Antitrust

Settlement to Resolve Allegations of Unlawfully Restrained Competition Obtained by New York Attorney General

  • New York AG Eric Schneiderman settled with waste hauling company Casella Waste Systems, Inc. to resolve allegations that it unlawfully restrained competition by combining restrictive contracting practices with market dominance and a pattern of acquiring smaller competitors.
  • The company’s contracts allegedly required it to be an exclusive provider, had long terms and severe early termination penalties, and allowed the company the right to match any competing offers. The AG alleged that long and restrictive contracts could entrench the market position of a dominant firm. The AG also alleged that the company had further strengthened its position through a pattern of acquiring smaller companies in key markets.
  • The settlement requires Casella to change its contracts, report any acquisitions of competitors to the AG, and pay the state $100,000. According to the AG, Casella entered into similar settlements with the Vermont AG in 2002 and 2011.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Enforcement Action Against Financial Services Company Results in $10 Million Recovery

  • The Consumer Financial Protection Bureau (CFPB) took enforcement action against Ace Cash Express for alleged use of illegal debt collection practices, resulting in a consent order that requires Ace to pay $5 million in consumer restitution and a $5 million civil penalty.
  • The CFPB alleged that Ace engaged in unfair, deceptive, and abusive practices to collect consumer debt by threatening litigation or criminal prosecution, threatening to charge extra fees and report consumers to credit agencies, and harassing consumers with collection calls. The CFPB further alleged that these practices created a false sense of urgency to pressure borrowers into taking additional loans that they could not afford.
  • The order requires Ace to refund $5 million in consumer payments, including fees and finance charges; pay a $5 million civil penalty; not engage in any unfair or deceptive collection practices; not use any abusive practices; submit a compliance plan to the CFPB; and be subject to further reporting and recordkeeping requirements.

CFPB Sues Law Firm for Allegedly Wrongful Debt Collection Practices

  • The CFPB sued Frederick J. Hanna & Associates and three of its principal partners for allegedly using illegal tactics to intimidate consumers into paying debt that they may not owe.
  • The CFPB alleges that the firm filed hundreds of thousands of debt collection lawsuits, often relying on deceptive court filings and faulty or unsubstantiated evidence.
  • The complaint alleges violations of the Fair Debt Collection Practices Act, which prohibits misrepresentations to consumers, and the Dodd-Frank Act, which prohibits deceptive acts or practices in the consumer financial marketplace. The CFPB seeks injunctive relief, damages, restitution, disgorgement, civil penalties, and costs.

Consumer Protection

Illinois Attorney General Sues Two Student Loan Debt Relief Companies

  • Illinois AG Lisa Madigan filed a lawsuit against First American Tax Defense LLC and Broadsword Student Advantage LLC alleging that they violated the state Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act. AG Madigan claims that these lawsuits are the first in the nation of their kind because they involve an allegedly new industry of student loan debt fraud that exploits those struggling to repay debt.
  • The companies allegedly were not licensed, engaged in deceptive marketing, illegally charged upfront fees, and offered fraudulent services or charged for services that are free through the government.
  • The AG seeks declaratory and injunctive relief, damages, to revoke or suspend all licenses, to void the company’s contracts with consumers, consumer restitution, civil penalties, and costs.

New York Attorney General Seeks to Delay Launch of Ridesharing Service

  • New York AG Eric Schneiderman and the state Superintendent of Financial Services sought a temporary restraining order against Lyft, a ridesharing service, to delay its scheduled launch in New York City.
  • The AG and Superintendent alleged that Lyft’s business practices do not comply with state lawbecause among other things, the company does not use drivers that have commercial insurance or are licensed by the city’s taxi commission.
  • According to a news report, Justice Kathryn Freed did not issue the restraining order after Lyft’s lawyers said at a hearing that the service won’t start until “the i’s are dotted and t’s are crossed.” Justice Freed stated, “I’m extending what is essentially a status quo.”

