Multistate Actions

Led by Colorado Attorney General Phil Weiser and New York Attorney General Letitia James, a bipartisan coalition of 28 attorneys general wrote Congress, urging it to restore the Federal Trade Commission’s (FTC) authority to obtain consumer restitution in actions filed under Section 13(b) of the FTC Act. The Supreme Court’s recent decision in AMG Capital Management, LLC, et al. v. Federal Trade Commission held that the FTC lacks the authority to obtain equitable monetary relief through its Section 13(b) enforcement actions. Instead, the agency must pursue restitution through, the “limited and cumbersome” Section 19 administrative process, which the letter states, is “no substitute for the ability to seek … relief directly in court.”

The multistate antitrust case against Facebook was dismissed by the U.S. District Court for the District of Columbia, which held that the laches doctrine barred the states’ Section 2 and Section 7 claims, which focused largely on Facebook’s acquisitions of Instagram in 2012 and WhatsApp in 2014. The court also held that “the States’ Section 2 challenge to Facebook’s policy of preventing interoperability with competing apps fail[ed] to state a claim under current antitrust law, as there is nothing unlawful about having such a policy.” Further, the court said any allegedly unlawful implementations of such a policy, which in theory could support a claim, were too old to support the states’ bid for injunctive relief. The related action by the FTC was also dismissed without prejudice because the complaint “failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services.” The court explained that the FTC failed to support its assertion that Facebook has a “60%-plus” market share and that the assertion was “too speculative.”

Led by South Carolina Attorney General Alan Wilson, 11 attorneys general wrote congressional leaders defending the “true lender” rule promulgated by the Office of the Comptroller of the Currency. The letter expresses opposition to congressional resolutions that would provide for the rule’s disapproval under the Congressional Review Act. A coalition of 26 attorneys general, led by Illinois Attorney General Kwame Raoul, previously urged Congress to repeal the rule.

Arkansas Attorney General Leslie Rutledge and Texas Attorney General Ken Paxton each filed actions charging the operators of the “Blessing Loom” with running an illegal pyramid scheme. Texas-based BINT Operations, LLC (“Blessings in No Time”) and officers LaShonda Moore and Marlon Deandre Moore operated nationwide and allegedly targeted African American communities, promising an 800% return on investment, and charging a minimum of $1,400 to participate. The Texas action was filed in Texas state court. The Arkansas action was filed jointly with the FTC in federal court in Arkansas.

District of Columbia Attorney General Karl A. Racine and Pennsylvania Attorney General Josh Shapiro announced they successfully collaborated with online food delivery platform Uber Eats to secure better disclosures about the price discrepancy between in-app purchases and orders placed directly with restaurants.

Individual Attorney General Actions

Arizona Attorney General Mark Brnovich announced the indictment of a Tucson man accused of identity theft and taking money from vulnerable adults. The indictment alleges that Hector Andres Aleman applied for loans in the name of victims without their authorization or knowledge and kept the cash for himself.

Arkansas Attorney General Leslie Rutledge announced a settlement with a woman operating as a money mule. Jean Butler, 73, of Hot Springs, Arkansas allegedly facilitated a multi-million-dollar international sweepstakes scheme, receiving funds sent to her from victims of the scam and funneling the money to operators of the scheme in Jamaica. The consent judgment requires Butler to pay civil penalties and restitution of $100,000.

Colorado Attorney General Phil Weiser obtained an agreement from DIRECTV to refund more than $1 million to Coloradans who were allegedly overcharged during the Altitude Sports blackout that occurred as a result of a contract dispute. The settlement also resolves allegations that DIRECTV unlawfully charged customers $10 for HD service even though high-definition television is now a household standard.

