- Association of Corporate Counsel

Dentons State AG Practice Group:
State Attorneys General -New Cops on the Consumer Beat
January 28, 2016
Presented to Arizona Association of Corporate Counsel
Terry Goddard
Bill McCollum
Former Attorney General of Arizona
Senior Counsel, Dentons
T +1 602 508 3937
[email protected]
Former Attorney General of Florida
Partner, Dentons
T +1 202 408 9145
[email protected]
CONFIDENTIAL
New Cops on the Consumer Beat:
What are the State AGs Up to?
• State attorneys general are more and more
powerful. Is that a problem?
The Washington Post, March 5, 2015
• State Attorneys General Press JPMorgan for
More Details on Hacking
The New York Times, January 14, 2015
• State Attorneys General, Feds Reach $25
Billion Settlement with Five Largest
Mortgage Servicers
NAAG, February 9, 2012
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Other recent headlines:
Eyeing major settlement, US states move quickly in VW case
Oct. 20,
2015
WASHINGTON (AP) — With billions of dollars at stake in restitution and penalties, U.S.
states are moving quickly to try to hold Volkswagen accountable for its emissionscheating scandal.
Forty-five states and D.C. have joined a multistate investigation led by attorneys
general, which is determining how VW was able to game emissions tests to hide that its
"Clean Diesel" cars emitted smog-causing exhaust up to 40 times dirtier than the law
allows.
The attorneys general are expected to seek compensation for consumers and
redress for environmental harm, building their investigations under state laws
that protect consumers from deceptive trade practices and set clean air
standards.
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New York Attorney General Examining Private Equity
Firm’s Mortgage Business (surprised?)
OCT. 6, 2015
The rapid growth of Caliber Home Loans, a mortgage company owned by the private
equity giant Lone Star Funds, has led to a surge in consumer complaints. Now it has led
to regulatory scrutiny of Caliber’s business practices.
Eric T. Schneiderman, the New York attorney general, has opened an investigation into
the mortgage company, a person in Mr. Schneiderman’s office confirmed.
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Arkansas Attorney General Joins Brief In Challenge
To Union Fees
• LITTLE ROCK — Arkansas Attorney General Leslie
Rutledge said Monday she has joined with 17 other
state attorneys general in an amicus brief submitted to
the U.S. Supreme Court in a case challenging the
constitutionality of mandatory union fees for public
employees.
• The plaintiffs in the case Friedrichs v. California Teachers
Association are challenging fees that California teachers
are required to pay to the union. Teachers in the state
cannot be required to join the union, but they still have to
pay a fee to cover the cost of “collective bargaining,
contract administration and grievance adjustment
purposes.”
• “No individual should be forced to help fund a cause he
or she does not support,” she said in a news release.
“Regrettably, as the law stands, public employees are
being forced to pay union fees, thus having their First
Amendment rights violated.” September 17, 2015
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JPM to reform credit card collection in settlement
with U.S., states
May
20,
2015.
JPMorgan Chase & Co (JPM.N) will pay $136 million and reform its credit card debt
collection practices as part of a joint state-federal settlement of a probe that found it had
acted illegally, U.S. authorities said on Wednesday.
The bank will also pay at least $50 million in consumer refunds and $30 million to the
Office of the Comptroller of the Currency in a related action, authorities said.
"This is a good, strong settlement that's going to help a lot of people," Iowa Attorney
General Tom Miller, who helped lead the probe, said on a conference call with
reporters.
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FTC, All 50 States and D.C. Charge Four Cancer
Charities With Bilking Over $187 Million from
Consumers
May 19, 2015
• Complaint Alleges Defendants Falsely Claimed Donations Would Help Pay For
Pain Medication, Hospice Care & Other Services; But Spent Donations on Cars,
Trips, Sports Tickets, & Professional Fundraisers
• The Federal Trade Commission and 58 law enforcement partners from every state
and the District of Columbia have charged four sham cancer charities and their
operators with bilking more than $187 million from consumers. The defendants told
donors their money would help cancer patients, including children and women
suffering from breast cancer, but the overwhelming majority of donations benefitted
only the perpetrators, their families and friends, and fundraisers. This is one of the
largest actions brought to date by enforcers against charity fraud.