New York Attorney General Settles With Beverage Company to Resolve Allegations of Misleading Advertising

  • New York AG Eric Schneiderman settled with the Varas Group to resolve allegations that it engaged in misleading advertising and social media campaigns to promote its Chicha Limeña soft drinks.
  • Varas allegedly advertised its soft drink as containing an ingredient (purple maize) that fights cancer, obesity, and diabetes, and has other health benefits. According to the AG, while purple corn/maize is touted as containing high levels of antioxidants, the health benefits have not been established in scientific literature.
  • Pursuant to the settlement, Varas will not make health related claims in its marketing materials and will pay $5,000 in penalties, costs, and fees.

Data Privacy

Vermont Attorney General Fines Small Business for Failing to Notify Consumers of Alleged Security Breach

  • Vermont AG Bill Sorrell, pursuant to an assurance of discontinuance, fined Mayfield, Inc., doing business as Shelburne Country Store, $3,000 for allegedly failing to inform online buyers of a security breach that compromised their credit card information.
  • The state’s Security Breach Notice Act requires businesses to notify the AG within 14 days of discovery of a data breach, and to notify consumers in the most expedient time possible, but no later than 45 days after discovery. The AG alleged that the breach happened in late 2013, that Mayfield was informed of the breach on January 9, 2014, but that Mayfield did not notify consumers until March 19, after being contacted by the AG’s office.
  • “At this stage of the game… we will not accept the excuse that a business did not know of its obligations to report a breach,” stated the AG.

New York Attorney General Issues Data Breach Report and Recommendations to Businesses and Consumers

  • New York AG Eric Schneiderman issued a report on the number, complexity, and costs of data breaches in the state. The report, Information Exposed: Historical Examination of Data Security in New York State, looks at an eight-year period from 2006 to 2013.
  • According to Information Exposed, reported data breaches tripled during the examined period and 22.8 million personal records were exposed in nearly 5,000 breaches. The report states that in 2013 alone, 7.3 million personal records were exposed in more than 900 breaches, costing upward of $1.37 billion.
  • The report found that “hacking” intrusions, in which third parties gain unauthorized access to data stored on a computer system, were the leading cause of breaches, accounting for nearly 40 percent of all breaches.
  • The AG also made recommendations on steps that organizations and consumers can take to protect themselves from data loss, including identifying and minimizing data collection practices, taking immediate action in the event of a breach, and creating strong passwords.

Employment

Agreements With Employment Agencies Announced by New York Attorney General

  • New York AG Eric Schneiderman announced agreements with five employment agencies to resolve allegations that the agencies engaged in unlawful discrimination and predatory business practices directed at immigrant job applicants. The five companies are Excellent Employment Agency, United Employment Agency, Patricia Employment Agency, Rivera Employment Agency, and Sunset Employment Services.
  • The agencies allegedly collected nationality, gender, and age information from job applicants to direct them to employers with allegedly discriminatory preferences or to jobs paying less than the applicable state minimum wage. The agencies also allegedly charged excessive referral fees and failed to provide refunds of advance fees.
  • Pursuant to the agreements, the companies must not engage in unlawful discrimination when making job referrals, refer applicants to jobs paying below minimum wage, charge excessive fees, or refuse to refund advance fees. In addition, the companies must pay $20,000 in penalties, fees, and costs; report to the AG any employers that make discriminatory requests or seek applicants for jobs paying below minimum wage; revise their policies and procedures; and obtain training.

Environment

New York Court Dismisses Lawsuits Regarding Hydrofracking

  • New York AG Eric Schneiderman announced that state Supreme Court Justice Roger McDonough issued two decisions dismissing two lawsuits that sought to force the state Department of Environmental Conservation (DEC) to terminate its ongoing review of the environmental impacts related to high-volume hydrofracking.
  • Hydrofracking is a hydraulic fracturing process used to drill for natural gas. The lawsuits, brought by the trustee of bankrupt gas development company Norse Energy and the Joint Landowners Coalition of New York against the state, asked the court to compel the DEC to terminate its environmental review of the practice.
  • The AG represented the state in the cases and asked the court to dismiss the lawsuits. “The court’s decision to allow the state review of hydrofracking risks to continue is an important victory in our effort to ensure all New Yorkers have safe water to drink and a clean, healthy environment,” stated the AG.

