Breaking News

Businesses Have the Mic at the NAAG Consumer Protection Seminar

• In a new blog post, Maria Colsey Heard and Ann-Marie Luciano discuss the National Association of Attorneys General (“NAAG”) 2016 Spring Consumer Protection Seminar, held in Washington, D.C. this week.  The semi-annual event drew consumer protection staff from AG offices across the country who are responsible for initiating and conducting investigations and litigations under states’ broad unfair and deceptive trade practices law.

Briefing by Cozen O’Connor’s State AG Practice Members

• Cozen O’Connor’s State AG Practice Members Maria Colsey Heard and Sean Riley briefed attendees at a continuing legal education event hosted by ALM, the publisher of the National Law Journal, The American Lawyer, and other legal news sources. The briefing, titled “State Attorneys General Investigations and Enforcement,” included information on sources of AG consumer protection authority, recent AG actions in the areas of Medicaid fraud and privacy, and tips on what to do when a company receives an AG subpoena.

2016 AG Elections

Cozen O’Connor’s State AG Practice Co-Hosts Teleconference on the 2016 AG Elections

• Earlier this week, Bernard Nash and Lori Kalani, Co-Chairs of Cozen O’Connor’s nationally recognized State AG Practice, shared their insights and prognostications on the ten 2016 state AG elections (5 incumbents, 5 open seats), as part of Cozen O’Connor Public Strategies’ series of briefings on the 2016 presidential election.
• To hear a recording of the briefing, click here.

Consumer Financial Protection Bureau

Arkansas Attorney General Requests the CFPB Hold a Meeting About Recent Proposed Federal Rule Changes

• Arkansas AG Leslie Rutledge sent a letter to the Consumer Financial Protection Bureau (“CFPB”) requesting that the agency hold a conference of the states to discuss the agency’s proposal for regulating a number of financial products, including credit lines, installment loans, deposit advances, automobile-title secured loans, and payday loans.
• In the letter, AG Rutledge states that the CFPB proposal “ignores the interests of the states and seeks to impose a one-size-fits-all federal approach.” AG Rutledge writes that the proposed regulations would conflict with, constrict, and otherwise unnecessarily interfere with existing state consumer protection laws, lending standards, licensing systems, and regulatory enforcement mechanisms.
• The letter urges the CFPB to convene a conference of the states to discuss these issues before taking further action, asserting that a conference of the states would provide an opportunity to discuss various state regulatory and enforcement systems, what states have learned from their own efforts to protect consumers, and how potential federal-state conflict might be avoided.

Consumer Protection

California Attorney General Sues Software Provider for Allegedly Providing Illegal Gambling Devices

• California AG Kamala Harris filed a complaint against software provider Pong Marketing & Promotions Inc. (“Pong”) for allegedly violating state criminal and unfair competition laws by engaging in illegal gambling.
• According to the AG’s office, Pong’s software allegedly was used in computer gambling devices in “sweepstakes” cafes across the state, which, according to the AG’s office, operate as mini-casinos. After the California Supreme Court ruled that the devices were illegal, Pong allegedly modified its software so that users could redeem cash prizes by executing the “skill” of clicking a mouse to stop a moving cursor during a specified time period. Generally, games of skill are exempt from California’s gambling laws.
• The AG’s complaint seeks injunctive relief and approximately $10 million in penalties.

FTC Settles with Dietary Supplement Marketers for Allegedly Deceptive Advertisements

• The Federal Trade Commission (“FTC”) reached a settlement with Lunada Biomedical, Inc. and its officers over allegations the company violated the FTC Act by using unsubstantiated claims to deceptively market a dietary supplement.
• According to the amended complaint, Lunada allegedly made unsubstantiated claims that dietary supplement Amberan alleviates every common symptom of menopause and causes weight loss, and allegedly also failed to disclose their relationship with consumer endorsers and falsely claimed high consumer satisfaction and success rates.
• Under the terms of the proposed stipulated order, Lunada must pay $250,000 of a suspended $40 million judgment, and is prohibited from, among other things, making claims that a dietary supplement treats specific symptoms of menopause, causes weight loss, or treats any disease unless they have human clinical testing sufficient to substantiate such claims.

