The State AG Report Weekly Update September 2018 #3

by Cozen O'Connor
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2018 AG Elections

New York Holds 2018 Primary Elections

  • New York held primary elections on Thursday, September 13.
  • Democrat Letitia James defeated three other candidates to secure her party’s nomination for the open AG seat. James is the New York City public advocate and previously served as an Assistant AG in the New York AG’s office and head of the Brooklyn Regional Office.
  • Republican Keith Wofford, an attorney in private practice, ran unopposed and will face James and third party candidates representing the Green, Working Families, Independence, and Reform Parties in the general election.

Bureau of Consumer Financial Protection

BCFP Office of Innovation Issues Proposal of “Disclosure Sandbox” for FinTech Companies

  • The Bureau of Consumer Financial Protection’s (“BCFP”) Office of Innovation issued a proposed policy to create a “Disclosure Sandbox” by revising the Bureau’s existing policies in order to encourage trial disclosure programs by deeming participating companies compliant with or exempted from certain BCFP rules and/or federal laws during a limited trial period.
  • Accord to the BCFP, the proposed policy would streamline the application and review process for testing new disclosures, expedite application decisions to within 60 days of submission, and establish a two-year time frame for testing disclosures, among other things.
  • The proposed policy would also allow companies using state “regulatory sandboxes” to participate in the BCFP’s Disclosure Sandbox without submitting an additional application.
  • As previously reported, Paul Watkins, former Chief Counsel for the Civil Litigation Division in the Arizona AG’s office who was tapped to lead the BCFP’s new Office of Innovation earlier this year, previously oversaw the launch of a “FinTech Regulatory Sandbox” program while at the Arizona AG’s office.

Consumer Protection

New York Attorney General Sues Online Ticket Resale Companies Over Allegedly Deceptive Sales Practices

  • New York AG Barbara Underwood filed a lawsuit against TicketNetwork, Inc., the operator of a ticket resale platform, and Eventvest, Inc. d/b/a Ticket Galaxy, a ticket broker, and the companies’ majority owner and executive Donald Vaccaro, over the alleged sale of “speculative tickets”—tickets that were not in the companies’ possession at the time of sale—in violation of state consumer protection laws.
  • According to the complaint, TicketNetwork, Ticket Galaxy, and other ticket resellers allegedly conspired to sell speculative tickets to consumers without adequately disclosing the speculative nature of the ticket purchase to consumers, and they also made post-purchase misrepresentations regarding changes to or the unavailability of the tickets purchased, among other things.
  • The complaint seeks injunctive relief, disgorgement of profits, restitution and damages to consumers, penalties, and costs, among other things.

Washington Attorney General Reaches Settlements with Eight Fast Food Franchisors Over “No Poach” Provisions in Franchise Agreements

  • Washington AG Bob Ferguson announced settlements with fast food franchisors A&W Restaurants, Inc. (“A&W”), Burger King Corporation (“Burger King”), DFO, LLC d/b/a Denny’s (“Denny’s”), Papa John’s International (“Papa John’s”), Pizza Hut LLC (“Pizza Hut”), Popeyes Louisiana Kitchen, Inc. (“Popeyes”), Tim Hortons USA, Inc. (“Tim Hortons”), and Wingstop Restaurants Inc. (“Wingstop”) to resolve the AG’s investigation into whether the franchisors’ alleged use of “no-poach” provisions in franchise agreements constituted an unlawful restraint of trade in violation of the state’s Consumer Protection Act.
  • Under the terms of the assurances of discontinuance (“AODs”) reached with A&W, Burger King, Denny’s, Pizza Hut, Popeyes, Tim Hortons, and Wingstop, each of the franchisors agreed to cease enforcing no-poach provisions—which prevent franchisees within the same chain from hiring away each other’s employees—currently in franchise agreements, to remove such provisions from current and future franchise agreements, and to notify all franchisees and owners of the prohibition.  In addition, the AOD with Papa John’s noted that the company had not routinely enforced the provision in their standard franchise agreements and altogether removed it prior to the AG’s investigation, but agreed not to include such provisions in future franchise agreements or enforce any such provision.
  • As previously reported, AG Ferguson reached similar settlements with seven other fast food franchisors in July 2018 and eight other fast food franchisors in August 2018, after 11 AGs issued letters to a number of national fast food franchisors inquiring about the alleged use of “no-poach” provisions in franchise agreements.

