On December 2, 2020, the Maine Office of the Attorney General announced that Aaron M. Frey was re-elected by a joint convention of the Maine Legislature to a second two-year term.

Following the election, Attorney General Frey issued a statement in which he identified issues he will focus on during this term,

“As Attorney General, I am sworn to defend the Constitution and to ensure that the rule of law is protected. I also will continue to work with the Legislature and the Mills administration to ensure that our state does everything in its power to address the pandemic, to combat the opioid crisis and obtain accountability for opioid manufacturers, to engage productively in the process of creating substantial reforms in the states relationship with Maine’s tribal nations, and to find meaningful ways to make our criminal justice system more equitable.”

Monday, November 23, 2020

  • New Jersey Attorney General Grewal announced complaints against four doctors and revoked the license of a fifth for writing “off-label” prescriptions for high dosages of a strong and highly addictive opioid and cancer pain medication for non-cancer patients. The doctors allegedly wrote the prescriptions after receiving payments from the drug’s manufacturer Insys Therapeutics, Inc. through a sham speaker program.
  • Missouri Attorney General Schmitt announced that his office resolved lawsuits against homeowners associations Country Club Homes and Crestwood Club Homes Association for failing to remove racially restrictive covenants from their governing documents. The Attorney General’s Office filed a notice of voluntary dismissal after it received documentation that the two associations removed the racially restrictive covenants.
  • Law360 reported that the U.S. Consumer Financial Protection Bureau (“CFPB”) pushed back on a motion for default judgment based on settlement negotiations and inability to pay, asking a California district judge to make student loan business GST Factoring Inc. and its owner pay over $53 million for the business’s role in an alleged student debt relief scheme. This CFPB’s request comes after a July 13 complaint which alleged that from 2015 to the present the defendants violated the Telemarketing Sales Rule by collecting $11.8 million in illegal advance fees from about 2,600 clients.

Friday, November 20, 2020

  • Ohio Attorney General Yost announced a consumer protection lawsuit against car dealership Worldwide Auto Sales after receiving around 80 complaints that the company was failing to deliver vehicle titles to consumers. The lawsuit also alleges that the company failed to deliver vehicle warranties and misrepresented details of sales, and it seeks restitution, declaratory relief, injunctive relief, and civil penalties.
  • Florida Attorney General Moody’s office announced an agreement with radiology practice Mori, Bean and Brooks, P.A. to resolve allegations of health care fraud. According to the press release, an investigation found that the company “knowingly submitted false claims to the Medicaid program for the interpretation of radiological images that were ineligible for reimbursement.” The company has agreed to pay $161,694 to resolve the lawsuit.
  • Law360 reported that many tech companies are urging the DC Federal Court handling the Google antitrust suit to only allow Google’s outside counsel to access sensitive confidential information that the companies shared as part of the DOJ’s investigation. Google has proposed a protective order to allow its in-house attorneys to access the information, but the companies are arguing that Google’s plan is not enough, that “the unique risks of inadvertent disclosure and improper use of their highly confidential materials ‘substantially outweighs any need identified by Google,’” and that “[d]isclosing these particularly sensitive documents to any Google employee risks serious harm to the non-parties and to the strong public interest in competition.”
  • Law360 reported that a Consumer Financial Protection Bureau lawsuit has accused Illinois debt relief and credit repair services company FDATR Inc. and its former owners of abusive telemarketing from 2011 until at least April 2019, charging disproportionately high fees, and making claims about reducing or eliminating student loan payments and improving credit scores when it was really just filing loan-consolidation paperwork.

