Chris Allen

Welcome to the fifth season of State AG Pulse. In this season, we’ll be digging into the weekly state AG news to bring you our insights on the impact of state attorneys general across a broad range of industry sectors. From technology to healthcare and telecommunications to consumer financial services, state attorneys general continue to wield extraordinary influence, not only in their own states, but also on the national stage. Now, on to this week’s episode.

Thank you for joining us for another episode of State AG Pulse. My name is Chris Allen. I am a partner in Cozen O’Connor’s State AG practice. And today I am very excited for both our topic, which I think again is very, very timely as well as for the guests we have to break these issues down. So first of all, we are joined by my partner and the co-chair of our state attorney general practice and the former attorney general of Arkansas, Dustin McDaniel. Dustin, welcome to your first recording of the state AG pulse.

Dustin McDaniel

Thanks. It’s great to be with you. Appreciate the invitation.

Chris Allen

We are also joined by another first timer, Grace Garver, one of our fantastic associates here in the State AG group. She sits right down the hall from me here in Washington, D.C. Hi, Grace, how are you?

Grace Garver

I’m doing well, thank you.

Chris Allen

Fantastic. So for those of you joining us today, last time we covered breaking news in the form of the DEI initiatives being pushed out by the Trump administration by others and the state AG attorney general reaction to that. Given the fantastic response we had to that episode, we thought maybe we’d talk about something else in the current events. And that is the changes that have occurred to the federal government, particularly regulatory agencies, and how state AGs are reacting to that.

So I don’t think anyone listening to this podcast can be ignorant of the fact that the Trump administration has embarked on a wholesale reorganization of the federal government. And regardless of your opinion on this subject, it has resulted, I think, in a dramatic transformation in how those federal regulatory agencies act. Lately we’ve seen a reduction in force followed by a pretty much complete freezing of activity over at the Consumer Financial Protection Bureau, the CFPB. We’ve also seen two Democratic commissioners fired from the FTC. And that’s in addition to other reductions in force and reorganizations in agencies ranging from the EPA to the SEC. And the reason that we are talking about this on State AG Pulse is because state attorneys general actually have concurrent enforcement authority either over state laws that parallel the areas that are touched by these federal regulatory agencies, or they actually have co-enforcement authority over the same statutes that these federal regulatory agencies are responsible for enforcing. So what I thought we’d do today is break down a little bit more about the nexus between these federal regulatory agencies and what state AGs are doing. And first, I’m going to turn to you, Dustin. You were attorney general of Arkansas. You oversaw an office that as many AG offices do, was responsible for a wide panoply of areas from consumer protection to antitrust. What was your relationship like with the federal regulatory counterparts?

Dustin McDaniel

Well, thanks for that, Chris. It’s good to be with you. Yeah, I served as attorney general of Arkansas from 2007  until  2015  . That doesn’t seem like that long ago, but it truly was a different era in American government. I was the youngest AG in the United States for six of my eight years. And the whole time I was there, I just thought this was how it was supposed to work. I didn’t realize that it was sort of a unique time window when states work together without great regard for political party affiliations. And, you know, we would stand up against the federal government when we thought that we should, and we would stand up for the federal government when we thought they were doing the right thing. And we didn’t really regard ourselves with who was in the White House. I was a Democratic attorney general and was more than happy to file suit against President Obama’s EPA or fight cases. In fact, we fought a couple of jury trials against DOJ in federal court in Arkansas, even though he and I were of the same party. And at the same time, you know, in my early couple of years, I would find ways to work with the Bush administration. It was purely a matter of case-by-case policy rather than some sort of political fealty. Unfortunately, today that’s not quite the case. What we saw over the last eight years really from Trump, Trump . and then the Biden administration and now Trump . is that about half of this nation’s attorneys general are going to be pretty much in lockstep trying to defend the president’s policies. And the other half are going to be in lockstep trying to oppose the president’s policies. Both sides have become quite a bit more sophisticated about how they do that, since then.

And we’re seeing that playing out now. That’s the biggest change. I can tell you that working across the aisle with your fellow attorneys general, regardless of party affiliation, that is the tradition. And it does still happen among AGs more than it does really in any other area of American government now. And I think that’s a wonderful thing. And I’m glad to see that it still happens. But when it comes to administration policies, we’ve seen a much more cohesive line on both sides, of people figuring out where they’re going to be.

Chris Allen

Yeah, it’s interesting you mention the bipartisanship that still happens in this area and you look back in the history…

Dustin McDaniel

By the way, are we allowed to drink coffee on the podcast? Is that all right? I don’t want to interrupt the podcast flow here, with informality, but I’m told that that is a hallmark of our podcast is informality.

