The State AG Report Weekly Update July 2019 #2

Cozen O'Connor

Cozen O'Connor


33 Attorneys General, U.S. Department of Justice, FTC Settle With Pharmaceutical Manufacturer Over Allegedly Monopolizing Opioid Addiction Treatment Market

  • 33 AGs, the U.S. Department of Justice (“DOJ”), and the Federal Trade Commission (“FTC”) reached separate settlements with pharmaceutical manufacturer Reckitt Benckiser Group plc (“RB Group”) to resolve allegations that it monopolized the opioid addiction treatment market in violation of the FTC Act, federal False Claims Act, Sherman Act, and state antitrust and consumer protection laws.
  • According to the FTC and AGs’ complaints, RB Group allegedly maintained a monopoly over the opioid addiction treatment market by collaborating with its former subsidiary, Reckitt Benckiser Pharmaceuticals n/k/a Indivior Inc. (“RB Pharmaceuticals”), to “product hop” by converting Suboxone—a medication used to minimize opioid withdrawal symptoms—from tablet to a dissolvable, oral film in order to extend its patent exclusivity protection, and it also misrepresented that the film was safer than tablets to consumers in a citizen petition filed with the U.S. Food & Drug Administration to delay generic alternatives from entering the market and promoted medically unnecessary uses of Suboxone, which caused false claims to be submitted to government health care programs.
  • Under the terms of the DOJ’s settlement agreement and forfeiture settlement agreement, RB Group must pay $500 million to the federal government, $200 million to the states, and forfeit $647 million in proceeds. Under the terms of the FTC’s proposed stipulated order, RB Group must pay $50 million to the FTC, support future citizen petitions it files with all studies and data on which it relies, notify the FTC of non-disclosure agreements it files for follow-on drug products and changes of corporate control before it starts to market drug products, and monitor compliance with the terms of the order.
  • As previously reported, 42 AGs filed a multistate lawsuit against RB Pharmaceuticals over these allegations in 2016.

Consumer Protection

Arkansas Attorney General Obtains Judgment Against Vacation Rental Company Over Allegedly Deceptive Business Practices

  • Arkansas AG Leslie Rutledge obtained a judgment against vacation rental company The Resort Place, LLC d/b/a Resort Place Travel and C4Success, and its owners (collectively, “TRP”) over allegations that it failed to book vacations for consumers in violation of the state’s Deceptive Trade Practices Act.
  • According to the complaint, TRP allegedly failed to secure lodging for consumers’ vacations and failed to book resorts promised after accepting payment for vacation bookings, causing consumers to be moved to hotels without promised amenities or to pay out-of-pocket at their destinations, and used consumers’ credit card information to pay for other consumers’ vacations.
  • According to the AG’s office, under the terms of the judgment, TRP must pay $162,624 in restitution to consumers and $470,000 in civil penalties, its business license has been revoked, and its owners are barred from owning an online travel agency or working as travel agents.
  • As previously reported, AG Rutledge filed the lawsuit against TRP in February 2017.

New York Attorney General Settles With Ticket Resale Companies for Allegedly Selling Tickets They Never Owned

  • New York AG Letitia James reached a settlement with ticket resale companies TicketNetwork, Inc., Ticket Galaxy, and their owner to resolve allegations that they sold tickets to consumers that they never owned in violation of the state’s Arts and Cultural Affairs Law.
  • According to the AG’s office, the ticket resellers allegedly sold consumers “speculative tickets”­—offers by ticket resellers to sell tickets that they did not actually have—to live events, attempted to purchase tickets from a different source only after speculative tickets were sold to consumers, charged inflated prices for speculative tickets before tickets were actually available, failed to deliver actual tickets to consumers, and misled consumers when they could not purchase tickets for the speculative tickets they had already sold.
  • According to the AG’s office, the ticket resellers must pay $1.55 million, clearly and conspicuously disclose to consumers when they do not possess tickets, and cease misrepresenting reasons why tickets purchased are not available.

