U.S. Supreme Court Bars State Suit Against Indian Community for Operating a Casino Outside Indian Lands
The U.S. Supreme Court ruled, in a 5-4 decision in the case of Michigan v. Bay Mills Indian Community, that tribal sovereign immunity bars Michigan’s suit against the Bay Mills Indian Community for opening a casino outside Indian lands. Justice Sotomayor filed a concurring opinion. Justices Scalia, Ginsburg, and Thomas joined by Scalia, Ginsburg, and Alito filed dissenting opinions. We had listed this as a case to watch in an October 2013 blog post. Sixteen AGs had filed a brief in support of the petitioner, Michigan. Oklahoma had submitted a separate brief supporting the petitioner. The decision affirmed a judgment of the U.S. Court of Appeals for the Sixth Circuit. The Supreme Court stated, “We hold that immunity protects Bay Mills from this legal action. Congress has not abrogated tribal sovereign immunity from a State’s suit to enjoin gaming off a reservation or other Indian lands. And we decline to revisit our prior decisions holding that, absent such an abrogation (or a waiver), Indian tribes have immunity even when a suit arises from off-reservation commercial activity. Michigan must therefore resort to other mechanisms, including legal actions against the responsible individuals, to resolve this dispute.” In addition to civil or criminal actions against tribal officials, the court also mentioned that states can use their leverage in negotiating a compact to bargain for waiver of the tribe’s immunity. Michigan AG Bill Schuette said he would follow the court’s advice and target individual tribal members for civil and criminal penalties.
State False Claims Act Enforcement Explodes in 2014
Over the last decade, False Claims Act (“FCA”) litigation has exploded, and actions asserting new theories of liability are resulting in increasingly large recoveries. Last year the U.S. Department of Justice (DOJ) announced that it had recovered $3.8 billion under the federal FCA in FY 2013. From all appearances FY 2014 promises to be another “banner year for civil fraud recoveries,” and the DOJ has already put up impressive numbers. While the DOJ continues to vigorously pursue FCA cases against companies in the health care and other sectors, cash-strapped states are now following suit. State Attorneys General (AGs) have increasingly pursued novel and creative FCA actions, as have private plaintiffs, who are authorized by qui tam provisions to stand in the shoes of states to sue and receive part of any recovery. A driver of this action was the Deficit Reduction Act (DRA) of 2005, which authorized states to receive, in addition to their own recoveries, 10 percent of the federal government’s share of recovered Medicaid funds if their FCAs are at least as robust as the federal FCA. As a result, since 2005 nearly a dozen states have either enacted false claims statutes or have amended existing statutes to make them equally or more robust than the federal FCA, including incorporating qui tam provisions and broadening the circumstances under which companies can be found liable for violations. Because many states are facing substantial budget pressure, FCA activity, in particular Medicaid fraud cases, are likely to substantially increase in 2014 and beyond. Plaintiff’s lawyers have also taken notice of the potential for large automatic recoveries in qui tam suits. This upward trend is likely to continue as plaintiffs increasingly assert multiple state FCA claims alongside federal claims and attempt to work alongside AGs in pursuing such cases. There are steps companies can take to reduce their potential exposure to FCA actions brought by the federal government, AGs, and/or qui tam plaintiffs. To read more about those steps, read our recent blog post on this topic.
Texas Primary Runoff Election Results
Texas held its primary runoff elections following its March 4 primary. Ken Paxton defeated Dan Branch for the Republican AG nomination by a margin of 63.4% to 36.6%, with 38% of precincts reporting. Paxton will face Democrat Sam Houston in November’s general election.
Arizona Primary Election Candidates
Arizona’s filing deadline passed on May 28. The candidates for the August 26 primary are Mark Brnovich (R), Tom Horne (R), and Felecia Rotellini (D).
We will continue to provide updates on AG-related elections. For breaking news, please follow us on Twitter @StateAGMonitor.
Consumer Financial Protection Bureau
Consumer Financial Protection Bureau Issues Supervisory Report on Payday Lender, Debt Collection, and Consumer Reporting Markets
The Consumer Financial Protection Bureau (CFPB) issued a supervisory report regarding consumer problems discovered by the CFPB while supervising the three nonbank financial markets of payday lenders, debt collectors, and consumer reporting agencies. Issues reported by the CFPB examiners in the payday lender market included lenders allegedly deceiving consumers to collect debt, illegally harassing borrowers, and hiring third-party collectors that illegally deceive and harass borrowers. Issues reported by the CFPB examiners in the debt collection market included debt collectors allegedly illegally misleading consumers about litigation, making excessive and illegal calls to consumers, and failing to investigate consumer credit report disputes. Finally, issues reported by the CFPB examiners in the consumer reporting market included consumer reporting agencies allegedly improperly handling consumer credit report dispute documents, and encouraging consumers to file disputes online or by telephone and then refusing to accept these consumer disputes.
Consumer Financial Protection Bureau Announces Development of Proposed Auto Lending “Larger Participant” Rule in Its Rulemaking Agenda
The Dodd-Frank Act authorizes the Consumer Financial Protection Bureau (CFPB) to supervise certain nonbank entities providing consumer financial products and services, including mortgage companies, private student lenders, payday lenders, and nonbanks the Bureau defines through rulemaking as “larger participants.” So far, the CFPB has issued rules to supervise the larger participants in the debt collection, consumer reporting, and student loan servicing markets. The CFPB announced in its spring 2014 rulemaking agenda that it is finalizing a rule that will define larger participants in the international money transfer market. It also announced in its agenda that it is developing a proposal to identify larger participants in the auto lending market. The CFPB’s agenda also lists payday loans and deposit advance products, overdrafts, and debt collection in the pre-rule stage. In the proposed rule stage, along with defining larger participants in the auto lending market, the CFPB lists requirements for prepaid cards.