Chris Allen

Yes. yes, it is a hallmark and also Folgers, if you’re out there and you’re looking to sponsor our podcast, we’d be happy to have you. Starbucks, Grace, you have Starbucks there. I would be very happy if they would throw some free espresso my way, but, back to the topic, Dustin, mentioned the bipartisanship of state AGs, working with their federal counterparts, I think in some of these regulatory areas. And that’s fascinating to me because if you look at some of the biggest efforts that have really ever been undertaken and I’m thinking here about, for example, the mortgage servicer settlements. I think that was back in . You had all ,  or  AGs working in tandem with HUD and the USDOJ. Right now you have various AGs engaged against various tech companies that are joint actions in many cases between the, or at least parallel actions between the FTC and state AGs. So, you know, it really is interesting that even though that I agree with you, Dustin, the landscape’s really changed, bipartisanship continues in this area. It’s funny thinking back to when the CFPB was set up, talking specifically about them, there kind of was a bipartisan era because that was in the aftermath or around the time of that bipartisan, multi-billion dollar mortgage foreclosure settlement that I mentioned. I don’t know if many of our listeners know that the state attorneys general were actually instrumental in setting that up. Dustin, think you were in office at the same time Roy Cooper was AG in North Carolina. And I know General Cooper was a strong supporter of the establishment of the CFPB. And I think you had more than a few Republicans too, who were actually supportive of the setup of that, you can see.

Dustin McDaniel

No, that’s exactly right. And you’re right about the history. So if you, if you go back to, all the way back to , when the National Association of Attorneys General, which has the unfortunate acronym of NAAG, was formed, it was created primarily to address antitrust, Standard Oil and federal preemption issues. If you fast forward to today, antitrust, competition issues in the marketplace, still a dominant theme among state AGs and in their cooperative efforts with their federal counterparts, which in that area is FTC, DOJ especially, that’s still strong. And by the way, what once was rather ubiquitously referred to as federal preemption now is federal overreach, that no matter which party is in the minority, they believe the party of the majority is engaged in terrible federal overreach and that state sovereignty is the great firewall against that. So you’re exactly right. In the era when I was attorney general, my first term was when we saw the financial crisis of , . I never heard of a subprime mortgage derivative before that. We knew that bad mortgage debt could be bundled together and turned into essentially an equity to be traded on an open market, and everybody knew they were pretty much worthless. And so the key was to get your profit out of it before the music stopped and everybody had to say, oh yeah, these are actually worthless. That led to state attorneys general banding together to frankly address the mortgage fraud crisis in a way that was not something that was feasibly done by the federal government alone. But if you go back from that even a decade, it was the state attorneys general in  that together brought about the big lawsuit settlement with Big Tobacco and changed forever the way tobacco is sold and marketed in the United States and the remedies to the states for tobacco. Two years after that, it was the state attorneys general, not the federal government, that was successful against Microsoft in the landmark modern antitrust case. And it was at the end of Trump . when Bill Barr’s attorney general term was ending at DOJ that he brought a case that was led by the Republican and Democratic attorneys general of Colorado and Nebraska and joined by other attorneys general in pursuing Google for monopolistic abuses of their market share in the search market. And it was just last year under Biden that that litigation came to fruition. And a judge has said that Google is in fact an abusive monopolistic player, and it is now back with Pam Bondi, with whom I served as attorney general, uh, when she was AG of Florida, that they are continuing that effort. So, you know, there are not a lot of things that you can look to and see that from Trump to Biden to back to Trump, that the policy stayed the same and the commitment remained steadfast, but antitrust was one of them and working with state AGs was one of them. And, and you’re right, I know, about CFPB. I remember going to the Hill at the time it was not and is not uncommon in federal law for there to be concurrent enforcement authority with state attorneys general and federal agencies. When Dodd-Frank was being pushed through, a myriad of financial reforms were being adopted trying to prevent from happening again what happened in -. One of the priorities was to create, and was very controversial, there’s no doubt about that, and it has remained controversial since the day that it was enacted, but just to create the CFPB, a whole new cop on the beat watching out for financial transactions of ordinary citizens and big banks especially. And it has been the bane of the existence of the financial industry ever since in many ways, but there is concurrent enforcement authority in that legislation for that agency, for AGs. So even though the president has laid off essentially the entire workforce at CFPB, their regulations still remain the law. The act that created it still remains the law. And now instead of one cohesive enforcement authority, you have ,  if you count DC,  if you count the territories, concurrent authorities that we don’t have any idea how they’re all going to look at it.

