consumer Protection Act’s prohibitions on deceptive and unfair practices is a novel assertion of authority held by many AGs to prosecute and end harmful business practices in their states.  As it plays out, this case may come to serve as a blueprint for other AGs to stymie the abuse of the legal system by patent trolls and end attempts to extort settlements from the business community.

Advocates for data privacy and protection are not limiting their focus to State Attorneys General, who are among the most prominent officials involved in those subjects, but are also prompting Assistant Attorneys General (AAGs), who often are responsible for day-to-day enforcement decisions to make such issues a priority for their office. Yesterday, the National Association of Attorneys General (NAAG) held the open sessions of its Spring Consumer Protection Seminar, during which federal regulators and policymakers and consumer advocates briefed AAGs on cloud technology and urged them to protect consumer privacy in the cloud.

Speakers, such as Justin Brookman, Director of the Project on Consumer Privacy of the Center for Democracy and Technology, Maneesha Mithal, Associate Director of the FTC’s Division of Privacy and Identity Protection, and John Morris, the Director of Internet Policy in the Department of Commerce’s (DOC) National Telecommunications and Information Agency, discussed the dangers to consumer privacy in storing personal information in the cloud. While extolling the benefits of cloud computing, they also emphasized to the AAGs in attendance that AG enforcement is critical to ensuring that the dangers to consumer privacy do not outweigh those benefits.

Director Brookman pointed out that the United States is one of the few Western countries without a basic consumer information privacy law and noted that existing federal laws (such as the Electronic Communications Privacy Act) are inadequate to police today’s Internet—implicitly calling for more to be done at the state level. If the AAGs in attendance did not hear this call, for emphasis he identified data privacy as the “largest consumer protection issue over the next 10 years.”

Associate Director Mithal discussed the need for continued (and greater) state and federal cooperation on privacy matters, including both on consumer education/outreach and enforcement matters. Notably, she emphasized the FTC’s use of Section 5 of the FTC Act, which prohibits unfair and deceptive acts and practices in trade or commerce, to police company statements about the data they collect and use, as well as their security procedures. Given that most states have similar laws ( mini-FTC Acts), AAGs likely will be expanding their enforcement using those laws and other regulatory tools.

Finally, Director Morris discussed the DOC’s multi-stakeholder process for the establishment of voluntary industry codes of conduct for consumer privacy, while at the same time emphasizing the administration’s privacy bill of rights, which notably calls for AG enforcement of any federal data privacy laws that are enacted.

Given the speakers’ expansion definition of the cloud,to include in effect any data that users store remotely, including that stored in remote email servers such as Google and Yahoo!, as well as data provided through social media platforms, any company that deals with consumer data through the Internet needs to ensure that it is aware of and accounts for the very real potential for enforcement at the state level. Privacy policies must be clear, concise, and most of all, correct to accurately inform consumers of how companies will use their personal data. Further, any data collected needs to be secured in a reasonable fashion. Although these steps are not “get-out-of-jail free cards,” they are the bare minimum foundation for company privacy policies to withstand state scrutiny.

Consumer Protection

California Attorney General Sues JPMorgan Chase Over Debt Collection

• California Attorney General Kamala Harris has announced that she has filed suit against JPMorgan Chase alleging the company engaged in fraudulent debt-collection practices.
• The complaint alleges that the company engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a 3-year period.
• The suit seeks a permanent injunction barring the unlawful practices as well as restitution for injured consumers.

Maryland Attorney General Urges Advertisers to Cease Advertising on Ask.fm

• Maryland Attorney General Doug Gansler is urging several major advertisers to pull support from the Latvia-based, ad-supported website Ask.fm.
• The site has become a forum for anonymous attacks on children and has allegedly been linked to multiple teen suicides.
• In a letter sent to advertisers, the AG says that the website “not only allows ‘anonymous publication of malicious personal attacks on teenagers and children as young as 8 years old,’ but also appears to collect personal information about children in ways that violate the federal Children’s Online Privacy Protection Act (COPPA).”