North Carolina Attorney General Obtains Default Judgment Against Event Production Companies for Allegedly Selling Tickets to Prohibited Events, Failing to Refund Consumers

  • North Carolina AG Josh Stein obtained a default judgment against event production companies Lantern Fest Productions, Inc. and Sack Lunch Productions, Inc. over allegations that they sold tickets to prohibited events and failed to refund consumers for cancelled events in violation of the state’s Unfair and Deceptive Trade Practices Act.
  • According to the complaint, the event production companies allegedly planned, advertised, and sold tickets to a “Lantern Fest” event in spite of aerial lanterns being prohibited under the state fire code, continued to sell tickets after being notified that their event was unlawful, misled consumers regarding their ticket refund policy, and refused to refund consumers upon their requests.
  • Under the terms of the default judgment, the event production companies must pay $80,607 in restitution to consumers and over $7.96 million in civil penalties, and permanently cease advertising, selling tickets to, or producing any entertainment events in the state.

West Virginia Attorney General Sues Rent-to-Own Business Over Allegedly Aggressive Collection Tactics

  • West Virginia AG Patrick Morrisey filed a lawsuit against rent-to-own business Howard Rents LLC d/b/a Aaron’s over allegations that it employed aggressive collection tactics in violation of the state’s Consumer Goods Rental Protection Act.
  • According to reports, Howard Rents allegedly made unwarranted phone calls to customers’ family members and references and went to customers’ homes and workplaces to coerce payment of debts.
  • According to reports, the complaint seeks injunctive relief and restitution.

FTC Settles With Infant Formula Manufacturer for Allegedly Falsely Claiming Formula Prevents Allergies

  • The Federal Trade Commission (“FTC”) reached a settlement with infant formula manufacturer Gerber Products Company d/b/a Nestle Nutrition (“Gerber”) over allegations that it falsely claimed that its formula prevents infants from developing allergies in violation of the FTC Act.
  • According to the complaint, Gerber allegedly falsely claimed that its Gerber Good Start Gentle Infant Formula prevents or reduces the risk of developing allergies and that its formula had received a qualified health claim from the U.S. Food & Drug Administration (“FDA”) when, in reality, the FDA rejected its petitions to use such claims.
  • Under the terms of the stipulated final judgment and order, Gerber must cease misrepresenting that its formula prevents or reduces the risk of developing allergies and that it possesses and relies on competent and reliable scientific evidence in making these claims, must preserve records relating to human clinical tests or studies, and must monitor compliance with the terms of the order, among other things.

FTC Obtains Temporary Restraining Order Against Student Loan Debt Relief Companies for Allegedly Deceptively Marketing and Selling Student Loan Debt Relief Services

  • The Federal Trade Commission (“FTC”) obtained a temporary restraining order (“TRO”) against student loan debt relief companies Elegant Solutions, Inc. d/b/a Federal Direct Group, Trend Capital Ltd. d/b/a Mission Hills Federal, Dark Island Industries, Inc. d/b/a Federal Direct Group and f/k/a Cosmopolitan Funding, Inc., Heritage Asset Management, Inc. d/b/a National Secure Processing, Tribune Management, Inc. d/b/a The Student Loan Group, and three individuals over allegations that they deceptively marketed and sold student loan debt relief services in violation of the FTC Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, and Telemarketing Sales Rule.
  • According to the complaint, the debt relief companies allegedly failed to obtain lower monthly payment amounts or loan balances that they promised to consumers, kept consumers’ student loan payments instead of applying them towards their loans, obtained consumers’ student loan credentials—such as usernames and passwords used to log in to U.S. Department of Education websites—and changed consumers’ contact information, and collected illegal advance fees in exchange for promised debt relief services.
  • Under the terms of the TRO, the debt relief companies are temporarily restrained making deceptive representations, collecting advance fees, or releasing customer information, and are subject to an asset freeze, among other things.

Data Privacy & Security

30 Attorneys General Settle With Health Insurance Company Over Alleged Data Breach

  • 30 AGs, led by Washington AG Bob Ferguson, reached a settlement with health insurance company Premera Blue Cross (“Premera”) to resolve allegations that it failed to secure patients’ personal and health information and misled patients about a data breach that affected almost 11 million patients in violation of the states’ consumer protection laws and the federal Health Insurance Portability and Accessibility Act (“HIPAA”).
  • According to AG Ferguson’s complaint, Premera allegedly allowed an unauthorized user to obtain unauthorized access to patients’ personal and health information by failing to address network vulnerabilities such as inadequate safeguards against phishing attempts, inadequate network segmentation and patch management, and ineffective password management policies and security tools; failing to inspect and safeguard patients’ personal and health information; and failing to comply with HIPAA’s security and privacy standards; and that it also allegedly misrepresented its privacy protections and ePHI safeguards in privacy notices, the scope and severity of the data breach, and the security measures it had in place at the time of the breach.
  • According to AG Ferguson’s office and under the terms of the consent decree, Premera must pay $10 million to the states, implement data security controls to protect ePHI, review its security practices annually and provide reports to AGs’ offices, map where HIPAA-protected information is located in its network, hire a chief information security officer (“CISO”), hold regular meetings between the CISO and its executive management, hire a compliance officer, create a compliance program, and provide security training to all employees who handle ePHI.