Texas Attorney General Reaches Settlement with PayPal Over Privacy and Security Disclosures

• Texas AG Ken Paxton settled with PayPal, Inc. over allegations PayPal violated the Texas Deceptive Trade Practices Act by failing to explain to users of its mobile phone money transfer application how users’ personal information would be used and shared.
• According to the AG’s office, PayPal’s mobile money transfer application Venmo allegedly used consumers’ phone contacts without clearly disclosing how the contacts would be used, did not clearly disclose how consumers’ transactions and interactions with other users would be shared, and misrepresented that communications from Venmo were actually from other Venmo users.
• Under the terms of the settlement, PayPal agreed to pay $175,000 to the State of Texas and improve its disclosures to consumers regarding privacy and security.

Employment

New York Attorney General Sues Pizza Delivery Chain and Its Franchisees for Alleged Underpayment of Wages

• New York AG Eric Schneiderman filed a lawsuit against Domino’s Pizza, Inc., Domino’s Pizza LLC and Domino’s Pizza Franchising LLC (collectively, “Domino’s”), as well as three Domino’s franchisees, over allegations that they violated state labor laws by underpaying pizza delivery workers.
• According to the petition, the three franchisees underpaid pizza delivery workers by failing to pay the legal minimum wage and overtime rates, and failing to adequately reimburse workers for their delivery expenses. According to the AG’s office, the alleged underpayments were primarily due to a computer system that Domino’s allegedly urged franchisees to use for payroll, which under-calculated gross wages.
• The petition also alleges that Domino’s is responsible for the underpaid wages as a joint employer of the franchisee workers. According to the AG’s Memorandum of Law in support of the petition, Domino’s is a joint employer because it exercised an “unusually high level of control over employee conditions,” and played a role in causing the wage violations.

Environment

New York Attorney General Settles with Home Improvement Stores Over Alleged Violations of State Law Protecting New York Waters

• New York AG Eric Schneiderman entered into two separate settlements with The Home Depot, Inc. and Lowe’s Home Centers, LLC to resolve allegations that they failed to display phosphorus-containing lawn fertilizers in a manner required by state law.
• New York’s Nutrient Runoff Law, intended to reduce water pollution caused by excess phosphorus running off lawns into New York waters, requires retailers to display lawn fertilizers containing phosphorous separately from those that are phosphorus-free, as well as to post signs that notify consumers about the legal restrictions on using phosphorus-containing lawn fertilizer. According to the AG’s office, Home Depot and Lowe’s were commingling phosphorous-containing fertilizers with phosphorus-free fertilizers in their displays and failing to display the required signage in violation of state law.
• According to the settlements, Home Depot will pay $78,000 and Lowe’s will pay $52,000 in penalties to New York State. The settlements further require both retailers to bring their stores in New York into full compliance with the Nutrient Runoff Law.
• In May 2015 the AG reached a settlement with Wal-Mart Stores, Inc. involving similar allegations.

Health Care

California, Washington Attorneys General Sue Medical Product Manufacturer for Alleged False and Deceptive Practices Related to Surgical Mesh Product

• California AG Kamala Harris and Washington AG Bob Ferguson filed separate complaints against Johnson & Johnson, Ethicon, Inc., and Ethicon US, LLC (collectively “J&J”) in state courts for alleged violations of state consumer protection laws for allegedly false and deceptive marketing of a surgical mesh product (“mesh”) designed to treat pelvic floor conditions in women. AGs Harris and Ferguson co-led an investigation by 46 states and the District of Columbia into the company’s practices regarding the mesh.
• According to the California and Washington complaints, J&J allegedly misrepresented the safety of the mesh and neglected to inform consumers and physicians of potential treatment complications and the full risks associated with the mesh. The AGs allege that the mesh caused women to face issues with urinary dysfunction, loss of sexual function, chronic inflammation and pain, and risk of chronic infection.
• The AGs seek, among other things, injunctive relief, monetary penalties and investigation costs.