Data Privacy

California Attorney General Won’t Back Down in Delta Privacy Suit

• Last week, citing federal preemption of the issue, a California judge tossed the state’s first attempt to sue Delta Airlines over alleged violations of state’s new data privacy statute requiring app manufacturers to clearly post privacy policies.
• Attorneys caution that this setback will not deter California Attorney General Kamala Harris from aggressively enforcing the state’s privacy laws. She has been a national leader in the data privacy field, and she is expected to continue her efforts.
• Dickstein State AG Practice partner Divonne Smoyer was quoted in a Law360 article on the California suit, stating that “State Attorneys General across the U.S. have picked up the topic of data security as a major issue, and have been urged on by federal regulators like the Federal Trade Commission to start exercising their authority. While this may be a hiccup and may cause them to take a look at things a little more closely, it won’t be a game changer or a game stopper.” Smoyer further noted that “states that have issues with loss of private information or companies that maintain inadequate security practices can use UDAAP statutes that are not very specific to sweep that up.”

Pharmaceuticals

Forty-three Attorneys General Send Letter to FDA Urging New Prescription Warnings

• Forty-three State Attorneys General sent a letter to the U.S. Food and Drug Administration (FDA) urging the FDA to adopt new black box labels for opiate-based prescription medications warning of the risk of Neonatal Abstinence Syndrome (NAS) caused by maternal opiate use while pregnant.
• Symptoms of NAS include malfunctions of the autonomic nervous system, respiratory system, and gastrointestinal tract, and occur after the baby is born and goes through opiate withdrawal.
• The AGs urge the warning to read: WARNING: USE OF NARCOTIC ANALGESICS IN PREGNANT WOMEN MAY CAUSE NEONATAL ABSTINENCE SYNDROME.

Pharmaceuticals and False Claims Act

Ranbaxy Settles with 50 States and the U.S. FDA

• Ranbaxy has reached a $500 million settlement with all 50 states and the U.S. Food and Drug Administration (FDA) over allegations that the company sold subpar generic drugs.
• The company has not sold drugs produced at the relevant Indian factories since 2008.
• The company also pleaded guilty to three felony counts of violating the federal drug safety law and four for making false statements to the FDA.
• The whistleblower that initially brought suit under the federal False Claims Act will receive close to $49 million.
• The settlement is the largest in history against a generic drug maker.

Insurance Coverage

Dickstein Shapiro Launches New Insurance Coverage Blog, Policyholder Informer

• Our Insurance Coverage Group has launched Policyholder Informer, a new legal blog that offers commentary and insight on insurance law by exploring it through recent rulings and judgments, news stories, and pop culture events.
• You can visit the blog or follow this helpful resource for policyholders on Twitter @PolicyholderLaw.

Consumer Protection

Illinois Attorney General Sues Auto Dealer

• Illinois Attorney General Lisa Madigan announced that she has sued Carterville RTA Auto Sales for deceptive sales practices.
• AG Madigan alleges that the company sold used cars “as is” and falsely promised either that vehicles were in good condition or that it would fix those with mechanical problems.
• The AG’s Office received nine complaints against the dealership with customers reporting losses of $500-$3,500.
• AG Madigan is seeking a permanent injunction against the dealership as well as customer restitution, a $50,000 civil penalty, and an additional $50,000 penalty for each violation of the Consumer Fraud Act with intent to defraud.

California Attorney General Sues Food Retailers for Lead Found in Candies

• California Attorney General Kamala Harris has sued Whole Foods, Trader Joe’s, and other food retailers, alleging that they are selling ginger and plum candies tainted by lead without appropriate warnings.
• The suit alleges that the retailers and candy makers “knowingly and intentionally” exposed consumers to lead in violation of Proposition 65, which requires businesses to warn of even minute amounts of chemicals deemed harmful. If found guilty, the retailers and candy makers face fines of up to $2,500 per day for each violation.

Data Privacy

Connecticut and Maryland Attorneys General Scrutinize LivingSocial

• Connecticut Attorney General George Jepsen and Maryland Attorney General Doug Gansler are looking into the privacy policies of LivingSocial following a data breach that compromised the information of as many as 50 million accounts.
• The AGs have requested a detailed timeline of the incident, as well as a breakdown of the number of affected accounts in each state and the type of information compromised.
• They have also requested LivingSocial’s privacy policies, any security or forensic reports related to the breach, and an outline of any plan developed to prevent the recurrence of a breach.

