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

Multistate

  • Five state attorneys general sued the U.S. Department of Education regarding the recent overhaul of Title IX regarding the definition of “gender identity discrimination.” Title IX of the Educational Amendments Act has helped ensure that women have equal access to educational facilities and programs by prohibiting sex-based discrimination in federally-funded education. The five state attorneys general assert that Title IX’s use of “sex” and “gender” as a binary between men and women shows that the Biden Administration’s expansion of sex discrimination to include “gender identity” is unlawful.
  • Three state attorneys general praised the FTC’s rule banning non-competes in employment. Michigan Attorney General Nessel noted that, by banning non-compete agreements nationwide, the FTC estimates its rule will: reduce health care costs, enhance entrepreneurship, increase innovation, and bolster worker earnings.

California

  • Attorney General Bonta announced that the California Department of Justice is accepting proposals for the 2024-25 Tobacco Grant Program. The program seeks to reduce the illegal sale of tobacco products to minors by providing approximately $28.5 million in grant funding to eligible local agencies.
  • Attorney General Bonta reached a $4.5 million settlement with University of Phoenix, and its parent company Apollo Education Group, Inc. for using “aggressive and unlawful military student recruitment tactics from 2012 through 2015.”  These tactics violated California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). Attorney General Bonta also alleged that the University of Phoenix violated directives issued by the Department of Defense to curb aggressive and deceptive recruiting of service members.

Washington

  • King County Superior Court Judge Marshall Ferguson rejected Albertson and Kroger’s request to dismiss Attorney General Bob Ferguson’s antitrust lawsuit against their proposed merger. Attorney General Ferguson asserted that the merger of the two largest supermarkets in Washington State would severely limit shopping options for consumers and would result in price increases for groceries.

Crowell attorneys attended the National Association of Attorneys General (NAAG) 2024 Consumer Protection Spring Conference in San Francisco, California on May 15. As usual, the conference included receptions and other networking events allowing the Crowell attorneys in attendance to engage with multiple attorneys general and a host of their respective staff members. The Consumer Protection Spring Conference included a panel session where esteemed panelists spoke on ways to improve the multistate investigation process.  Oregon Attorney General Ellen Rosenblum, moderated the panel of two speakers: Kwame Raoul, Illinois Attorney General and Co-Chair, National Association of Attorneys General Consumer Protection Committee, and Edward Manibusan, Northern Mariana Islands Attorney General. Below are some of the major takeaways from the discussion.

  • Attorneys General in Multistate Investigations Stand to Benefit from Increasing Collaborative Efforts. The panelists expressed concern that multistate executive committees sometimes decide on settlement distribution plans that lead to unfair results for other states in the multistate group.  The power in a multistate investigation lies in the state attorneys general collaborating to ensure fair results for most instead of favorable results for a select few.  The panelists encouraged states to look to allow fair monetary relief to all states as well as broad injunctive relief.  They also noted that this can be challenging to execute in cases where states are working with or alongside private trial lawyers who are focused on monetary gains rather than injunctive relief. But this is a great opportunity for state attorneys general to mindfully tip the scale.
  • Multistate Investigations Could Move More Quickly, but Complex Matters Require Time.  The panelists agreed that, in general, multistate investigations could move faster. But this perspective was balanced against the understanding that these investigations, by nature, are incredibly complex and require multiple layers of review and oversight. Overly speeding up investigations could ultimately be a disservice to both sides. Reaching settlements early in an investigation can expedite the process, but so to can efforts by companies to be forthcoming and provide information that will allow the multistate group to resolve certain issues more quickly.
  • Proactive and Frequent Communication is Key.
    • Improving Internal Communications Within OAGs. The panelists emphasized the importance of attorneys general communicating with the staff leading investigations.  Often, parties to an investigation will attempt to communicate directly with the attorney general and it is crucial that the attorney general be aware of what staff has been doing and the state of the major issues in the investigation.  Such improved communication can also lead to improved ideas and perspectives. For instance, Illinois Attorney General Raoul’s staff attorneys have helped him think more broadly about how allocations of settlement funds should be distributed, leading to more creative and consumer-focused solutions.
    • States Should Improve Communications with Investigation Targets. Multistate executive committees need to do a better job ensuring consistent communications with the targets of investigations so that target companies know what they are looking for and why.  They should also encourage more back and forth communication with target companies to ensure productions and other parts of the investigation proceed efficiently. 
    • Companies Should Consider Improving Communications as well. Companies undergoing investigation can speed the investigation process by improving their communications with the multistate group. Proactively communicating disputes and changes in circumstances that may affect the investigation will allow for a more organized and focused investigation.  