Data Privacy

New Mexico Attorney General Sues Tech Companies Over Gaming Applications Tracking User Location

  • New Mexico AG Hector Balderas filed suit against Tiny Lab Productions, Twitter, Inc., MoPub, Inc., Google, Inc., AdMob, Inc., AerServ LLC, InMobi PTE Ltd., AppLovin Corporation, and ironSource USA, Inc. (collectively, “tech companies”) alleging that the tech companies’ gaming applications for children violate the New Mexico Unfair Practices Act and the federal Children’s Online Privacy Protection Act’s prohibition on collecting personal data from children under the age of 13 without parental consent.
  • According to the complaint, the tech companies developed and marketed gaming applications designed for children that collect users’ geolocation, demographics, online activity, and other personal data without verifiable parental consent and provided that data to third parties for use in targeting children with advertisements based on their own personal information.
  • The complaint seeks injunctive relief, restitution, civil penalties, litigation costs, and attorneys’ fees, among other things.

For-Profit Colleges

19 Democratic Attorneys General Secure Summary Judgment that U.S. Department of Education Delay of Borrower Defense Rule was Unlawful

  • 19 Democratic AGs, led by Massachusetts AG Maura Healey, secured summary judgment in a federal lawsuit against the U.S. Department of Education and Secretary of Education Betsy DeVos challenging the Department’s delay in implementing borrower protection regulations.
  • As previously reported, the AGs sued the Department in the U.S. District Court for the District of Columbia for repeatedly delaying implementation of the “Borrower Defense Rule,” which provides protections to federal student loan borrowers against misconduct by postsecondary institutions. The Department delayed the initial effective date of the Rule, published an “Interim Final Rule,” and then issued a Final Delay Rule further postponing the effective date until July 1, 2019.
  • According to the District Court Judge’s opinion and order, the various mechanisms by which the Department repeatedly delayed the Borrower Defense Rule were based on an unlawful construction of the Higher Education Act of 1965, arbitrary and capricious under the Administrative Procedure Act, and procedurally invalid.
  • According to the Massachusetts AG’s office, the AGs intend to seek a court order requiring the Department to implement the Borrower Defense Rule immediately and in full.

Health Care

Massachusetts Attorney General Settles with Health Care Providers Over Alleged Failure to Disclose Billing Information to Patients

  • Massachusetts AG Healey announced a settlement with Partners HealthCare System Inc. and Massachusetts Eye and Ear Infirmary (collectively, “providers”) over allegations that the providers failed to adequately disclose billing information in violation of state consumer protection law.
  • According to the AG’s office, the providers allegedly failed to adequately disclose billing policies that led patients to incur unexpected charges for health care services.
  • According to the AG’s office, under the terms of the settlement the providers will pay $175,000 in penalties and will adopt policies to increase transparency, including notifying patients of additional out-of-pocket costs and fees for “hospital outpatient facilities” or “urgent care” services, among other things.

Pharmaceuticals

Oregon Attorney General Sues Opioid Manufacturer for Allegedly Violating a Prior Settlement and State Law Over Opioid Marketing

  • Oregon AG Ellen Rosenblum filed a lawsuit against opioid manufacturers Purdue Pharma L.P., Purdue Pharma, Inc., and The Purdue Frederick Company (collectively “Purdue Pharma”) for allegedly violating a 2007 stipulated judgment with the state, as well as violating the Oregon Unlawful Trade Practices Act, the Oregon False Claims Act, the Oregon Elderly Persons and Persons with Disabilities Abuse Prevention Act, and the Oregon Racketeer Influenced and Corrupt Organizations Act, through allegedly false, deceptive, and misleading marketing of opioid products.
  • According to the complaint, Purdue Pharma allegedly downplayed the risk of addiction posed by prescription opioids, overstated the effectiveness of opioid treatment for chronic pain, targeted marketing towards the elderly to promote long-term use of high doses of its opioid products, and sponsored allegedly misleading studies and marketing campaigns intended to persuade physicians to ignore risks associated with long-term opioid use, among other things.
  • The complaint seeks injunctive relief, civil penalties, civil forfeiture, litigation costs, and attorneys’ fees, among other things.

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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