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 21, 2016

Campaign Finance

Washington Attorney General Settles with Lobbying Firm Over Alleged Campaign Finance Violations

  • Washington AG Bob Ferguson reached a settlement with the Washington State Association for Justice (“WSAJ”) to resolve allegations that it violated state campaign finance disclosure laws.
  • According to the complaint, the AG’s office received a Citizen’s Action Notice reporting WSAJ’s alleged failure to file financial and in-kind contributions as part of their “lobbyist employer reports.”
  • Under the terms of the settlement, WSAJ must pay a $1,500 penalty and $7,740 in costs and fees.

Consumer Protection

Florida Attorney General and FTC Settle with Computer Tech Support Companies Over Allegedly Deceptive Computer Virus Testing

  • Continuing a series of actions against computer tech support companies, Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) reached a settlement with PC Cleaner Inc., Netcom3 Global Inc., and Netcom3, Inc. d/b/a Netcom3 Software, Inc. over allegations that the companies violated the Federal Trade Commission Act (“FTC Act”) and the Florida Deceptive and Unfair Trade Practices Act.
  • According to the FTC’s complaint, the companies allegedly provided consumers with free anti-virus software trials that detected nonexistent malware or system errors and required consumers to purchase the full software to “fix” those nonexistent errors.
  • Under the terms of the settlement, the companies will, among other things, pay $258,000 of more than $29 million in suspended judgments. Texas AG Ken Paxton also announced a separate $20,000 settlement with PC Cleaner, Inc. over alleged violations of the Texas Deceptive Trade Practices Act.

Illinois Attorney General and FTC Settle with Nutrition and Weight Management Direct Selling and Multi-Level Marketing Company

  • Illinois AG Lisa Madigan and the FTC reached separate settlements with Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife LTD (collectively “Herbalife”), an international seller of nutrition and healthy-lifestyle products, to resolve investigations called for by Bill Ackman, a billionaire hedge-fund manager whose fund had taken a short-position on the company in excess of $1 billion.
  • Under the terms of the settlements, Herbalife can continue operating its multi-level marketing business while basing its compensation plan on verified retail sales.
  • The FTC settlement contains elements that may be applicable to other companies in the multi-level marketing industry.

FTC Finalizes Settlement with Four Companies for Allegedly Deceptive “All Natural” Advertisements

  • The FTC reached a settlement with Trans-India Products, Inc. d/b/a/ ShiKai; The Erickson Marketing Group, Inc. d/b/a Rocky Mountain Sunscreen; ABS Consumer Products, LLC d/b/a EDEN BodyWorks; and Beyond Coastal Suncare over allegations the companies violated the FTC Act by using unsubstantiated claims to deceptively market sunscreen, shampoo, body lotion, and other health and beauty products.
  • According to the complaints, the companies allegedly marked their products as “All Natural” or “100% Natural,” but used non-natural or synthetic ingredients.
  • Under the terms of the final consent orders, the companies must refrain from similar misrepresentations of their products. The FTC has not settled its complaint against a fifth company, California Naturel, Inc., for similar allegations.

Environment

3 AGs Sue Car Manufacturer Over Alleged Violations of State Environmental Laws

  • Maryland AG Brian Frosh, New York AG Eric Schneiderman, and Massachusetts AG Maura Healey filed separate suits against Volkswagen AG, Volkswagen Group of America, Inc., Audi AG, Audi AG of America, LLC, Porsche AG, and Porsche Cars of North America, Inc. (collectively the “VW Group”) over allegations that the VW Group violated state environmental laws by using software that manipulated data produced during emissions standards testing.
  • According to the AGs, the VW Group allegedly sold certain diesel vehicles equipped with “defeat device” software intended to circumvent applicable emissions standards for certain air pollutants. By doing so, the VW Group allegedly allowed nitrogen oxide emissions to be released into the air at rates exceeding the states’ emissions standards, posing a risk to citizens’ health and the surrounding environment.
  • The New York suit seeks, among other things, $15,000 per violation of environmental laws per day. Both the Maryland suit and Massachusetts suit seek, among other things, $25,000 per violation, with each day considered to be a separate violation. These suits follow a partial settlement that VW reached in June 2016 with at least 43 AGs, including these three, over allegations that VW violated state consumer protection laws related to the defeat device software used in certain VW vehicles.