False Claims Act

Forty-Five States and the Federal Government Settle With Astellas Pharma for $7.3 Million

  • Forty-five states and the federal government settled with Astellas Pharma US, Inc. for $7.3 million to resolve state and federal false claim allegations related to its product, Mycamine.
  • Mycamine is a sterile, lyophilized antifungal agent approved by the U.S. Food and Drug Administration (FDA) to treat adult patients suffering from serious and invasive infections caused by the Candida fungus and to prevent Candida infections in adults undergoing stem cell transplants.
  • During the relevant period, Mycamine was not approved by the FDA to treat pediatric patients. Astellas allegedly knowingly marketed and promoted the drug during that period to pediatric patients causing false claims to be submitted to state and federal health care programs for uses of the drug that were not approved by the FDA.
  • The settlement stems from a qui tam action that was filed in the U.S. District Court for the Eastern District of Pennsylvania.

Health Care

Attorneys General Investigating Pelvic Mesh Products

  • Texas women claiming alleged injuries from pelvic mesh implants, which are used to correct pelvic organ prolapse, sent a letter to Texas AG Greg Abbott requesting an investigation. A spokesperson for the AG declined comment, but confirmed that the AG’s office is leading a nationwide investigation of mesh products that includes nine other states.
  • According to a news report, the women suggested that the AG pursue legal action against Johnson & Johnson, a maker of the implants, for allegedly engaging in deceptive business practices in violation of consumer protection laws.
  • Representatives of Johnson & Johnson did not respond to requests for comment, but the company’s lawyers have argued in lawsuits that the implants were effective and that the company properly warned consumers about related risks.

Mortgages/Foreclosures

Five Attorneys General and the Federal Government Settle Mortgage-Backed Securities Claims With CitiGroup for $7 Billion

  • Following investigations, the AGs for CaliforniaDelawareIllinoisMassachusetts, and New Yorkand the U.S. Department of Justice (DOJ), settled with CitiGroup, Inc., for $7 billion to resolve claims related to its conduct in the packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities.
  • The settlement, which includes an agreed upon statement of facts, requires CitiGroup to pay $4.5 billion of the $7 billion to state and federal entities and $2.5 billion to consumers as relief, which will include loan modifications and refinancing for distressed borrowers.
  • The $4.5 billion to state and federal entities will be divided as follows: $4 billion to DOJ as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA); $208.25 million to the Federal Deposit Insurance Corporation; $102.7 million to California; $92 million to New York; $45.7 million to Massachusetts; $44 million to Illinois; and $7.35 million to Delaware.
  • According to the DOJ, the $4 billion civil penalty is the largest penalty to date under FIRREA.

State AGs in the News

Former Utah Attorneys General Charged on Criminal Allegations  

California Attorney General Convenes Multinational Law Enforcement Summit on Technology and Transnational Crime

  • California AG Kamala Harris will convene officials, including U.S. state AGs, U.S. federal officials, the Mexico AG, the El Salvador AG, and Mexico state AGs, for a multinational summit focused on the use of technology to fight transnational organized crime.
  • The summit, which will take place on July 20, will be held in association with the annual meeting of the U.S. Conference of Western Attorneys General and will focus on intellectual property violations, money laundering, and human trafficking.
  • In March, we blogged about AG Harris and four other AGs signing a letter of intent with Mexico to fight money laundering. The letter and this summit follow a delegation visit, led by AG Harris, to Mexico to enhance efforts to combat transnational crime.

States v. Federal Government

Maine Attorney General Sues Environmental Protection Agency

  • Maine AG Janet Mills filed a lawsuit against the U.S. Environmental Protection Agency (EPA) alleging that it failed to approve the state’s water quality standards under the Clean Water Act.
  • The complaint alleges that the state submitted revised standards, which included standards for waters that are arguably within Indian territories or land, to the EPA more than one year ago. The AG alleges that the EPA had begun in 2004 to limit its approvals to waters outside of Indian territories and land.
  • The AG asserts that the EPA has a duty to either approve the state’s revisions to its standards or identify any necessary changes the state must make to its standards for approval. AG Mills argues that the EPA has not fulfilled either of its duties, which creates uncertainty for state residents.
  • The AG seeks a declaration that the state’s jurisdiction extends to all waters of the state, including waters that are arguably within Indian territories or land; a declaration that the revised standards are deemed approved by the EPA and in effect; and award of attorney fees and costs.