Georgia Attorney General Chris Carr and the Consumer Financial Protection Bureau (CFPB)  obtained a stipulated permanent injunction and civil penalty against an alleged deceptive credit repair operator and its owners and executives. Burlington Financial Group and its owners and executives, Richard Burnham, Katherine Burnham, and Sang Yi, allegedly violated the Telemarketing Sales Rule and Georgia law and deceived consumers into hiring the company to lower or eliminate credit card debts and improve consumers’ credit scores. Ultimately, however, consumers were often left with more debt, impaired credit scores, and subjected to lawsuits and bankruptcy. If entered by the court, the order would ban the company and its owners and executives from the industry and impose a civil penalty of $150,001.

Kentucky Attorney General Daniel Cameron sued CVS for the company’s role in the opioid epidemic. The lawsuit alleges the company engaged in unlawful business practices and failed to guard against the diversion of opioids.

Maryland Attorney General Brian Frosh announced charges against two retail pet stores for violating a Maryland law prohibiting the retail sales of puppies. Just Puppies of Maryland, Inc. and Just Puppies, Inc., two retail pet stores in Rockville and Towson respectively, and Mitchell Thomson, the owner of both stores, were charged with selling puppies to consumers in violation of the No More Puppy-Mills Act and the Consumer Protection Act. The puppy mill act, passed in 2018, prohibits the offer for sale of cats and dogs by retail pet stores to curb sourcing of animals from “puppy mills” and prevent the mistreatment of animals.

Massachusetts Attorney Maura General Healey obtained a $3.5 million settlement from a company for false claims about its ability to refund the state for N95 masks that were not delivered. Bedrock Group LLC (Bedrock) delivered fewer than 100,000 of the 1 million N95 masks the state ordered in April 2020. Bedrock then allegedly made repeated false statements in connection with its obligation to refund the state. In addition to returning the $3.2 million it owed to the state, Bedrock agreed to a $250,000 payment for civil penalties and a voluntary debarment from contracting with the state or any political subdivision for five years. Attorney General Healey also secured $260,000 from an anesthesia provider to settle “surprise billing” allegations. South Shore Anesthesia Associates (SSAA) allegedly failed to adequately disclose to certain patients that SSAA was out of network with those patients’ health plans and then sought to collect unfairly high charges from the patients. The agreement provides restitution and debt cancellation for affected consumers as well as civil penalties.

Mississippi Attorney General Lynn Fitch sued insulin manufacturers and PBMs over insulin pricing practices. The suit asserts Mississippi Consumer Protection Act claims as well as unjust enrichment and civil conspiracy claims. The state is asserting its consumer protection and unjust enrichment claims both in its parens patriae capacity and in its capacity as a payor and purchaser of the at-issue diabetes medications. Defendants include Eli Lilly and Company, Novo Nordisk Inc., Sanofi-Aventis U.S. LLC, Express Scripts Inc. and related companies, CVS Health Corporation and a related entity, Caremark RX, L.L.C. and related companies, UnitedHealth Group, Inc., and Optum, Inc. and a related entity.

Missouri Attorney General Eric Schmitt announced a settlement with Jim Bakker and Morningside Church Productions. In March 2020, the Missouri Attorney General’s Office sued Bakker and Morningside Church Productions for marketing “silver solution” as a potential cure for the coronavirus. Under the consent judgment, Bakker, Morningside Church Productions, and all persons acting on their behalf are enjoined from advertising or selling “silver solution” to diagnose, prevent, mitigate, treat, or cure any disease or illness. Missouri consumers who paid or contributed money in connection with the product will receive approximately $156,000 in restitution.

New Mexico Attorney General Hector Balderas filed suit against baby food makers and retailers for selling products containing toxic heavy metals. The suit alleges that manufacturers Beech-Nut, Nurture, and Hain Celestial, and retailers Walmart and Kroger promoted and sold contaminated products as safe and appropriate for babies, infants, and young children. The lawsuit follows a congressional report finding that levels of arsenic, lead, cadmium, and mercury in certain baby food products were multiple times higher than allowed under existing regulations for other products.