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New York questions big retailers over 'on-call' staffing
Mon
April
13,
2015
New York's attorney general has sent letters to 13 national retailers, including Gap Inc,
Target Corp and JC Penney Co Inc, about "on-call shifts" in which workers are told
whether to report to work a day or less before a scheduled shift.
Attorney General Eric Schneiderman's letters, sent on Friday, say on-call systems
leave "too little time to make arrangements for family needs, let alone to find an
alternative source of income to compensate for the lost pay" on days the employees
are not called in to work.
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Attorney General Wants College America To Stop
‘Ongoing Deceptive Trade Practices’
Feb
16,
2015
DENVER (CBS4) – CBS4 has learned that the Colorado attorney
general has filed a lawsuit against a chain of career colleges along
the Front Range. The suit is under seal by a judge’s order, but
CBS4 Investigator Rick Sallinger has learned the case involves a
well-known name.
9
Missouri Attorney General Chris Koster Announces
Settlement With Tyson
• Jan 20, 2015
• Tyson Foods will pay a total of $540,000 in
penalties, damages and environmental
improvements stemming from a fish kill in Barry
County. KSMU's Michele Skalicky has more.
• According to Koster, beginning May 16, 2014, the
Tyson Foods facility at Monett discharged
wastewater from the company's Aurora facility into
the city of Monett's sewer system. The discharge
contained a highly acidic animal feed supplement,
which caused the city's biological wastewater
treatment system to fail. Contaminated water
containing a high level of ammonia flowed into
Clear Creek killing at least 100,000 fish.
10
Minnesota attorney general calls for scrutiny of
proposed Sysco/US Foods merger
Dec 19, 2014
• Minnesota's attorney general has asked
regulators to "closely scrutinize" the
proposed merger of the country's largest
food wholesalers.
• Houston-based Sysco Corp., the largest food
supplier in the U.S., announced in December
2013 that it wanted to buy its only close
competitor, Rosemont, Ill.-based US Foods.
The two companies are the only ones in the
country with national reach and combined
would control about 25 percent of the
market, according to the Wall Street Journal.
11
States Urge Tougher Curbs on E-Cigarettes
Group of 29 Attorneys General Asks FDA to Restrict
E-Cigarette Ads, Ban Flavors
Aug. 8,
2014
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State AG Powers and Responsibilities
State AG powers and responsibilities can vary depending on the state, but often include
the power to:
• enforce state consumer protection ("unfair and deceptive trade practices") statutes;
• enforce antitrust statutes;
• enforce state environmental laws;
• institute civil investigations and lawsuits;
• issue legal opinions;
• serve as legal counsel to state agencies;
• defend and/or challenge the constitutionality
of legislative or administrative actions
on both the state and federal levels;
• enforce open meetings and records laws;
• revoke corporate charters;
• and in a majority of states, handle criminal appeals and serious state-wide criminal
prosecutions.
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How did AGs become so powerful?
• Brief History of multi state litigation
• Tobacco!
• Together states can have a significant impact
• The Insider movie’s hero = Mike Moore
• $6 Billion settlement in 1998
• Big Pharma issues
• Off label marketing
• Price maintenance through suppressing
generics
• Average wholesale pricing (AWP)
• Mortgage Meltdown
• Federal litigation
• Obamacare challenge
• Immigration, challenge Presidential Order
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Who are the AGs???
• Aspiring governors?—nearly all of them.
• Former criminal prosecutors/Ass’t AGs
• Bondi (FL);Harris (CA); Hood (MS);
• Sorrell (VT); Coffman (CO); Zoller (IN);
• Wasden (ID); Miller (IO); Schimel (WI);
• Former Senators and Congressmen
• DeWine OH); Landry (LA); Schuette (MI)
• Former legislators
• Frosh (MD); Jepsen (CN); Kilmartin (RI); Matigan (L); Pruitt (OK); Paxton (TX);
Koster (MO); Schmidt (KA); Stenehjem (ND)
• Corporate lawyers
• Racine (DC); Beshear (KY); Schneiderman (NY); Slatery (TN); Foster (NH);
Peterson (NB); Strange (AL); Ferguson (WA)
• General Counsels
• Fox (MT)
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State Attorneys General Political Landscape
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What are AGs going to do next?
