Labor & Employment

Massachusetts Attorney General Alleges Chipotle Served Up a Side Order of Wage and Hour Violations, Reaches $2 Million Settlement

• Massachusetts AG Maura Healey reached a settlement with casual dining restaurant chain Chipotle Mexican Grill, Inc. (“Chipotle”) to resolve allegations of child labor and non-payment of wages and sick time in violation of the state’s Wage Act, Child Labor Laws, Earned Sick Time Law, and laws requiring the retention of true and accurate payroll records.
• The AG’s office issued four citations against Chipotle, for allegedly permitting minors to work more than 48 hours per week and more than 9 hours per day, allowing minors to work during the night, failing to provide proper notice to its employees about earned sick time policy, and failing to pay certain employees for all hours worked, among other things.
• Under the terms of the settlement agreement, Chipotle will pay $1.37 million in penalties to the AG’s office, $2,280 in restitution to affected employees, and a special assessment of $500,000 to the AG’s office to be used for education and enforcement oversight of child labor laws, training and skills development of young workers, or other assistance to youth. Chipotle also agreed to self-auditing for potential labor law violations and reporting to the AG’s office going forward, among other things.

Consumer Financial Protection Bureau

CFPB Clarifies Its Policy for Supervision and Enforcement of “Abusive” Acts and Practices

• The Consumer Financial Protection Bureau (“CFPB”) issued a Statement of Policy Regarding Prohibition on Abusive Acts or Practices (“Policy”), clarifying how it intends to apply the “abusiveness” standard for conduct prohibited in the provision of consumer financial products or services under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
• Under the Policy, the CFPB will primarily cite or challenge conduct as abusive only when the harm to consumers outweighs the benefit, will generally avoid pleading separate abusiveness and unfairness or deception violations arising from substantially similar facts, and will seek monetary relief for abusiveness only for violations where there has been a lack of good-faith efforts to comply with the law, among other things.
• The Policy went into effect on January 24, 2020.

Democratic Attorneys General to Supreme Court: Dodd-Frank Is Constitutional and Necessary (With, or Even Without, CFPB)

• Twenty-four Democratic AGs, led by New York AG Letitia James, filed an amicus brief in the U.S. Supreme Court in Seila Law, LLC v. Consumer Financial Protection Bureau, No. 19-7, arguing that Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which established the CFPB, withstands constitutional scrutiny.
• In the case, petitioner Seila Law, LLC challenged a CFPB investigation into its practices on the basis that the CFPB’s structure, in which the CFPB’s director can be removed only for cause, is unconstitutional. According to the petitioner, the removal provision impinges on executive powers, thereby violation of separation of powers principles, and that the unconstitutionality of that provision renders the entire Title unconstitutional.
• In their brief, the AGs argue, among other things, that even if the CFPB’s structure is unconstitutional, that provision is severable from the rest of Title X because of the explicit severability clause included in the Dodd-Frank Act. The AGs further argue that even if the CFPB were found to be unconstitutional and not severable, the other provisions of Title X should still be preserved because they provide powerful tools that states use to combat financial fraud and abuse, and therefore, striking down Title X in its entirety would cause great injury to the states.

Financial Industry

Bipartisan Coalition of 23 Attorneys General Argue Against Rule Alleged to Weaken States’ Ability to Enforce Usury Laws

• A bipartisan coalition of 23 AGs, led by California AG Xavier Becerra, New York AG Letitia James, and Illinois AG Kwame Raoul, submitted a comment letter to the Office of the Comptroller of the Currency (“OCC”) in opposition to a proposed rule, “Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred” (“Proposed Rule”), which would establish that when a bank sells, assigns, or otherwise transfers a loan, the interest permissible prior to the transfer remains in effect following the transfer.
• In the comment letter, the AGs argue that, because certain banks are exempt from state usury limits and the Proposed Rule would allow the interest rate charged by the exempt institution to carry over to future debt holders, the Proposed Rule would help shield predatory lending practices by payday, car title, and installment lenders, and facilitate “rent-a-bank” schemes in which national banks would enter into sham partnerships with unregulated entities so that these entities can exceed state interest caps by buying loans that the national banks originate specifically for that purpose.
• The comment period for the Proposed Rule closed on January 21, 2020.

Pharmaceuticals

“Pharma Bro” Back in Hot Water: FTC, New York Attorney General Sue Vyera Pharmaceuticals, Martin Shkreli for Allegedly Monopolizing Critical Medication and Raising Its Price by 4000%

• The Federal Trade Commission (“FTC”) and New York AG Letitia James jointly sued pharmaceutical manufacturer Vyera Pharmaceuticals LLC and its former executive, Martin Shkreli, along with two other related defendants (collectively, “Vyera”) for allegedly stifling competition and engaging in a monopolistic pricing scheme for a life-saving medication in violation of the FTC Act, the Sherman Act, the Clayton Act, and New York’s antitrust laws.
• The complaint alleges that once Vyera had acquired the rights to Daraprim—the gold-standard treatment for toxoplasmosis, a condition that can lead to deadly infections in people with suppressed immune systems like HIV/AIDS patients—it increased the price from $17.50 to $750 per pill; and restrained competition through restrictive distribution agreements, preventing competitors from accessing critical ingredients necessary to formulate Daraprim, and engaging in “data blocking” practices that prevented distributors from sharing their sales data with third-party reporting companies.
• The complaint seeks, among other things, declaratory injunctive and monetary relief, civil penalties, and attorney’s fees and costs. It also seeks a permanent injunction against Shkreli, who is currently in federal prison following a conviction for securities fraud, that would bar him from owning or working for any company in the pharmaceutical industry.

Securities

Bipartisan Coalition of 24 Attorneys General Files an Amicus Brief in Support of SEC’s Ability to Seek Disgorgement from Fraudsters

• A bipartisan coalition of 24 AGs, led by Illinois AG Kwame Raoul, filed an amicus brief in the U.S. Supreme Court in support of the Securities and Exchange Commission’s (“SEC”) position in Liu v. Securities and Exchange Commission, No. 18-1501, that it should be allowed to seek the remedy of disgorgement in civil enforcement actions against fraudulent actors.
• In the brief, the AGs argue that disgorgement is needed to redress the harm done to the victims of fraud and to deter future fraudulent behavior, and point out that in fiscal year 2019 alone, fraudulent actors were required to repay more than $3.2 billion in disgorgement via SEC enforcement actions.
• The AGs further argue that removing the SEC’s ability to seek disgorgement would allow bad actors to keep gains obtained by fraud—thereby encouraging further scams—and that investors may lose confidence in the markets if the SEC loses its ability to seek disgorgement.