The State AG Report - Volume 7, Issue 41

Cozen O'Connor

Cozen O'Connor

Democratic AGs Seek Review of Sweeping U.S. Postal Service Changes

  • A group of 20 Democratic AGs, led by New York AG Letitia James and Pennsylvania AG Josh Shapiro, filed a complaint with the Postal Regulatory Commission urging that it order the U.S. Postal Service (“USPS”) to request an advisory opinion regarding the Postmaster General’s strategic ten-year plan for USPS.
  • The complaint alleges that USPS adopted a strategic plan that will significantly alter its operations—including enacting slower service standards and increasing rates—without obtaining an advisory opinion from the Commission as required by the Postal Reorganization Act and Postal Accountability and Enhancement Act of 2006.
  • The AGs argue that, under those laws, an advisory opinion is legally required whenever USPS makes nationwide service changes, and while USPS sought two advisory opinions on specific changes included in the plan, these changes represent only a small portion of the plan’s scope that is subject to the advisory opinion requirement.
  • The complaint seeks an order directing USPS to request an advisory opinion on the entire strategic plan, in part so that states and the broader mailing public have an opportunity to comment on the planned changes.

Two Democratic Attorneys General Announce Future Plans

  • District of Columbia AG Karl Racine announced that he will not seek reelection or run for mayor in 2022. Elected in 2015, AG Racine is the first elected AG in the District. Ryan Jones, an attorney in private practice, previously declared his candidacy for the Democratic nomination for the office.
  • Pennsylvania AG Josh Shapiro announced his candidacy for the Democratic nomination in the 2022 open-seat race for Pennsylvania governor. AG Shapiro is currently serving his second term, which ends in 2024, and is term-limited from seeking re-election.
  • To “meet” the state AGs across the nation and read more AG election news and insights, visit The State AG Report.

Fertility Clinic Allegedly Failed to Safeguard Personal Health Information of 15,000 Patients

  • New Jersey Acting AG Andrew Bruck reached a settlement with healthcare provider Diamond Institute for Infertility and Menopause, LLC (“Diamond”) to resolve allegations stemming from a 2016 data breach that compromised the personal health information of nearly 15,000 patients in violation of the New Jersey Consumer Fraud Act, the New Jersey Identity Theft Prevention Act, and the federal Health Insurance Portability and Accountability Act.
  • According to the AG’s office, Diamond allegedly failed to safeguard electronic protected health information (“ePHI”) stored on its network and failed to detect unauthorized access to its network for over five months. Specifically, Diamond allegedly failed to conduct adequate risk assessments of potential vulnerabilities to the safety of ePHI on its network, review and modify security measures as needed, encrypt ePHI, implement proper procedures for passwords, and implement procedures to authenticate persons seeking access to ePHI, among other things.
  • Under the terms of the consent decree, Diamond will pay $412,300 in civil penalties and $82,700 in attorneys’ fees and costs, and must strengthen its data protection protocols, including by developing and implementing a comprehensive written information security (“IS”)program, creating a new corporate officer position responsible for the IS program, training employees on information privacy and security, and implementing personal information safeguards and controls such as encryption, logging and monitoring, and password management, among other things.

Reverse Mortgage Provider Allegedly Misled Consumers Despite 2016 Consent Decree

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with reverse mortgage provider American Advisors Group (“AAG”) to resolve allegations that it engaged in deceptive conduct to market and sell its reverse mortgages in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”).
  • The complaint, filed concurrently with the proposed consent order, alleges that AAG’s marketing materials deceptively inflated home estimates and falsely represented that AAG made every attempt to ensure that the home value information provided was reliable, and that AAG violated a December 2016 CFPB administrative consent order issued over a variety of allegedly deceptive statements in AAG’s marketing materials and prohibiting AAG from violating the Act for five years.
  • Under the terms of the proposed consent order, AAG will pay nearly $1.3 million to the CFPB, including over $173,000 for consumer redress and a $1.1 million civil money penalty. AAG is also prohibited from misrepresenting any material facts, including estimated home values, and must submit for CFPB’s review certain marketing materials and a comprehensive compliance plan that details steps AAG will take to comply with the consent order, among other things.

The FTC is Not Sleeping on Allegedly False “Made in USA” Claims by Mattress Company

  • The Federal Trade Commission (“FTC”) reached a settlement with Ran Reske, the owner of mattress company Resident Home LLC d/b/a/ Nectar Sleep and other brands (collectively, “Nectar Sleep”), to resolve allegations that Nectar Sleep made false advertising claims in violation of the FTC Act and the FTC’s Made in USA Labeling Rule.
  • According to the complaint, Nectar Sleep allegedly marketed its DreamCloud mattresses as being made with 100 percent U.S.-made materials, when they were actually assembled and finished overseas and often use significant amounts of imported materials. The FTC further alleged that Nectar Sleep violated a 2018 FTC administrative consent order resolving similar allegations regarding misleading U.S.-origin claims.
  • Under the terms of the consent order, which incorporates the terms of the 2018 order, Nectar Sleep will pay $753,000 for consumer redress, is prohibited from making unsupported or unqualified U.S.-origin claims, and must clearly disclose foreign components or processing of its products when making qualified U.S.-origin claims, among other things.
  • As previously reported, the Made in USA Labeling Rule prohibits marketers from including unqualified “Made in the USA” claims on product labels unless: (1) final assembly or processing occurs in the United States; (2) all significant processing for creating the product occurs in the United States; and (3) all or virtually all ingredients or components of the product are made and sourced in the United States.

FTC Sends a Flurry of Notices of Penalty Offenses, Warns of Steep Penalties for Unfair and Deceptive Business Practices

  • The Federal Trade Commission (“FTC”) recently sent Notices of Penalty Offenses (“Notices”) to more than 700 businesses, including consumer products companies, retailers and retail platforms, and advertising agencies, warning them about various practices that the FTC previously determined to be unfair or deceptive in violation of the FTC Act.
  • The Notices identify a number of practices relating to endorsements, such as fake online reviews and failure to disclose an unexpected material connection with an endorser, that have been found to be unlawful, and warn that a business could incur up to $43,792 per violation if it uses endorsements in ways that the FTC previously found to be unfair or deceptive.
  • The FTC also recently sent Notices to 70 for-profit educational institutions listing claims regarding graduates’ employment and earnings prospects that the FTC deems unfair and deceptive and that can incur a financial penalty.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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