Crowell attorneys attended the National Association of Attorneys General (NAAG) 2024 Consumer Protection Spring Conference in San Francisco, California on May 15. As usual, the conference included receptions and other networking events allowing the Crowell attorneys in attendance to engage with multiple attorneys general and a host of their respective staff members. The Consumer Protection Spring Conference included a panel session titled Developments at the FTC: Rulemakings.  Assistant Attorney General Elizabeth Blackston, Illinois Attorney General’s Office, moderated the panel of two speakers: Thomas Dahdouh, Staff Attorney (former attorney advisor to Commissioner Chopra), Federal Trade Commission (FTC) and Lartease Tiffith, Executive Vice President for Public Policy, Interactive Advertising Bureau.  Below please find some key takeaways:

  • FTC & State Attorneys General Relationship: The presentation focused on the importance of the relationship between the FTC and state attorneys general, specifically the willingness of these regulators to work alongside one another. The FTC issued a report, “Working Together to Protect Consumers: A Study and Recommendation on FTC Collaboration with the State Attorneys General,” regarding the federal and state relationship and recommendations for further collaboration on April 10, 2024.  Since January 1, 2020, the FTC has brought 33 joint enforcement actions with either state attorneys general offices or more localized district attorneys.
  • Remedies of the Regulators: The FTC cannot seek damages pursuant to Section 13(b) of the FTC Act due to the 2021 ruling in AMG Capital Management LLC v. FTC. The FTC can seek damages from courts for trade regulation rule violations. Specifically, the FTC can seek consumer redress under Section 19 for all trade regulation rule violations and civil penalties under Section 5(m)(1)(a) for knowing trade regulation rule violations. The AMG ruling is why, at least partially, that the FTC has intentionally focused on rulemakings recently, especially in the Bureau of Consumer Protection (see below discussion of rules). However, state attorneys general are likely able to seek such redress under state unfair or deceptive acts or practices laws or other consumer protection laws. The availability of such remedies for state attorneys general amplifies the FTC’s desire to work in partnership with the state enforcers.
  • Click to Cancel Rulemaking (update to the Negative Option Rule): The FTC is focused on an alleged increase in consumer difficulties with subscription services. The FTC seeks to require sellers to provide an easy and simple cancellation process, that is at least as easy as the sign-up process. Further, the proposed updated rule would require sellers to disclose material terms, to provide clarity about free trials or other offers that transition into regularly-occurring charges, and to stop sellers from making it difficult for consumers to cancel services. Presently, the FTC relies upon a number of existing rules that apply to negative option marketing, including the current Negative Option Rule, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act (ROSCA). The Notice of Proposed Rulemaking was issued on April 24, 2023.
  • Fake Reviews Rulemaking: The FTC believes the Endorsement Guides alone have not successfully eliminated the proliferation of fake consumer reviews. As such, the FTC has also proposed a rule to address the misleading treatment of consumer reviews. Mr. Dahdouh specifically discussed how the proposed rule would bar sellers from 1) buying reviews, 2) manipulating reviews, 3) negative review suppression 4) selling fake social media indicators (e.g., fake followers and fake views), and 5) failing to disclose material connections related to reviews, among other requirements that the rule specifically outlines in seven categories. The Notice of Proposed Rulemaking was issued on July 31, 2023.
  • COPPA Rulemaking: The Children’s Online Privacy Protection Rule (COPPA) went into effect over two decades ago and requires online service providers that collect personal information from children under the age of 13 to both notify and obtain consent from parents prior to collecting, using, or disclosing children’s data. The FTC seeks to expand COPPA to implement further limitations on the retention of children’s data and security measures for children’s data, as well as to place limits on technologies, such as persistent identifiers, that encourage children to remain online. The Notice of Proposed Rulemaking was issued on January 11, 2024.
  • Non-Compete Clause Rulemaking: The proposed rule would prohibit most employee non-competes, with retroactive effect. However, the rule has already faced legal challenges regarding whether the FTC has the legal authority to issue such a rule. Mr. Dahdouh focused on the FTC’s perceived authority for unfair methods of competition rulemaking via Section 6(g) of the FTC Act. Conversely, Mr. Tiffith argued the FTC’s lack of authority and critiqued both the necessity and reasonableness of the rule itself. The Rule was published on May 7, 2024.
  • Mr. Dahdouh’s presentation did include disclosures stating that all information came from public Notices of Proposed Rulemakings and that the presentation makes no suggestions, express or implied, that the proposed rules will be approved by the FTC either as originally proposed or with modifications.