Thursday, November 19, 2020

  • Pennsylvania Attorney General Shapiro announced that his office settled with Event Ticket Sales LLC for failing to disclose fees prior to ticket purchases and for its refund policy. As part of the announcement, Attorney General Shapiro stated, “Advertising one price and charging another will roll out the red carpet to an investigation by my office. Consumers need to know how much money their credit cards will be charged before they click to buy a ticket for a concert, show, or event. And promised refunds for canceled events must be honored.” Under the Assurance of Voluntary Compliance, the company has agreed to change its disclosure of fees and provide full refunds for all Pennsylvania consumers who purchased tickets for canceled events.
  • Illinois Attorney General Raoul announced a settlement resolving his lawsuit against Hilco Redevelopment, LLC, following a lawsuit Raoul filed following the release of contaminants as part of the demolition of a smokestack. The consent order requires the company to adhere to dust mitigation plans for the rest of the demolition project and provide funding to support the neighboring community’s long-term health and wellness.
  • Arizona Attorney General Brnovich announced that his office is partnering with CVS Pharmacy on a new consumer fraud awareness program to combat gift card scams in Arizona.  All CVS Pharmacy Stores in Arizona will display the STOP signs at gift displays to prompt customers to stop and think about why they are buying a gift card and remind customers that gift cards cannot be used to pay government agencies.
  • Antitrust Law Daily reported that Senator Mike Lee (R., Utah) proposed the “One Agency Act,” which would consolidate antitrust enforcement authority in the DOJ and remove the FTC’s authority over antitrust matters, though it would not change the FTC’s enforcement powers over unfair and deceptive acts and practices. According to the article, “Lee cited the FTC’s antitrust case against Qualcomm and the differing positions of the two federal antitrust agencies on the case as reasons for consolidating enforcement in one agency.”

Eight months into the COVID-19 pandemic, the U.S. Department of Justice (DOJ) and its law enforcement partners are taking an increasingly aggressive approach to investigating and pursuing allegations of fraud related to federal relief programs designed to aid small businesses and their employees. Over the past week, the DOJ announced charges against 11 individuals in connection with two different COVID-19 relief fraud schemes. In each case, the individuals sought to illegally obtain millions of dollars in relief funds guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP).

$16M PPP Fraud in S.D. Texas

On November 17, six individuals from Texas and one from Illinois were charged in an indictment filed by the DOJ for their alleged participation in a scheme to obtain approximately $16 million in forgivable PPP loans by filling out at least 80 fraudulent PPP applications. The defendants submitted these applications on behalf of various businesses, some of which they allegedly owned, and some of which were owned by third parties (and for which they allegedly received large kickbacks). The scheme involved the submission of fraudulent bank records and/or fake federal tax forms. The defendants also falsified the number of employees and the average monthly payroll expenses of the applicant businesses, and then laundered the proceeds of their scheme by writing fake paychecks to fake employees (including some of the defendants and their family members), which were cashed at a check cashing store owned by one of the defendants. A Porsche and a Lamborghini were among the items allegedly purchased and seized by federal agents in connection with the scheme. All seven defendants were charged with conspiracy to commit wire fraud and wire fraud. One defendant was also charged with money laundering.

$5.6M PPP and EIDL Fraud in C.D. California

On November 18, four members of a Los Angeles-based fraud ring were charged in an indictment filed by the DOJ for allegedly submitting at least 35 fraudulent EIDL and PPP loan applications seeking over $5.6 million in COVID-relief funds. In making these applications, the defendants used fictitious business names as well as fake, stolen, or synthetic identities. They submitted fake identity documents, and false payroll records and tax documents. Once their applications were approved by the SBA and federally-insured financial institutions, the defendants directed the funds to be deposited into bank accounts that they controlled. Before the scheme was uncovered, the defendants allegedly used the funds for their personal benefit, including to buy luxury homes. All four were charged with conspiracy to commit bank and wire fraud, bank fraud, and wire fraud. One individual was also charged with aggravated identity theft.