Three Attorneys General Will Investigate Alleged eBay Data Breach
Connecticut AG George Jepsen, Florida AG Pam Bondi, and Illinois AG Lisa Madigan have announced investigations of an alleged data breach of eBay user passwords. According to a news report, AG Jepsen’s office stated that the investigations by the states would focus on eBay’s measures for securing data, circumstances that led to the breach, and the company’s response. AG Bondi is saying that the breach may have a magnitude of historic proportions. As we posted last month, AG Jepsen and AG Madigan, along with other AGs, also investigated Experian plc’s alleged data breach, which may have exposed millions of social security numbers.
California AG Kamala Harris issued recommendations to businesses that may collect personally identifiable information from state residents regarding how to craft effective, transparent, and compliant privacy policies for consumers. The recommendations include: prominently labeling the section of the policy that addresses online tracking and “do not track” disclosures; describing how consumers may respond to an Internet browser’s “do not track” signal; stating whether third parties are or may be collecting personally identifiable information; making the policy readable; and using plain, straightforward language rather than jargon. The recommendations, which follow the release of a cybersecurity guide by the AG to small businesses in March, are a “tool for businesses to create clear and transparent privacy policies that reflect the state’s privacy laws and allow consumers to make informed decisions,” stated AG Harris.
Massachusetts Attorney General Settles Hazardous Air Emissions Allegations With Laboratory Companies for $1.75 Million
Massachusetts AG Martha Coakley settled with Alpha Analytical, Inc., Accutest Laboratories of New England, Inc., Spectrum Analytical, Inc., and Con-Test Analytical Laboratory, four laboratory companies that perform commercial-scale environmental testing, to resolve allegations that they failed to obtain required state permits and control hazardous air pollutant emissions. Pursuant to the consent judgments Alpha will pay $700,000 and Accutest, Spectrum, and Con-Test will each pay $350,000. The companies must also comply with state air permitting requirements and install emission control equipment for sample analyses that will reduce hazardous air pollutant emissions.
Wisconsin Attorney General Settles Air Pollution Allegations With Electric Power Company
Wisconsin AG J.B. Van Hollen obtained a stipulated judgment against Wisconsin Electric Power Company for alleged air pollution violations. Wisconsin Electric Power allegedly replaced blades on two of its turbine units, which AG Van Hollen argued constituted a major modification under state air pollution regulations and thus became subject to stricter nitrogen oxide emission limits. Testing indicated that the company’s emissions allegedly did not comply with the legal limits for nitrogen oxide emissions that applied after the modifications were made to the turbines. The judgment requires the company to pay $50,000 in forfeitures, statutory surcharges, and costs.
Twenty Attorneys General Challenge Affordable Care Act
Twenty attorneys general led by Texas AG Greg Abbott filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit, in the case of Hotze v. Sebelius, challenging the Affordable Care Act (ACA). The AGs argue that the ACA is unconstitutional because it does not comply with the U.S. Constitution’s Origination Clause, which provides that all bills for raising revenue shall originate in the U.S. House of Representatives. They state that the U.S. Supreme Court, in National Federation of Independent Business v. Sebelius, upheld the ACA under Congress’s power to tax. The AGs conclude that because the U.S. Senate was the first to craft the ACA, it is not constitutional because it does not comply with all the constitutional requirements for tax statutes. “The federal government cannot have it both ways,” states Kansas AG Derek Schmidt who joined the brief. “If the individual mandate is constitutional because it is a tax, then the bill that created it must comply with all the constitutional requirements for a tax bill.” For more on the AGs involvement with the ACA, including their evolving consumer protection role under this act, see our recent blog post.
State AGs in the News
New York Attorney General and Airbnb Enter Into Agreement Regarding Compliance With Subpoena
New York AG Eric Schneiderman and Airbnb entered into an agreement regarding Airbnb’s compliance with a subpoena that requested information on Airbnb hosts as part of an investigation into potential violations of state tax and hotel laws. Pursuant to the agreement Airbnb will provide the New York AG with the requested information about its hosts, but the information will be redacted of personal information, including names, email addresses, social security numbers, and tax identification numbers. Airbnb will only provide the redacted information upon request and only for those hosts that become subject to an investigation or an enforcement action by the state. Airbnb will also require all new hosts that list properties within the state to view and click through a notice regarding the state multiple dwelling, tax, rent regulation, zoning, and business licensing laws. Airbnb will also send this notice in a separate email to all hosts that currently list properties in the state. According to a joint statement by AG Schneiderman and Airbnb, the agreement “appropriately balances [AG] Schneiderman’s commitment to protecting [state] residents and tourists from illegal hotels with Airbnb’s concerns about the privacy of thousands of other hosts.”
Twenty-Three Attorneys General File Amicus Brief Opposing Connecticut Gun Law
A group of 23 AGs led by Alabama AG Luther Strange filed an amicus brief in the U.S. Court of Appeals for the Second Circuit against a Connecticut gun law that bans certain kinds of semiautomatic firearms. A group of 22 AGs led by AG Strange recently filed an amicus brief in the same court opposing a similar New York law. The groups filing the two amicus briefs consist of the same 22 AGs, with the addition of New Mexico AG Gary King on the amicus brief opposing the Connecticut law. The briefs argue that the New York and Connecticut bans are unconstitutional because those states failed to show that the bans would increase public safety or decrease gun violence.