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

Multistate

  • In the first week of April, the state attorneys general gathered for a meeting of the Attorney General Alliance (ANA). The alliance discussed ANA chair and Nevada Attorney General Ford’s initiative on consumer protection education. The discussion covered consumer protection topics such as finance, cybersecurity, and artificial intelligence. The meeting also included a fireside chat between Attorney General Ford and Consumer Financial Protection Bureau Director Rohit Chopra regarding collaboration between the agency and state attorneys general.
  • A multistate coalition of 11 attorneys general filed a multistate action against Mariner Finance for widespread violations of various state consumer protection laws. The suit alleges that Mariner Finance charged consumers for hidden add-on products that consumers did not agree to purchase, potentially totaling over $121.7 million in nationwide premiums and fee add-ons (excluding all interest Mariner Finance received for these add-ons). The complaint alleges that Mariner Finance either materially misrepresents or intentionally excludes information about the add-ons, which are deployed through aggressive sales tactics designed to force consumers to refinance in a predatory debt cycle. This lawsuit was originally filed in August 2022 by Pennsylvania, the District of Columbia, New Jersey, Oregon, and Washington, but recently, Wisconsin, North Carolina, New York, Illinois, Indiana and Tennessee moved to intervene. The lawsuit seeks full restitution, repayment of any unlawful profits, civil penalties, rescission of all current contracts and injunctive relief.
  • A bipartisan coalition of 18 state attorneys general and U.S. Transportation Secretary Pete Buttigieg announced the Airline Passenger Protection Partnership which has the goal of investigating airlines and ticket agents and holding them accountable when they violate aviation consumer protection laws. The Partnership expands the Department of Transportation’s (DOT) oversight capacity by establishing a new fast-track system prioritizing misconduct cases brought by State AGs that allege unfair or deceptive airline practices.
  • A coalition of 19 state attorneys general announced that they filed a Motion for Leave to Intervene as Respondents in the State of Iowa v. Securities and Exchange Commission to defend the SEC’s recently adopted Final Rule regarding corporate climate disclosures. The case was brought by Republican attorneys general and industry entities challenging the regulations. The coalition asserts that the states have a substantial interest in defending the Final Rule, which provides the States, their residents, and other investors with information about climate-related risks that is critical to making informed investment decisions.

Illinois

  • Illinois Attorney General Raoul recently presented a proposed budget for the Illinois Attorney General’s Office for the 2025 fiscal year to the Illinois legislature. We found this noteworthy because it highlights the sheer scale of some states’ consumer protection efforts. The Illinois Attorney General’s Office generated more than $1 billion in revenue for Illinois in 2023, so for each taxpayer dollar received, the office generated $17.55 for the state. The Illinois Attorney General’s Office responded to over 19,000 consumer complaints in 2023 and returned $145 million to consumers through direct restitution efforts.
  • Illinois Attorney General Raoul charged Mr. Eric Zabalza of Chicago with thirteen counts of theft and three counts of home repair fraud for allegedly scamming Cook County residents for more than $20,000 of uncompleted work. Mr. Zabalza is the owner of Sierra Fencing Inc., a fence construction and installation company. 
  • Illinois Attorney General Raoul announced that he filed a lawsuit against MV Realty PBC, LLC and MV Realty, LLC as well as corporate managers Amanda Zachman, Antony Mitchell and David Manchester, for allegedly tricking financially strapped consumers into confusing and convoluted 40-year real estate brokerage contracts in violation of the state’s Consumer Fraud and Deceptive Business Practices Act and the Uniform Deceptive Trade Practices Act. More specifically, MV Realty allegedly induced consumers to enter into 40-year contracts that obscured the defendants’ actual business model, which is based on extracting so-called “early termination fees” from unwitting consumers if they attempt to sell or otherwise transfer their homes. These “early termination fees” can cost tens of thousands of dollars. The contract also provides for the filing of a “memorandum” against consumers’ homes that restricts their ability to sell or refinance for decades. Attorney General Raoul is seeking restitution for the consumers, civil penalties of up to $50,000 per violation, and the State’s costs and expenses.

Massachusetts

  • Massachusetts Attorney General Andrea Joy Campbell issued an advisory providing guidance to developers, suppliers, and users of AI regarding their obligations under state consumer protection, anti-discrimination, and data security laws. The advisory clarifies that existing state consumer protection, anti-discrimination, and data security laws apply to emerging technology, including AI systems, just as they would in any other context.     