State AGs in the News

CWAG Holds Annual Meeting in Idaho

  • The Conference of Western Attorneys General (“CWAG”) held its Annual Meeting in Sun Valley, Idaho from July 17 to July 20. Attendees included Attorneys General from the United States and Mexico, representatives from the federal government, including the U.S. Department of Justice, and members from the private sector.
  • Idaho AG Lawrence Wasden moderated the opening panel, “What Keeps These General Counsels Up at Night?” which focused on the changing role of general counsels today and a variety of issues that concern them, including cybersecurity risk and the rapid pace and impact of innovation. Panelists included: Laura Fennell, Executive Vice President, General Counsel & Secretary of Intuit; Tim Harris, Executive Vice President & General Counsel of Prudential Financial; and Tim Murphy, General Counsel & Chief Franchise Officer of MasterCard.
  • The agenda also included perspectives on recent Supreme Court decisions, and panel discussions on nutritional supplements, cybersecurity, and food and drink labeling. Portions of the meeting will be made available online.

Former New Jersey Attorney General Admits Guilt in Bribery Case

  • David Samson, former New Jersey AG and former Chairman of the Port Authority of New York and New Jersey (“Port Authority”) Board of Commissioners, pleaded guilty to federal bribery charges for accepting a benefit of more than $5,000 from United Airlines, Inc. (“United Airlines”).
  • According to the Department of Justice (“DOJ”), former AG Samson used his position as chairman of the Port Authority to compel United Airlines to restore a flight between Newark, New Jersey, and his home in South Carolina by removing a hangar agreement between United Airlines and Newark Liberty International Airport from the Port Authority’s agenda in 2011 until they agreed to reinstate the flight.
  • Under former AG Samson’s plea agreement, he faces a maximum prison term of 24 months and a fine of $250,000 or twice the gross gain or loss from the offense. United Airlines will not face criminal charges, but separately reached an agreement with the DOJ to reform its compliance program and pay a civil penalty of $2.25 million.

Nevada Attorney General Settles with K-12 Test Creator for Breach of Contract

  • Nevada AG Adam Paul Laxalt settled with Smarter Balanced Consortium (“Smarter Balanced”), part of the UCLA Graduate School of Education and Information Studies, to resolve allegations that it failed to deliver a testing system to administer standardized tests to grade school students.
  • According to the AG’s office, Smarter Balanced allegedly developed content and provided electronic testing materials to Nevada students in grades three to eight that did not meet expectations and prevented students from completing their examinations, causing their scores to be invalidated.
  • Under the terms of the settlement, the company will, among other things, reduce its fees under the contract with the Nevada Board of Education by $996,895. AG Laxalt filed a complaint and reached a settlement on this issue with another vendor on the contract, Measured Progress, in August 2015.

State vs. Federal

15 Attorneys General Pen Letter to Congress Regarding Federal Agencies’ Regulatory Processes

  • 15 AGs, led by West Virginia AG Patrick Morrisey, composed a letter addressed to Congressional leadership alleging that federal agencies are violating the Administrative Procedures Act (“APA”) and urging the Congress to take action to ensure that agencies engage in “transparent” rulemakings that are consistent with their statutory and Constitutional authority.
  • According to the letter, the AGs allege that federal agencies issue guidance and other informal agency statements to avoid the notice-and-comment process required when issuing formal rules under the APA and regulate beyond their statutory authority. The letter cites specifically to certain guidance and rule-makings carried out by the Consumer Financial Protection Bureau and the Environmental Protection Agency in support of their allegations.