Looking Ahead

As the pandemic continues and these types of schemes grow more sophisticated and coordinated, federal prosecutors will continue to prioritize and prosecute this kind of fraud. Indeed, U.S. Attorney’s Offices across the country have created COVID-19 task forces solely for the purpose of rooting out perpetrators of federal relief fund fraud. Further, the Pandemic Response Accountability Committee (PRAC), in collaboration with Offices of Inspector General and other federal law enforcement partners, remains on high alert in detecting and preventing fraud related to federal coronavirus relief programs. The SBA Office of the Inspector General, which reports to the PRAC regarding the use of pandemic funds, has opened dozens of investigations into suspected fraud and issued various reports warning of the pervasiveness of the issue. To that end, lenders, service providers, banks, and other financial institutions should be vigilant about their continued roles in processing applications for stimulus program loans, following Bank Secrecy Act protocols, and other regulatory or statutory requirements, in order to avoid potential criminal or civil exposure for their unwitting roles in schemes that were recently charged. As the government has demonstrated, their efforts to prosecute COVID-19 fraud will only continue to expand.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Wednesday, November 18

  • Attorneys General from 34 states announced a $113 million settlement with Apple over its 2016 decision to throttle iPhone speeds to address shutdowns, rather than disclosing the battery issues it discovered to consumers or replacing batteries. The Attorneys General allege that failing to disclose these issues and throttling iPhone performance allowed Apple to profit from selling additional iPhones to consumers whose phone speeds were slowed. The settlement requires Apple to provide consumers with truthful information about iPhone battery health, performance, and power management on its website, in update installation notes, and in the iPhone user interface. The investigation was led by Arizona Attorney General Brnovich, Arkansas Attorney General Rutledge, and Indiana Attorney General Hill. Apple also settled class action litigation related to the same conduct, and will  pay out up to $500 million in consumer restitution.
  • New York Attorney General James announced her support for a relief package that will provide New York City taxi medallion owners with debt forgiveness on outstanding loans for the medallions. The relief package, introduced by the New York Taxi Workers Alliance, will guarantee loans written down to no more than $125,000.
  • Sixteen attorneys general and New York City sued the Department of Energy for failing to meet legal deadlines for reviewing and updating national energy efficiency standards for 25 categories of products and equipment, such as washers and dryers, microwave ovens, and air conditioners and heaters. The coalition argues that the failure to update the standards violates the Energy Policy and Conservation Act.

Friday, November 13, 2020

  • Ohio Attorney General Yost filed a second lawsuit to prevent the annual collection of $150 million in nuclear generation fees from Ohioans which go to Energy Harbor, as part of House Bill 6. The press release states that HB6 “was crafted and approved under corrupt and cloaked actions.”
  • Law360 reported that the U.S. DOJ’s Antitrust Division released new guidance on Thursday, November 12, 2020 regarding when and how arbitration should be used in merger challenges in the future. The guidance states that arbitration should be used when merger challenges brought in the courts would cause an unacceptable delay and when they would not adequately conserve the division’s resources. Arbitration should also be used when the issues are easily enough agreed upon and when the case would benefit from the subject matter expertise of the arbitrator, as well as when the parties want to decide the potential remedies in advance of the proceedings.

Recently, New York enacted a new law against gendered pricing that was included as a key component of the state’s Fiscal Year 2021 budget and Governor Cuomo’s 2020 Women’s Agenda. In a press release announcing the law, Governor Cuomo states, “By abolishing the pink tax, women and girls will no longer be subject to harmful and unfair price discrimination and any businesses who fail to put an end to this despicable practice will be held accountable.” Other state actors are quoted as lauding the new law and comparing the “pink tax” to gender discrimination against women.

The new law, GBS, § 391-U, which went into effect on September 30, 2020, prohibits charging different prices for goods or services that are “substantially similar” but are marketed to different genders. The law applies at all levels of the supply chain. Goods under the law are defined broadly as “any consumer product used, bought, or rendered primarily for personal, family or household purposes.” “Substantially similar” goods are defined as those that “exhibit little difference in the materials used in production, intended use, functional design and features, and brand.”

Similarly, services under the law are described as “any consumer services used, bought or rendered primarily for personal, family or household purposes.” Services that are “substantially similar” are those “that exhibit little difference in the amount of time delivering, difficulty, and cost in providing the service.” Consumers may ask those who provide services for a price list in advance.