Maryland

  • Maryland Attorney General Brown announced a settlement with Royal Caribbean Cruises Ltd. d/b/a Royal Caribbean International to resolve an investigation into the Capital Jazz SuperCruises. The cruises were cancelled due to the COVID-19 pandemic. Although the tickets were sold by Capital Jazz, Inc., that company is not a part of the settlement and Royal Caribbean has agreed to pay amounts owed to consumers who have not received refunds at this time. The settlement includes a $1.3 million restitution payment to consumers, as well as a $100,000 payment to the state.

New Hampshire

  • New Hampshire Attorney General Formella filed a civil complaint in a County Superior Court against NEC Construction 603 LLC, CRV Construction & Tiny Homes LLC, Utopia Construction & Designs, as well as Christopher & Caitlin Vittum for violations of the New Hampshire Consumer Protection Act. The complaint alleges the defendants violated the state consumer protection law by making material misrepresentations, collecting and spending advance payments without intent to complete construction projects and failing to respond to consumer inquiries. Attorney General Formella is seeking restitution for the consumers, civil penalties of $10,000 per violation, and the State’s costs and expenses.

Washington

  • Washington Attorney General Ferguson issued a statement after a County Superior Court judge ruled that Washington’s ban on the sale of high-capacity gun magazines is unconstitutional. Attorney General Ferguson filed a lawsuit against Gator’s Custom Guns last September arguing the retailer intentionally violated the Consumer Protection Act when it continued selling high-capacity magazines after the state law banning such activity went into effect. Attorney General Ferguson plans to file an emergency motion to Washington’s Supreme Court seeking a stay.
  • Washington Attorney General Bob Ferguson announced that District Court Judge Ricardo S. Martinez granted AG Ferguson’s partial summary judgment against Allure Esthetic, a plastic surgery provider in Seattle, and its owner, Dr. Javad Sajan, for allegedly falsely and illegally inflating its ratings on online platforms including Yelp and Google. According to the complaint, Allure and Dr. Sajan violated the Consumer Review Fairness Act and Washington’s Consumer Protection Act for allegedly requiring more than 10,000 patients to sign illegal non-disclosure agreements that forced patients to contact the business directly if they had any concerns rather than posting a “negative review.” The agreement stated that Allure considered anything under four stars a “negative review,” and required patients to “not say anything” that would “hurt the reputation” of the provider. Under this “pre-service” non-disclosure agreement, Allure required patients to agree to “pay monetary damages to the practice for any losses” if they failed to remove a negative review. Some patients were also required to waive health privacy rights, to “allow a response [to the review] from the practice with my personal health information” if they post a negative review. Attorney General Ferguson is seeking injunctive relief, restitution for consumers, civil penalties of up to $7,500 per violation, and the State’s costs and expenses.

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

Multistate

  • A multistate coalition of attorneys general and the Consumer Financial Protection Bureau announced a $811 million judgment against bond services company Libre by Nexus, Inc., its parent company Nexus Services, Inc, and its principals, for using deceptive and abusive tactics to target immigrants in federal detention centers and their families. The original lawsuit was based on the Consumer Financial Protection Act, the Virginia Consumer Protection Act, the Massachusetts Consumer Protection Law, the Massachusetts Fair Debt Collection Practices Act, New York Executive Law § 63(12), and New York General Business Law § 349. The judgment includes injunctive relief, restitution to affected consumers, and civil penalties.
  • A coalition of 17 state attorneys general submitted a comment letter supporting the Consumer Financial Protection Bureau’s proposed overdraft fee rule, an amendment to its Truth in Lending Act regulations. Specifically, the proposed rule would require large banks to apply all consumer protections, including disclosures about interest rates, to overdraft fees. The coalition is writing in support of the rule and also requesting that the CFPB set the benchmark overdraft fee at $3.
  • Several state attorneys general have filed a motion in the U.S. District Court for the Southern District of Texas, asking the court to take more aggressive action against John Caldwell Spiller II after Spiller violated permanent bans against robocalling and telemarketing. The attorneys general allege that he has set up at least three new businesses since their lawsuit began, alleging violations of state and federal telephone privacy and telemarketing laws. The attorneys general seek a ruling that Spiller cannot engage in any telephone-related services, an order that Spiller pay over $122.3 million in damages, and an order that Spiller dissolve his existing telephone service companies.
  • A coalition of 28 Republican state attorneys general sent a letter to the U.S. Environmental Protection Agency, asking the agency to withdraw a proposed rule which would regulate meat and poultry processing plants under wastewater regulations. The coalition believes the rule exceeds the EPA’s Clean Water Act authority and is concerned about the costs meat processing plants will incur under the rule.
  • A coalition of 21 state attorneys general sent a letter to Congress, asking it to amend language in its 2018 Farm Bill that has been used to sell unregulated intoxicating hemp. Specifically, the coalition asks Congress to change the definition of hemp to clarify that there is no loophole for intoxicants. The coalition also asks Congress to reaffirm that it does not limit states regulation of cannabinoids or other intoxicating hemp derivatives.