Three Democratic State Attorneys General Take Stand Against IT Theft

• California Attorney General Kamala Harris, Massachusetts Attorney General Martha Coakley, and Washington Attorney General Bob Ferguson were praised in an Op-Ed published in the National Law Journal for their actions against companies that gain unfair competitive advantages through the use of pirated information technology.
• The opinion piece lists recent actions taken by the three AGs targeting companies that steal information technology. The piece urges other State AGs to follow the example set by these three and target companies that harm competition by stealing information technology.

Environmental

13 Attorneys General Write to EPA About Hydraulic Fracturing

• Thirteen Attorneys General have sent a letter to the FDA warning the agency not to employ backdoor “sue and settle” tactics to regulate hydraulic fracturing and oil production.
• The letter follows another sent to the EPA by the AGs of northeastern states threatening to sue the agency for not taking over regulatory responsibility of oil and gas production.
• The 13 states that joined the most recent letter are: Alabama, Indiana, Kansas, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Texas, West Virginia, and Wyoming

Attorney General News

Democratic Attorneys General Association (“DAGA”) Hosts Policy Conference

• The Democratic Attorneys General Association is hosting a policy conference in Newport, Rhode Island this week.
• DAGA is a political organization formed to support the work of Democratic State Attorneys General. DAGA also raises and contributes funds and support to Democratic candidates for Attorney General.
• Conference topics include “Powering the Future: a discussion about how electric utilities are transitioning to cleaner generation and utilizing advanced technologies to power our economy,” the status and prospect of marriage equality in the states, and an update on 2013-2014 Attorney General races.
• Fundraisers for Rhode Island AG Peter Kilmartin and Missouri AG Chris Koster will also be held.

Hot News

The State AG Enforcement Era Has Begun

• Practice group Partners Bernie Nash, Milton Marquis, and Divonne Smoyer published the article, “The State Attorney General Enforcement Era,” in Corporate Counsel.
• The article details several ways State AG authority is expanding, including multistate actions, federal co-enforcement authority, and False Claims Acts and qui tam and reverse qui tam actions. The article also outlines the evolving areas of interest to State AG offices.

Consumer Protection

Texas Attorney General Shuts Down Unauthorized Legal Services Provider

• Texas Attorney General Greg Abbott secured a court order against Just for People, Inc. ordering the company be dissolved and cease offering unauthorized immigration consulting services.
• The company will pay $480,000 in civil penalties and must provide more than $195,000 in restitution for violations of the state’s Deceptive Trade Practices Act.
• Attorney General Abbott has shut down more than 75 unauthorized legal services providers since 2002.

Massachusetts Attorney General Settles with Auto Emissions Inspectors

• Massachusetts Attorney General Martha Coakley announced that she settled with William and Michael Daly resolving allegations that they conducted fraudulent inspections at Bill’s Auto Center.
• The AG alleged that between 2008 and 2010 the employees conducted fraudulent inspections by testing vehicles they knew would pass the emissions test, printing passing certificates for those vehicles, and using those certificates to represent vehicles with failed emissions tests.
• The process is called “clean scanning” and allegedly violates the state’s Clean Air Act, state Regulation of Business Practices, and the Consumer Protection Act.
• Under the settlement, the Dalys and the auto center must pay up to $116,000 in civil penalties, which will be waived if the Dalys and the auto center comply with the settlement agreement.
• This is the 11^th judgment AG Coakley’s office has obtained against stations and inspectors related to emissions fraud claims since 2009.

Pharmaceuticals

Thirty-Six Attorneys General Settle with Amgen

• Several State Attorneys General Offices announced a multistate settlement between Amgen, Inc. and 36 State AGs resolving claims brought under state False Claims Acts.
• The AGs allege that Amgen inflated pricing data for its prescription drugs, allegedly causing state Medicaid programs to overpay for the drugs.
• Amgen has agreed to pay approximately $11 million to settle the claims.

State v. Federal

Republican State Leadership Committee Releases Paper on State Attorneys General

• The Republican State Leadership Committee (RSLC) published “Federalism’s Top Cops: The Role of Today’s Republican State Attorneys General.”
• Written by RSLC President Christopher Jankowski, the article references increasing litigation by Republican AGs to defend “federalism” including litigation challenging the Affordable Care Act and numerous Environmental Protection Agency regulations that may encroach upon state rights.