The gendered pricing law could impact a wide range of goods and services, including but not limited to:

  • Personal care products such as razors, deodorant, toothbrushes, and body wash
  • Gendered toys and children’s clothing
  • Adult clothing of the same brand
  • Dry cleaning, tailoring, laundry services, and haircuts

The law could also potentially be read to cover sellers like car dealerships or financial service providers if they sell their products or services at different prices to women and men.

On the other hand, businesses whose pricing is based on difficulty, cost incurred, time, labor, or materials involved in manufacturing a good or offering a service, or any other gender-neutral reason for a price differential, should not be concerned about running afoul of the new law. However, these businesses should ensure they are able to document these reasons for the price difference in case they become subject to investigation.

California already has an analogous law, the Gender Tax Repeal Act, which prohibits price discrimination for similar services based on gender. However, this law is limited to services and does not cover goods. California’s law also requires certain businesses, such as hair salons, tailors, and dry cleaners, to clearly and conspicuously post pricing lists for their services, while New York’s law only recommends such disclosures and requires businesses to provide customers with pricing lists upon request.

The press release states that those who violate the gendered pricing law are subject to injunctive relief, consumer restitution, and fines of up to $250 for the first violation and up to $500 for any subsequent violation. To avoid liability under this law and becoming subject to the accompanying fines, any business which sells similar goods or services to different genders should carefully ensure that its pricing system does not violate the law against gendered pricing and that it can support pricing differences with documentation showing legitimate reasons for such variance. Additionally, businesses should be on notice that other states may follow in New York’s footsteps and enact similar laws against gendered pricing of goods and services.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Thursday, November 12, 2020

  • District of Columbia Attorney General Racine filed a lawsuit against Capitol Petroleum Group, LLC (“CPG”), one of the District of Columbia’s leading retailers and distributors of gasoline, as well as affiliated companies, for price gouging during the COVID-19 crisis. The press release states that Attorney General Racine’s investigation “revealed that even as wholesale gas prices dropped when the economy slowed in March and April 2020, CPG unlawfully doubled its profits on each gallon of gas sold to consumers at 54 gas stations in the District.” CPG and its affiliates also allegedly unfairly increased profit margins when they distributed gas to other retailers. The lawsuit is seeking injunctive relief, restitution, and civil penalties.
  • Tennessee Attorney General Slatery reached a settlement with DOC Disinfectant, which allegedly made deceptive and misleading claims related to its cleaning products and services. DOC allegedly falsely claimed that its products and services were FDA and EPA approved and could eliminate COVID-19 as well as protect against its presence on surfaces for up to 90 days. It also included the logos of companies it had never worked with on its website. The settlement includes provisions requiring DOC to cease its deceptive claims and pay $5,000.
  • Law360 announced that the Federal Trade Commission (“FTC”) is considering ways to open its merger review process to deals that are below the financial reporting thresholds. This announcement, which includes potential antitrust scrutiny over “major firms that scoop up so-called nascent competitors,” comes from statements made by FTC Office of Policy Planning Director Bilal Sayyed and FTC Chairman Joseph J. Simons at the America Bar Association’s antitrust fall forum.

Monday, November 9

  • Law360 reported that the head of the UK’s Competition and Markets Authority (“CMA”) Andrea Coscelli argued that antitrust enforcement in the UK needs updates, such as more direct regulation instead of a case-by-case approach, and that it needs “a few extra layers of regulation.” Coscelli also stated that more regulation is needed over technology