California

  • California Attorney General Bonta announced a settlement with corporate landlord Arnel Management Company, resolving allegations that it unlawfully withheld security deposits from tenants in Orange and Los Angeles counties by automatically deducting pre-set cleaning charges, in violation of Business and Professions Code section 17200, Civil Code section 1950.5, and Business and Professions Code section 17500. The settlement requires Arnel to pay more than $1 million in civil penalties and donations, and it must comply with injunctive terms.

New Hampshire

  • New Hampshire Attorney General Formella announced that the Charitable Trusts Unit and Consumer Protection and Antitrust Bureau completed their reviews of the proposed transaction between Valley Regional Healthcare, Inc. and Dartmouth-Hitchcock Health, and that the Attorney General’s office negotiated proposed terms to alleviate harm to health care consumers. Some of the terms include prohibitions on anticompetitive contracting, a Clinical Services Growth Plan, and annual reporting. Dartmouth-Hitchcock Health has also agreed to contribute $2 million to the Health Care Consumer Protection Trust Fund.

Massachusetts

  • Massachusetts Attorney General Campbell announced a court order against VICA Trading, Inc. d/b/a VapeSourcing, requiring it to stop marketing and selling flavored tobacco products in the state. The order follows a lawsuit alleging that VapeSourcing violated Massachusett’s flavored tobacco ban andConsumer Protection Act.

New York

  • New York Attorney General James announced over $1.9 million in settlements with five Nissan car dealerships in Long Island and New York City, for allegedly overcharging consumers who wished to purchase their vehicles after their lease terms in violation of the Motor Vehicle Retail Leasing Act. Specifically, an investigation revealed that the dealerships added junk fees or falsified the vehicles’ prices between 2020 and 2023, as well as provided deceptive invoices to consumers. The settlements include consumer restitution payments and civil penalties.
  • New York Attorney General James announced an almost $230,000 settlement with contracting agency Allied Universal Security Services and the Board of Managers of a New York City condominium building for allegedly underpaying its contracted security guards in violation of Real Property Tax Law §421-a(8). Under the settlement, Allied Universal must pay the employees what they are owed plus interest as well as audit its contracts with all other New York City buildings and certify payment of prevailing wages.

North Carolina

  • North Carolina Attorney General Stein announced a $2,100,000 settlement with Mako Medical Laboratories, LLC, resolving allegations that the business submitted false claims to the state Medicaid program, violating state Medicaid policy. Specifically, Attorney General Stein’s office alleged that Mako conducted duplicative urine drug testing that was not medically necessary or reasonable.

Crowell attorneys attended the National Association of Attorneys General (NAAG) Spring Symposium in Chicago, Illinois on April 24-26. As usual, the conference included multiple receptions and other networking events allowing the Crowell attorneys in attendance to engage with multiple attorneys general and a host of their respective staff members.  The team attended a session titled Antitrust 101: Everything you need to know about antitrust laws in the 21st century. Attorney General Letitia James moderated a dynamic Q&A with Professor Stephen Calkins Professor of Law and Director of Graduate Studies at Wayne State University Law School. Below please find some key takeaways:

  • The session began with Professor Calkins providing a high-level overview of the federal antitrust statutes, Section 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. He also explained the seminal cases interpreting these main provisions. Professor Calkins described some of the more complex legal concepts that exist within federal antitrust laws, e.g., the difficulty of determining and proving whether an agreement exists under a Section 1 claim, and the crucial role that market definition plays in Section 2 and Section 7 cases.
  • Professor Calkins did not limit his presentation to federal antitrust issues, he also highlighted the active role state attorneys general (State AGs) are playing in this field. Unsurprisingly, State AGs in California, Minnesota, New York, and Washington are some of the offices bringing the highest number of antitrust cases. The professor highlighted by name the firms that are well-equipped to defend corporations facing antitrust law suits from state enforcers, including Crowell & Moring.
  • Antitrust law is making a very tangible difference in many American’s day-to-day lives. Whether it’s a realtor’s 6% commission split; college athletes’ power over their name, image, and likeness; credit card interchange fees; elite colleges’ financial aid changes, iOS Apple Store practices; or non-competes, the breadth and impact of antitrust cases cannot be overlooked. Importantly, he noted that many of these cases were brought by plaintiffs’ attorneys or State AGs.
  • During the question and answer portion of the session, New York Attorney General Letitia James asked the professor for his impressions on certain antitrust issues related to both federal and state governments. He noted the following:

    • The sheer number of antitrust cases has increased at the federal level (the United States Department of Justice and the Federal Trade Commission) and the state level.