New York Attorney General Letitia James announced a $230 million settlement with Johnson & Johnson (J&J) regarding the company’s role in the opioids epidemic. Payment under the settlement will occur over a period of nine years and the terms also bar J&J from manufacturing or selling opioids anywhere in New York and acknowledge J&J’s exit from the opioid business nationally. Final details regarding the  allocation of the settlement funds and precise timeline for receiving J&J’s payments are dependent upon state legislation and the concurrence of counties who also have cases pending against J&J. The trial against the remaining defendants in New York’s opioid case began June 28. Attorney General James also sued Lear Capital and founder Kevin DeMeritt for allegedly defrauding New Yorkers out of $10 million in a precious metal investment scam. The defendants allegedly charged hidden commissions of up to 33% on more than $43 million in sales and operated without being registered as a commodity broker-dealer, commodity investment advisor, or a telemarketer — all as required by New York law.

North Carolina Attorney General Josh Stein reached a $40 million agreement with JUUL that will drastically reform the business practices of the e-cigarette maker to avoid appealing to young people. North Carolina is the first state in the nation to successfully hold JUUL accountable for its role in spiking teen use and dependence on e-cigarettes. Actions filed by other attorneys general are pending in multiple jurisdictions. The North Carolina settlement includes restrictions on sales to anyone whose age has not been verified through independent verification systems, restrictions on marketing, and a prohibition on new flavors and nicotine content levels without FDA authorization. Payment to the state will occur over six years and fund programs to help people quit e-cigarettes, prevent e-cigarette addiction, and research e-cigarettes. Attorney General Stein also obtained a default judgment providing more than $600,000 in financial relief for borrowers impacted by a failed consumer finance company. North Carolina-based Alpha Finance Company (Alpha), which primarily made retail installment auto loans, abruptly closed in 2019 leaving some borrowers with outstanding secured loans that had balances and others with paid-off loans whose liens had not been cancelled by Alpha. Because of the judgment, borrowers will now be able to obtain clear titles to their vehicles and outstanding loans were cancelled.

Ohio Attorney General Dave Yost filed a landmark lawsuit to declare Google a public utility. The suit seeks a legal declaration that Google is a common carrier (or public utility) subject to proper government regulation. As such, according to the suit, Google has a duty to offer sources or competitors rights equal to its own, meaning it should not prioritize the placement of its own products, services, and websites on search results pages. Further, those equal rights should extend to advertisements, enhancements, knowledge boxes, integrated specialized searches, direct answers, and other features. The lawsuit does not seek money damages. Attorney General Yost also reached a settlement with Frontier Communications (Frontier) to increase the quality of internet coverage to underserved areas of Ohio. The settlement resolves allegations that Frontier advertised and charged for internet speeds it knew could not be reached. As part of the agreement, Frontier is funding upgrades to its internet infrastructure to provide or enhance existing services in Ohio.

Texas Attorney General Ken Paxton reached agreement with tobacco companies R.J. Reynolds, and ITG Brands, LLC (ITG) resulting in the recovery of $195 million for the state of Texas. According to the Texas claim, following ITG’s 2015 acquisition of certain brands from R.J. Reynolds, payments related to the acquired brands required by the 1998 Texas tobacco settlement agreement were not made to the state. ITG has assumed the financial obligations for the brands and agreed to make the $195 million in back payments and make future payments.

Washington Attorney General Bob Ferguson obtained $475,000 from debt collector Machol & Johannes, resolving allegations that the company failed to offer consumers legally required garnishment exemptions and unlawfully assessed fees and costs to consumers despite not collecting any money from them. Attorney General Ferguson also recovered $375,000 from a California vaping company, E-Juice Vapor Inc., to resolve a suit alleging illegal sales into Washington State which involved sales to investigators posing as minors.

West Virginia Attorney General Patrick Morrisey reached a settlement with a burial vault retailer to resolve allegations the company accepted payment for items that it did not deliver. Moreland Burial Vault Company agreed to pay $18,600 to fully reimburse affected consumers and pay the state $1,544 in civil penalties.

Other articles in this edition include:

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