18 Democratic Attorneys General Urge Congress to Pass Bill Banning Asbestos

  • 18 Democratic AGs, led by California AG Xavier Becerra and Massachusetts AG Maura Healey, sent a letter to leaders in the U.S. House of Representatives in support of the Alan Reinstein Ban Asbestos Now Act of 2019, which would amend the Toxic Substances Control Act and prohibit the manufacture, processing, and distribution of asbestos in the country, effectively reinstating the asbestos ban adopted by the U.S. Environmental Protection Agency (“EPA”) that had been vacated by the Fifth Circuit Court of Appeals in 1991.
  • In the letter, the AGs argue that congressional action is necessary because the EPA has taken inadequate action to address the health and environmental risks posed by asbestos by excluding exposure to legacy asbestos from its risk evaluations and failing to pursue all reasonably available information about asbestos for those risk evaluations, and further because the EPA has not prohibited asbestos use, which could allow for future use of asbestos.
  • The AGs urge Congress to pass the bill, which is pending in the U.S. House of Representatives Subcommittee on Environment and Climate Change.
  • As previously reported, 15 Democratic AGs, led by AG Becerra and AG Healey, petitioned the EPA in January 2019 to issue a rule requiring more robust reporting by those who import asbestos or use it domestically.

For-Profit Colleges

Massachusetts Attorney General Settles With For-Profit College for Allegedly Failing to Disclose Information to Students

  • Massachusetts AG Maura Healey reached a settlement with for-profit college Salter College and its parent company Premier Education Group to resolve allegations that it misled students in violation of the state’s for-profit and occupational school regulations.
  • According to the AG’s office, Salter College allegedly failed to disclose job placement, loan repayment, and graduation rates to students as required by law.
  • According to the AG’s office, under the terms of the assurance of discontinuance, Premier must pay $100,000 to the state, discharge $1.6 million in in student debts, seek to have student credit reports cleared of negative reporting regarding the debts, cease enrolling students in the state, and cease operating in the state by the end of the year.

Labor & Employment

Massachusetts Attorney General Issues Civil Citations to Supermarket Over Allegedly Failing to Pay Minimum Wage and Overtime, Keep Proper Payroll Records

  • Massachusetts AG Maura Healey issued a civil citation against Rosa Supermarket Inc. and its president (collectively, “Rosa”) over allegations that it failed to pay wages and keep proper payroll records in violation of the state’s minimum wage and overtime laws.
  • According to the AG’s office, Rosa allegedly failed to pay the state minimum wage and overtime, issue suitable paystubs to employees, and keep complete time records for employees.
  • According to the AG’s office, the civil citation requires Rosa to pay $313,915 in restitution and penalties.

Massachusetts Attorney General Settles With Home Health Care Company for Allegedly Failing to Pay Timely and Overtime Wages

  • Massachusetts AG Maura Healey reached a settlement with Pinnacle Home Healthcare Services Inc. and its owner (collectively, “Pinnacle”) to resolve allegations that it failed to pay timely and overtime wages in violation of the state’s wage and hour laws.
  • According to the AG’s office, Pinnacle failed to timely pay home health care aides and underpaid wages to the aides.
  • According to the AG’s office, under the terms of the settlement, Pinnacle must pay $162,000 in restitution and penalties.

State v. Federal

18 Democratic Attorneys General Urge FTC to Protect Workers From Anticompetitive Labor Practices

  • 18 Democratic AGs, led by District of Columbia AG Karl Racine, submitted a comment to the Federal Trade Commission (“FTC”) in response to the FTC’s request for public comments in connection with its hearings on Competition and Consumer Protection in the 21st Century.
  • In the comment, the AGs argue that federal enforcers should use their antitrust enforcement authority to address anticompetitive labor practices such as non-compete and no-poach agreements that depress wages, limit job mobility, and limit opportunities for advancement and incorporate labor concerns into merger reviews.
  • The AGs commit to further emphasize labor considerations in their antitrust work, and encourage the FTC to do the same, whether independently or in collaboration with state enforcers.

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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