    • Federal agencies stand to gain from the invaluable local experience that State AGs provide through additional resources and a better understanding of local consumers’ and markets. Not only this, but there are often potential antitrust violations that a federal agency may never hear about because the impact is more localized.

    • When determining whether an antitrust violation occurred, there are a few questions to consider: how is the quality of the service or product being affected, is innovation being stifled or nurtured, and how are prices being affected?

    • When considering whether to block or allow mergers, federal agencies don’t have the ability to predict the future and whether one of the parties will go out of business. Although agencies do the best they can, positive results are never guaranteed.  

    • State AGs often face an uphill battle when the company in question has already settled with the federal government on similar issues.

    • Transformative technology, such as generative artificial intelligence, has the power to significantly affect competition. The RealPage lawsuit is a good example of how outsourcing pricing decisions to a centralized entity has the potential to affect competition. 

Crowell attorneys attended the Democratic Attorneys General Association (DAGA) Policy Conference in Seattle, Washington on February 14 & 15. As usual, the conference included multiple receptions and other networking events allowing the four Crowell attorneys in attendance to engage with multiple attorneys general and a host of their respective staff members. The Seattle policy conference included a session titled Safeguarding Vulnerable Populations in a Digital Age.  Attorney General Brian Schwalb, District of Columbia, moderated the panel of three speakers: Attorney General Ellen Rosenblum, Oregon; Jacqueline Beauchere, Global Head of Platform Safety, SNAP; and Dr. Katie Davis, Associate Professor and Director of the Digital Youth Lab at the University of Washington.  Below please find some key takeaways:

  • Oregon Attorney General Ellen Rosenblum began her term as President of the National Association of Attorneys General (NAAG) in January 2024. Each year the NAAG president identifies a Presidential Initiative and General Rosenblum has selected America’s Youth: AGs Looking out for the Next Generation.  One focus of the America’s Youth initiative will be technology and technological effects on children’s lives.
  • Attorneys general are considering a variety of technology-related concerns affecting young people including sexploitation of minors and mental health concerns, such as depression and anxiety.
  • Attorneys general offices have authority to enforce the Children’s Online Privacy Protection Rule (COPPA). Many attorneys general engaged with the FTC’s most recent request for public comment on proposed revisions to COPPA and submitted comments in early 2024 based on their experiences and findings related to COPPA enforcement. A key concern for attorneys general is COPPA’s age restriction, in that COPPA does not apply to children over the age of thirteen.
  • Beyond COPPA, each state has unfair or deceptive acts or practices statutes (UDAP), which may also be utilized to pursue enforcement against companies using deceptive business practices in digital forms. The attorneys general specifically called out enforcement opportunities against social media companies. 
  • Some states have additional laws to address businesses’ technological practices. For example, Oregon has Oregon Student Information Protection Act to address educational technology that collects student information and limits student data collection to education purposes (as opposed to the sale of data for advertising purposes).
  • Social media industry panelist, Jacqueline Beauchere, asserted that companies are unable to control all outcomes for children and thus parent involvement is key. Some social media platforms offer parental controls, special security features, and other involvement options, such as Snapchat’s ‘family center.’ But, these security features are not consistent across platforms and the social media industry regularly experiences market entrants who employ varying levels of safeguards and security policies. 
  • Attorneys general indicated a desire to partner with willing technological companies, similar to partnerships between technological companies and social science researchers. For example, Meta partnered with Center for Open Science to provide anonymous data to researchers. The panel also discussed that the United Kingdom has compelled companies to produce data, in some instances, for investigations and social science research. 
  • The social media business model utilizes advertising data that is fueled by engagement, with minimal concern for user well-being. Therefore, a key concern for attorneys general is to craft injunctive remedies that limit potentially addictive or biased algorithms and lack of safeguards. The panelists discussed formulating models designed to encourage well-being and simple mutual connection. 
  • Attorneys general also want social media platforms to have ‘opt-in’ policies for minors as opposed to ‘opt-out’ policies, which they believe will create an additional safeguard. A key piece of security information is who children are connecting with through social media applications, as connections with unknown or anonymous individuals on social media applications is a primary risk factor for young people. Social media companies are criticized for a focus on features and metrics that are designed to create peer competition, which the critics believe can only lead to negative stigma and poor mental health outcomes for children who use the platforms. 
  • Children are not the only population vulnerable to deceptive technological businesses.  Attorneys general also are focused on scams facilitated through social media companies that are designed to deceive elderly and vulnerable citizens. 

