The State AG Report

Editor-in-Chief: Christopher Allen
Contributing Editors: Grace Garver, Hannah Land, Keturah Taylor, Emily Yu

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The State AG Report Weekly Update July 2, 2015

Antitrust

Second Circuit Upholds Ruling Against Apple for E-Book Price Fixing Conspiracy

  • The U.S. Court of Appeals for the Second Circuit upheld a District Court ruling, finding that Apple orchestrated a conspiracy among book publishers to fix prices for e-books.
  • A lawsuit was brought by 33 Attorneys General, consumers, and the Department of Justice against Apple and five publishers. Apple agreed to a $450 million settlement in July 2014 to avoid a jury trial on damages, but under that settlement’s terms Apple’s payments would have been substantially reduced if the Second Circuit reversed the lower court.
  • As a result of the appellate court’s decision, Apple will pay $400 million to consumers and $50 million to states under the settlement. The five book publishers have already paid $166 million in damages to consumers as part of their settlements.

Charities

Minnesota Attorney General Reaches $1.8 Million Settlement with Thrift Store Chain

  • Minnesota AG Lori Swanson reached a settlement with the nation’s largest thrift store chain, TVI, Inc., d/b/a Savers, Inc., and its subsidiary Apogee Retail, LLC, for allegedly misleading the public about its contributions to charities from donated goods and violating state charities laws.
  • According to the complaint filed by AG Swanson in May, Savers allegedly misled the public and violated state charities laws by, among other things, not paying charities for donations of household products, selling goods for much more than is given to charity, encouraging the public to make donations to benefit one charity when the donations are actually made to another, and failing to comply with state registration and financial reporting laws.
  • According to the AG’s Office, as part of the settlement Saver’s will pay a total of $1.8 million to several charities, register with the state, disclose in any marketing that it is a “for-profit fundraising company,” and also disclose in solicitations and signs the amount it pays the charity for donations.

Consumer Protection

Florida Attorney General and FTC Stop Credit Card Interest Relief Company from Robocalling

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) filed a complaint and obtained a temporary restraining order (“TRO”) against an Orlando-based operation, Payless Solutions, and its officers for alleged violations of state and federal law for unfair and deceptive practices and telemarketing.
  • According to the complaint, the operation allegedly robocalled consumers to sell credit card interest rate reduction services, charged up-front fees ranging from $300 to $3,499 for services it typically never rendered, and made unauthorized charges after obtaining a consumer’s credit card information.
  • The TRO prohibits the operation from robocalling consumers, freezes its assets, and appoints a temporary receiver over the business.

New Jersey Attorney General and FTC Settle with App Developer over Allegations of Generating Virtual Currencies Through Malware

  • New Jersey Acting AG John Hoffman and the FTC reached a settlement with the developers of “Prized,” a mobile application, over allegations that the app violated state and federal unfair and deceptive practices laws.
  • According to the complaint, the developers allegedly marketed their app as a legitimate program that was free from malicious software, despite the fact they had created the app to take control of consumers’ smartphones to generate virtual currencies for themselves. The malware, according to the complaint, left smartphones barely functional.
  • Under the settlement, the app developers are prohibited from marketing or selling products that function as malware and must pay a penalty, among other things.

After Inquiries from Two Attorneys General, FCC, and U.S. Senators, Company Agrees to Change Autodialing Policies

  • As we previously reported, New York AG Eric Schneiderman, the Federal Communications Commission and four Democratic U.S. Senators wrote to PayPal Inc. expressing concerns and requesting more information on modifications the company made to its user agreements for possible violations of consumer protection laws.  A similar letter was also sent by Missouri AG Chris Koster last week.
  • PayPal’s new user agreements, according to the letters, would potentially allow the company to use autodialed or prerecorded calls or text messages to contact users and to collect debts, solicit opinions, and offer promotions without consumer consent and without the opportunity to opt-out.
  • In response, PayPal has altered its user agreements, to “clear up any confusion” about its provisions. Specifically, the company will only use autodialed or prerecorded calls or text messages for contacting users about fraud or debt collection relating to their accounts, which consumers will have the option to opt-out of, and will only use such contact methods for marketing purposes where they have prior express written consent by the consumer.

False Claims Act

New York Attorney General Settles with Pharmacy for Alleged Violations of the False Claims Act. 

  • New York AG Eric Schneiderman reached a settlement for $2.5 million with Trinity Homecare LLC, a pharmacy that dispenses and delivers prescription drugs directly to patient’s homes, over allegations that the company violated the False Claims Act. 
  • According to AG Schneiderman, the company “pushed infusion drugs” to hemophilia patients and then sought Medicaid reimbursement even when the drugs were unnecessary or in excessive quantity. The company also allegedly billed Medicaid for drug deliveries never received by the patient or unverified by the company.  According to the AG’s press release, the case began as a qui tam action alleging improper conduct and false Medicaid billing

 State AGs in the News

New York Attorney General Immune From Libel Stemming From Leaked Documents in a Malpractice Case

  • A New York Appellate court handed down a decision holding that New York AG Eric Schneiderman is immune from libel stemming from the leak to the press by opposing counsel of a memorandum it received from the AG’s office that contained statements critical of a prison doctor as part of a malpractice case.
  • The court upheld the New York Court of Claims’s denial of the doctor’s motion to add the Attorney General’s office to its libel suit, finding in relevant part that the AG is afforded absolute immunity in judicial proceedings where statements are made in the context of the legal action and are pertinent to the case.
  • The prison doctor, whose actions relating to the treatment of a prison inmate are part of the malpractice lawsuit filed against the state, was attempting to sue the AG’s office alleging, in part, that the disclosure of the memorandum to opposing counsel was a libelous act under a “republication” theory.

State v. Federal

40 Attorneys General File Amicus Brief in Support of Mississippi Attorney General’s Authority to Investigate Internet Companies for Violations of State Law

  • 40 Attorneys General, led by Kentucky AG Jack Conway, Arizona AG Mark Brnovich, and Louisiana AG Buddy Caldwell, filed an amicus brief with the U.S. Court of Appeals for the Fifth Circuit in support of Mississippi AG Jim Hood’s authority to investigate Google Inc. and YouTube LLC for potential violations of state law.
  • AG Hood previously sent a subpoena to Google to investigate, in part, internet search results that revealed links to websites that sell drugs without prescriptions and sites that improperly linked to copyrighted music, videos, and other material.  In March, a federal District Court in Mississippi granted a preliminary injunction blocking AG Hood’s investigation after Google filed a complaint against the AG alleging that the investigation was preempted by federal law.
  • In their amicus brief, the AGs state that the lower court’s preliminary injunction order would undermine an AG’s power to protect the public against violations of state law. They argue that Google’s lawsuit is a “premature attempt to short-circuit Mississippi’s valid administrative subpoena enforcement process” and that the court lacks subject matter jurisdiction over Google’s claims because there is no case or controversy when a complaint is based on claims the AG has not yet filed.

25 States Sue EPA Over Clean Water Act Rule Defining “Waters of the United States”

  • 25 states have filed lawsuits against the U.S. Environmental Protection Agency (“EPA”), challenging a recent rule published by the agency that defines “waters of the United States” as including tributaries and adjacent waters, and thus subjects all such waters to federal pollution laws under the Clean Water Act.
  • The lawsuits, filed separately in federal courts in Texas, North Dakota, and Georgia, allege that the EPA rule places a large amount of intrastate waters under the supervision of the federal government, which they assert, inter alia, violates states’ sovereignty rights, exceeds the federal government’s authority under the Commerce Clause, and is arbitrary and capricious in violation of the Administrative Procedures Act.