Looking into our crystal ball
Many and varied backgrounds
Highly different goals and ambitions
Political ideology -- How important?
Staff are critical to impact, state by state
Some very long serving staff have a national
reputation/leadership
Julie Brill in Vermont, Pat Connors in Florida
Noreen Matts, Arizona, Kip Holmes, Arizona
NAAG working groups, start chewing on an issue
Issue CIDs; NO Notice to potential defendants
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National Association of Attorneys General
• Agricultural Committee
• Charities Committee
• Federalism/Preemption Committee
• Financial Services Consumer Protection Enforcement,
Education, and Training Fund Committee
• Gaming Committee
• Human Trafficking Committee
• Intellectual Property Committee
• Internet Safety/Cyber Privacy and Security Committee
• Substance Abuse Committee
• Veterans Affairs Committee
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Consumer issues
• AG sweet spot!
• Regardless of party = AGs are pro consumer
• Unfair and Deceptive trade practices = law in all states
• No one else in the space (except FTC, CFPB and Justice)
• Extensive litigation and information about:
• Identity theft, data breaches and privacy
• Mortgage deceptions, refinance schemes
• Solar leasing schemes, frauds on spam emails
• State False Claims Act and Medicaid fraud litigation
• Open to Emerging technologies
• New entries, keep markets open, anti trust
• Instant messaging, sharing economy, texting, alternative legal services
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State Attorneys General Data Breach
Investigations
AG Investigative Process; Overview
• Data Breach Notification Responsibility
• AG Inquiry Letter
• Confidentiality of Document Productions
• Tolling Agreement
• Resolution
Consumer Breach Notification Analysis
• Varied Definitions of Personal Information.
• Notification Timeframe.
• Risk of Harm Analysis.
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State Attorneys General Data Breach Investigations
Unfair & Deceptive Trade Practices Jurisdiction
• "Reasonable" security practices.
• Deceptive policies and privacy statements.
Legislative Initiatives
• California: Personal information expanded to include a username or email address, in
combination with a password or security question and answer that would permit access to an
online account. (2013)
• Florida: Requires production of forensics reports. (2014)
• New York: Legislation allowing safe harbor for companies adopting heightened data security
standards. (2015)
• Illinois: Expanded definition of PII. (2015)
Important Factors in Regulator Analysis
• Potential for Consumer Injury (Identity Theft, Credit Cards, etc.)
• Consumer Notification Timeline
• Reasonableness of Security Practices
• Facts surrounding breach detection (self-detected, response time, etc.)
• Cooperation with Law Enforcement
• Ongoing process of assessing security enhancements
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Working with the AGs need not be defensive:
Keeping text messaging spam free
• AG concerns about spam
• Conduit for many consumer frauds
• Many consumers (including the AGs) rely on Texting
• deliver urgent corporate messages or
• communication with family members
• Read much quicker than e-mail
• Virtually spam free
• Petition at FCC to allow more general messengers
• More spam will follow
• AGs registered their concerns led by
Lawrence Wasden of Idaho
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Rooftop solar leases and consumer fraud
Suit claims solar power firms deceived
customers, skirted law
• Consumer finance issues are a particularly strong AG
concerns due to their experience with sub prime
mortgages and ‘mortgage rescue’ frauds..
AG Healey: solar
company violated deals
with central Mass towns
and institutions
• NAAG held an panel discussion on solar lease
problems at the annual meeting in San Diego last
June.
• AGs Brnovich of Arizona and Hood of Mississippi
were so concerned they sent a letter to their
colleagues warning of some of the solar lease pitfalls
for consumers
• Many state’s now have advice to solar consumers on
their AG’s webpages
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Thank you
Terry Goddard
Bill McCollum
Former Attorney General of Arizona
Senior Counsel, Dentons
T +1 602 508 3937
[email protected]
Former Attorney General of Florida
Partner, Dentons
T +1 202 408 9145
[email protected]
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