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

Multistate

  • A bipartisan coalition of 21 state attorneys general sent a letter urging congressional leaders to take action on hemp products that became legal through the 2018 Farm Bill. The letter encourages federal lawmakers to amend the definition of hemp and to clarify that states can take their own measures to regulate the plant and its derivative products.
  • A multistate coalition of 16 state attorneys general filed an antitrust lawsuit against Apple Inc. in the U.S. District Court for the District of New Jersey, alleging that Apple is monopolizing the market for smartphones, stifling innovation and development of apps and related technology in violation of Section 2 of the Sherman Act as well as New Jersey and Wisconsin’s Antitrust Acts.

California

  • California Attorney General Rob Bonta publicized a settlement with Mariner Health Care, Inc., the operator of 19 skilled nursing facilities in California, resolving allegations that Mariner  jeopardized residents’ health and well-being, and misled prospective residents and their families about the quality of its facilities in violation of federal and state laws and regulations applicable to skilled nursing facilitates. The settlement, linked to the Bankruptcy Reorganization Plan of two Mariner entities in Chapter 11, will provide injunctive relief for a minimum of five years, require monitoring by an independent monitor for a minimum of three years, payment of $2.25 million in costs, and imposes civil penalties of $15.5 million dollars for any future violations of the injunction or law.

Connecticut

  • Connecticut Attorney General William Tong announced that Florida-based ghost gun dealer Steel Fox Firearms will dissolve its business operations as part of a settlement with the State, resolving allegations that its sale of illegal, untraceable ghost gun parts in Connecticut violated the Connecticut Unfair Trade Practices Act and General Statutes § 42-110a, et seq., and particularly General Statutes § 42-110b. Connecticut banned the sale and receipt of ghost gun components in 2019. According to the Office of the Attorney General, Steel Fox was well aware of the law, and shipped illegal gun parts to Connecticut anyway.

Massachusetts

  • The Massachusetts Attorney General’s Office filed a motion for preliminary injunction against Champion Funding, Inc., Champion Funding LLC, Judgment Acquisitions Unlimited, Inc., Andrew Metcalf, d/b/a Judgment Acquisitions Unlimited, Inc., and Andrew Metcalf, individually, to halt harmful debt collection practices. According to the complaint, the defendants violated various state laws regulating trade including, G.L. c. 93A, Sec.2(a); G.L. c. 93, Sec. 24A; and G.L. c. 93, Sec. 49. The AG’s office intends to immediately stop the defendants from engaging in aggressive and potentially unlawful debt collection tactics, such as seizing consumers’ cars unlawfully, and to ensure compliance with debt collection laws.

Missouri

  • Missouri Attorney General Andrew Bailey announced that his office filed suit in Boone County against Anthony Walters for allegedly defrauding a consumer in connection with his business Anthony Walters Carpentry, LLC when he failed to provide promised home renovation services. According to the complaint, Anthony Walters Carpentry violated the Missouri Merchandising Practices Act, § 407.010, et seq. AG Bailey’s office is pursuing full restitution for the consumer who suffered losses, seeking injunctive relief to prevent future instances of consumer fraud, and asking for civil penalties against Anthony Walters. These include financial penalties for violating consumer protection laws.

Oregon

  • Oregon Attorney General Ellen Rosenblum publicized the award of $9.4 million in civil damages in her office’s lawsuit against Talmage LLC and its founder, Edward Shugrue III. The two-year civil investigation filed in Multnomah County Circuit Court which resulted in finding that Talmage engaged in misconduct against the Oregon Public Employees Retirement Fund in violation of the Oregon Antitrust Laws.

Utah

  • After a lawsuit brought by the Federal Trade Commission and the Utah Attorney General’s Office against Response Marketing Group, LLC in November 2019, over $10 million in refunds will be issued to consumers who allegedly paid for a deceptive real estate investment training scheme that falsely promised significant profits through “flipping” houses in violation of federal and state consumer fraud statutes and telemarketing statutes.  

Washington

  • The Washington’s Attorney General’s Office won a trial against debt collection agency Optimum Outcomes. Optimum is the last remaining defendant in Attorney General Ferguson’s charity care lawsuit against Providence Health & Services. King County Superior Court Judge Sean O’Donnell ruled that Optimum violated the state Consumer Protection Act by violating the medical debt collection rights of Washington patients more than 82,000 times. Judge O’Donnell ordered Optimum to pay $10 per violation for a total civil penalty of $827,290, which will be paid into the State’s general fund.