Chris Allen

That’s a fantastic point. And Dustin, you mentioned the layoffs at CFPB. Grace, very quickly, can you tell us what exactly is going on right now? What’s the current state of play with the CFPB? Because as Dustin said, with an agency with such a broad enforcement remit, I think what happens to it over the next several weeks and months is going to be very important to understand.

Grace Garver

Yeah, happy to hop in here, Chris. Thank you. So I think as we’ve all been hinting at, the CFPB is definitely in a bit of state of flux right now. So just to kind of sum up what’s happened since Trump took office. Back in February, Trump’s Treasury Secretary moved to halt the agency activities of the CFPB, including new rule makings. Then the CFPB’s acting director closed the CFPB’s headquarters and stated his intent to decline to withdraw funds on behalf of the agency, effectively, you know, further halting their activities. The agency staff has also been reduced by more than  percent and they have stated their intent to make further cuts. On the litigation side, the agency has also dropped some of its ongoing cases against major banks, although interestingly they’ve also stated that some of their other continuing litigation they will continue to pursue. So meanwhile, while this has been happening, state AGs, particularly the Democrats, have pushed back against what they call a dismantling of the CFPB. In February,  AGs submitted an amicus brief challenging these efforts to weaken the agency, arguing that it would cause irreparable harm to consumers. The latest update on this is that on March th, a DC District Court judge granted a preliminary injunction that bars the agency from deleting records and data and from engaging in mass employee firings without cause. Next week on April th, a DC Circuit panel will hear the Trump administration’s arguments for a stay on this preliminary injunction. So will definitely be interesting to see how this is resolved in the coming weeks and months.

Chris Allen

Yeah, thank you for that summary. You know, it is interesting to see the Democrats weighing in in favor of keeping the CFPB. And certainly, I know it’s been a big partner for them, and they’ve been able to divide the workload a little bit in terms of enforcing those statutes and regulations. Going back to a point you made earlier, Dustin, those statutes and regulations in the Dodd-Frank Act are going to remain in effect unless Congress gets its act together and actually decides to pass a law. And so…the AGs, I know that there have been a few AGs that have actually enforced some of those provisions on their own, even without the CFPB. And it’s not just in the CFPB context that AGs have done that. There have been times where, for example, AGs have wielded their authority to review antitrust combinations or alleged combinations in violation of the Sherman Act as provided for in the Hart-Scott-Rodino Act. I believe it was the T-Mobile acquisition where you had the USDOJ approve that, but then you had a group of AGs led by California and New York who actually brought a challenge against that. So even though we’re talking about the CFPB, and I think that’s a big area, it bears remembering that there are lots of different statutes that AGs can still enforce even if the federal regulators are watered down or in the case of the CFPB shut down altogether.

Dustin McDaniel

I look, I make my living representing companies dealing with state attorneys general. I’m very proud of the work that I do and that we do as a team on that. know, I don’t know, my heart is always in my law school class where I’m giving grandiose historical context on how some of this stuff came to be. And I think it’s perfect time to tip the hat to our great friend and the founder of this particular practice group, Bernie Nash, because it was Hart-Scott-Rodino that when he was on the Senate committee that was working to create that legislation. State AGs already had concurrent antitrust authority. They didn’t have a budget. They didn’t have any cohesive way of working together on it. New York and California and Florida and Ohio would kind of work on antitrust work, but other states had, you know, really, really small staff allocations to it. And since that legislation, every state now has antitrust authority and they are exercising it and they exercise it together. They also are looking at, and in this case, we’re talking about the Democrats because as the current administration is looking to really completely, in a generational way, reshape the American governmental structure, states are having to rethink what their roles are in our federalist system. And when Secretary Kennedy decided to terminate thousands upon thousands of Health and Human Services workers, change the priority and role of the office, state AGs started looking to do two things. One, they all have standing to bring actions in federal court to challenge what they believe to be unlawful or unconstitutional acts from the administration. And two, they all represent their own state agencies and they all are part of both the judicial and executive branch. I think the modern attorney general is universally considered to be an executive official, not a judicial official, but they do have one foot in the judicial branch but they’re all looking to see what they’re going to do to bolster their own state health departments to take up the slack. So whether it’s CFPB or FTC, especially, or HHS or frankly any of the other agencies that are undergoing serious transformations right now, it’s going to be the state attorneys general that are going to be looking to fill the void. And the real problem for American business is again, there’s  of them counting DC in the territories and as much as business struggles to manage the regulatory environment of the federal government, at least there’s only one federal government. Trying to do that on  different playing fields from Guam to California to Florida, unbelievably expensive, horribly unpredictable, very, very difficult. And dealing with attorneys general is going to be one of the most important elements of trying to manage that strategic landscape as it’s evolving.