Friday, November 6

  • New York Attorney General James announced a lawsuit against international auction house Sotheby’s for violating the False Claims Act. Sotheby’s allegedly violated the Act by creating and using false tax exemption resale certificates for an art collector client, knowing the art collector was not eligible to claim the exemption because the art was not for resale and was actually for personal use.
  • Law360 reported that the CFPB is suing Florida fintech company Driver Loan LLC for allegedly misleading consumers with its bank-like deposit program used to fund short-term rideshare driver loans. The company allegedly charged annual percentage rates of nearly 1,000% but told consumers the annual rate was 440%. The company also allegedly misrepresented that consumers’ deposits were Federal Deposit Insurance Corporation insured with guaranteed returns. The lawsuit is seeking injunctive relief and damages.
  • Law360 reported that Google will not file a motion to dismiss the DOJ’s antitrust suit but will instead answer the complaint by December 21, 2020, based on a Friday filing to the DC District Court. The parties also told the judge that they have agreed on many provisions and terms, though some significant issues are still in dispute. The parties will submit position statements by November 13, 2020.
  • Law360 reported on November 4, 2020 that California voters approved ballot measure Proposition 22, exempting Uber and other app-based delivery and ride-hailing companies from California’s 2019 revised worker classification test and allowing these companies to treat their workers as independent contractors. Proposition 22 still provides some requirements for these employers, such as setting an earnings floor of 120% of the minimum wage for time the workers spend serving customers, providing subsidies for state health care insurance, and requiring them to insure workers for injuries on the job.

Pennsylvania AG Josh Shapiro (D) has won a second term. With 94.4% votes being reported, AG Shapiro had over 3.3 million votes and won with a 3% lead.

To learn more about Josh Shapiro, please view Crowell & Moring’s “2020 Attorneys General Election Summary.”

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Wednesday, November 4, 2020

  • Florida Attorney General Moody announced that her Consumer Protection Division has secured almost $3 million after a trial against The Surrogacy Group, LLC and its owner for providing deceptive services to couples who are seeking to have a child through surrogacy. The judgment includes over $2 million in consumer restitution and $720,000 in civil penalties for unfair and deceptive conduct. This conduct included making false or misleading representations to solicit business, accepting large fees for services the business did not provide, and misappropriating funds for personal use.
  • New York Attorney General James announced that she and Governor Cuomo have renewed for the eighth time the state’s order to halt the collection of medical and student debt that has been referred to the Office of the Attorney General for collection. The renewal will last through December 31, 2020.

Tuesday, November 3, 2020

  • Arkansas Attorney General Rutledge announced several lawsuits against illegal pyramid schemes in Arkansas. The defendants allegedly told consumers they could earn a 700% return on their investments and also “bless” their communities by joining “Blessing Loom” boards and by recruiting other members. The defendants did not offer any products or services in return for the consumers’ investments but did offer an opportunity to earn money. The defendants eventually began using the consumers’ contributed money as their own. Each defendant could face a fine of $10,000 for each violation of the Arkansas Deceptive Trade Practices Act.

Monday, November 2, 2020

  • New Jersey Attorney General Grewal announced that Wakefern Food Corp. and two of its ShopRite supermarket entities agreed to pay $235,000 and improve data security to resolve allegations that they did not adequately protect more than 9,700 New Jersey shoppers’ personal information. The companies failed to properly dispose of electronic devices that they used to collect pharmacy customers’ signatures and purchase information.

Friday, October 30, 2020

  • It was announced that West Virginia Attorney General Morrisey reached a $101.35 million settlement with 11 paving and asphalt companies, representing the largest single-state antitrust settlement in West Virginia’s history. The settlement resolves allegations that the companies conspired to monopolize West Virginia’s asphalt and paving market, reducing competition and maximizing profits at the expense of taxpayers.
  • Washington Attorney General Ferguson announced that a King County Superior Court Commissioner ordered a fraudulent Auburn property management company, NW Property Solutions, to pay $500,000 in restitution and penalties for making unauthorized modifications to homes and then refusing to pay the homeowners.
  • California Attorney General Becerra led a multi-jurisdiction lawsuit challenging the US Equal Employment Opportunity Commission’s (“EEOC”) decision to revoke full access to federal employment data that state and local fair employment practice agencies use to monitor and combat workplace discrimination. The lawsuit is arguing that the EEOC’s decision violates the Civil Rights Act and the Administrative Procedure Act. The attorneys general of Maryland and Minnesota also joined the lawsuit.
  • California Attorney General Becerra and the California Department of Pesticide Regulation filed a complaint against Alpine Helicopter Service, Inc. and its pilots for alleged incidents of pesticide drift that harmed nearby communities. The complaint is seeking civil penalties and injunctive relief.