Chris Allen

Yeah, it’s interesting because there’s two sides to that coin, right? On the one hand, you have  different perspectives,  different legal regimes, but then you also have the mechanisms that AGs actually can use to coordinate their efforts and basically set themselves up, I would say, as almost a parallel regulator to the federal government by working together. So, Grace, I know before you joined us, you had spent some time at the National Association of Attorneys General. And so, could you talk a little bit about the role that’s played by NAAG and by other organizations like AGA, RAGA, DAGA in terms of coordinating AG action?

Grace Garver

Organizations like NAG help provide really important resources to state AGs because they help them facilitate conversations with each other and coordinate together on multistate matters. In general, think multistate litigation is a really important way that AGs exert regulatory power over industry because it allows them to combine resources and often achieve a more economically impactful result against alleged misconduct. Multistate settlements are often where you see some of the really, really big settlement numbers. And oftentimes states can’t get that kind of result on their own. So I think by providing that sort of forum for discourse between states that they might otherwise have a hard time connecting on some of these issues, NAAG and RAGA and DAGA and the others really play a big role in sort of getting those settlements across the line.

Chris Allen

I want to just to raise one more question for both of you. We’ve talked about the tools that AGs have in terms of regulations, these parallel federal statutes and their own state statutes. Grace, you just talked about the forums they have to cooperate and to raise issues and make each other aware of priorities. And Dustin, you’ve talked a little bit about the incentives that AGs have to pursue actions on their own and the history of them doing that. What’s the top line takeaway for clients that are trying to navigate this incredibly dynamic space right now?

Dustin McDaniel

Engage, engage, engage. There is no place where American business can go to just hope that they will be forgotten or left alone when it comes to the state attorneys general. Whatever that era ever may have been is gone. And it is best to know attorneys general on the front end before you get that first letter with that state seal at the top that your general counsel opens trepidatiously and pulls it out and says “This is a request for information. We are looking into your business or your sector.” That’s not the best time to look around and say, gosh, does anybody know the attorney general of that state? Or does anybody know if other AGs are asking these questions of other companies or can they even ask us that? What is this pre-litigation discovery mechanism that they have where they can send out a mandatory fishing net and there’s nothing I can do about it even though they haven’t sued me? That can’t be right. Nobody else can do that.

Chris Allen

That’s another freaking podcast, Dustin…

Dustin McDaniel

It is, but when the question is, what should you be doing? Engage with attorneys general and get to know how they function and who they are now because the fact that your company has not ever had to deal with them in the past, you will.

Chris Allen

And Grace, to your point, think making sure you’re abreast of what’s going on at those AG meetings of NAAG and the other organizations is also a really important component of what Dustin described.

Grace Garver

Yeah, absolutely. In fact, myself and some others from our team here at Cozen are going to be attending NAAG’s AG Symposium Conference in Nashville in early April. And then we have a bunch of other exciting events that we’ll be attending later on this spring and summer as well.

Dustin McDaniel

Yeah, it’s going to be a busy summer and I’m proud to say that Cozen O’Connor will be well represented and our clients will be well represented at all of them. And, you know, there are topics on the discussion agendas at each one of these meetings. The old adage in Arkansas is if you don’t have a seat at the table, you’re likely what’s on the menu. And that is never more true than in the AG world.

Chris Allen

We could keep talking about this because again, things are constantly developing in this area and there’s just so much that touches on basically every single sector, every single practice that I think all of our clients and indeed anybody listening to this podcast would be interested in. But unfortunately the limits of time are pushing against us. So Dustin, Grace, thank y’all both so much for joining us today. Hope to have you back on future episodes.

And Starbucks, if you’re listening, you’re more than welcome to cater our next one because we’ll continue to need coffee because I think everybody needs a little bit of coffee as they try and follow what’s going on with both the federal government and the state attorneys general these days. So on behalf of State AG Pulse, this is Chris Allen. Thank you again for joining us in this episode and we look forward to hopefully your joining us on the next one as we can continue to try to provide insights and analysis on some of the most cutting issues of the day.

You have been listening to State AG Pulse brought to you by Cozen O’Connor’s State AG Group and the State AG Report. Please leave us a five star rating and of course tune in again in two weeks for our next episode. Thank you so much for joining us.