In last night’s election, 10 State Attorneys General races were decided, with North Carolina and Pennsylvania remaining too close to call.

Of the remaining eight states the winners are:

  • Indiana:  Todd Rokita  (Republican/newly elected)
  • Missouri:  Eric Schmitt (Republican/Incumbent)
  • Montana:  Austin Knudsen: (Republican/newly elected)
  • Oregon:  Ellen Rosenblum (Democrat/Incumbent)
  • Utah:   Sean Reyes (Republican/Incumbent)
  • Vermont:  TJ Donovan (Democrat/Incumbent)
  • Washington:  Bob Ferguson (Democratic/Incumbent)
  • West Virginia:   Patrick Morrisey  (Republican/Incumbent)

We congratulate the winners and will continue to watch Pennsylvania and North Carolina. We will provide updates as they are available.

We will also report on Maine’s State Legislature results when they are available, as the State Legislature will vote on the new AG.

To learn more about the new and returning Attorneys General, please view Crowell & Moring’s “2020 Attorneys General Election Summary.”

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

October 29:

  • North Carolina Attorney General Stein announced that his office obtained a consent judgment against Stephen Gould Corporation in a price gouging lawsuit. The consent judgment requires the company to pay $150,000 in civil penalties and other fees, and the company is barred from engaging in unfair and deceptive practices and from selling or advertising PPE at unreasonably excessive prices. The lawsuit alleged that the company offered 7 million masks to healthcare organizations at a markup of over 100%, misleading the potential customers about the drastic nature of the markup.
  • It was announced that a National Association of Attorneys General (“NAAG”) working group submitted its report to Congress about efforts to prevent illegal robocalls. In the report, the NAAG working group notes that members have taken actions to implement its recommendations, such as filing enforcement actions against individuals and entities for illegal robocalls, identifying and warning voice service providers that facilitate illegal robocalls, and implementing technology that blocks robocalls as well as caller ID authentication.
  • Minnesota Attorney General Ellison announced that his office reached a settlement agreement with a hospital, Hutchinson Hospital, requiring it to reinstate favorable hospital billing terms that it terminated for many patients, increasing their bills beyond what they had previously agreed to pay. The hospital’s termination of the billing terms violated a regulatory agreement that exists between the Minnesota Attorney General’s office and nonprofit hospitals.

October 28:

  • New Jersey Attorney General Grewal announced that the State Board of Medical Examiners permanently revoked the license of a physician who allegedly traveled once a week from her home in Rhode Island to her office in New Jersey to prescribe large amounts of opioids and other addictive medications to patients without conducting the required examinations and screenings. The physician must also pay $50,000 in costs and penalties under the Final Consent Order.
  • New Jersey Attorney General Grewal announced a seven-count lawsuit against a financial consultant and his business, alleging that the business defrauded at least 57 investors out of almost $2.2 million through fraudulent sales of unregistered securities. The owner then allegedly used these funds for his own personal benefit.

October, 23:

  • Florida Attorney General Moody announced an agreement resolving a review of a proposed merger between Waste Management, Inc. and Advanced Disposal Services Inc., two of the largest waste disposal and collection service providers in the United States. The agreement requires the two companies to divest key assets across several Florida markets to environmental services company GFL Environmental, which allows GFL to serve as a competitor. The agreement is also with the US DOJ, Wisconsin, Pennsylvania, Minnesota and Illinois. The agreement is here.
  • A bipartisan coalition of 38 attorneys general filed an amicus brief in Supreme Court case Facebook v. Noah Duguid, which will determine the scope of the Telephone Consumer Protection Act (“TCPA”). Facebook is arguing that because its dialing technology stores and dials pre-existing telephone numbers rather than using a random number generator, its text messages do not violate the TCPA. The attorneys general are arguing that Facebook’s requested narrowing of the TCPA’s definition of auto-dialers would limit the Act’s protection of consumers. The brief is available here.