District of Columbia

  • Washington, D.C. Attorney General Brian Schwalb provided testimony in a public hearing in support of B25-0609, the Protecting Affordable Loans Amendment Act of 2023 (PALs Act). General Schwalb explained that this Act is necessary to stop predatory lenders who charge high-interest rates, way above the District’s approved limit of 24%. These lenders use loopholes through partnerships with banks in states who do not have these limits, a tactic called “rent-a-bank” schemes. General Schwalb shared that his office had been successful in fighting these schemes, but the PALs Act would make it easier to protect consumers.

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

Multistate

  • A coalition of 41 attorneys general called on Meta Platforms, Inc. to address the risk of scammers taking over user accounts on Facebook and Instagram. The letter sent by the attorneys general outlined a series of steps that Meta could take to increase efforts in mitigating account takeovers.
  • A coalition of nine attorneys general and the Federal Trade Commission filed suit against the Cancer Recovery Foundation International, Inc. (CRFI), also known as the Women’s Cancer Fund, and its founder and president, Gregory Anderson for allegedly knowing that funds raised for cancer patients were not actually helping women with cancer or their families. Instead, the funds were used to pay professional fundraisers and Anderson’s salary. A civil investigation revealed that CRFI allegedly directed significantly less funds to cancer patients and their families than actually donated. Between 2017 and 2022, approximately $18.25 million was donated to the charity and only $194,809 went to women with cancer. 
  • A coalition of 16 attorneys general demanded answers from Wells Fargo concerning the company’s debanking policies. Wells Fargo announced that the company will close the accounts of organizations or individuals it views as a risk. The attorneys general indicated that the company’s debanking policies carry out the Biden administrations agenda on gun control and environmental policy. The attorneys general believe that these debanking policies discriminate against certain businesses and consumers.

Arizona

  • Attorney General Mayes filed a lawsuit against Oh La La by Posh, LLC, a quinceañera dress store, and its owner, Renne Cuellar. The lawsuit alleges that Oh La La and Cuellar participated in deceptive and unfair practices in violation of the Arizona Consumer Fraud Act by accepting deposits for orders totaling thousands of dollars before closing the store and failing to give customers the order or a refund.             

Connecticut

  • Attorney General Tong called on the Public Utilities Regulatory Authority to reject Connecticut Water Company’s (CT Water) application to raise water utility rates from 1.5 cents per gallon to 1.8 cents. This would be about a $21.8 million rate increase. The Attorney General indicated that water utility rates should be no higher than necessary and identified areas of accounting, revenue, and expenses where shareholders could cover the cost instead of ratepayers.

Michigan

  • Attorney General Nessel secured a consent judgment to resolve a lawsuit against Rockford business owner David Foster, Choice Tree Service, LLC, and Storm Support Emergency Tree Removal, LLC for illegal business practices including charging excessive prices and intentionally misleading customers about their rights, agreements they were signing, and liabilities outside of insurance coverage. Pursuant to the settlement, Foster and the two LLCs will pay $13,500 to the Department for its enforcement efforts, a portion of which will be distributed among three consumers who assisted in the suit.

Minnesota

  • Attorney General Ellison announced a lawsuit against four solar-lending companies for violating state laws prohibiting deceptive trade practices, deceptive lending, and illegally high rates of interest. The lawsuit claims that GoodLeap, Sunlight Financial, Solar Mosaic, and Dividend Solar Finance deceived consumers to take out loans according to the companies’ false promise of low interest and collected approximately $35 million in hidden fees.

Missouri

  • Attorney General Bailey filed charges against David V. Lott for defrauding investors through his business, Missouri Holding Group, Inc. Lott allegedly falsely promised high investment yields with quick return. Instead he used client funds for his other business ventures and personal expenses causing victims to lose $1,120,000.

New Jersey

  • Attorney General Platkin announced that an Essex County vascular surgeon, Marc Watson, agreed to permanently cease to engage in clinical practice of medicine and surgery in the state to resolve allegations of indiscriminately prescribing high volumes of controlled dangerous substances (CDS) to patients with addictions. Watson allegedly engaged in gross negligence and professional misconduct by prescribing high volumes of controlled dangerous substances (CDS), such as benzodiazepines, stimulants, and narcotics, without sufficient medical justification. Additionally, Watson conducted inadequate physical examinations, maintained insufficient record-keeping, and failed to properly monitor patients.

New York

  • Attorney General James announced Shake a Paw, a pet store, will pay an estimate of $300,000 to about 190 customers for illegally and knowingly selling sick puppies. Shake a Paw misled customers by advertising about selling the “healthiest” and “best of the best puppies” from the “most trusted breeders.” In fact, Shake a Paw kept dogs in inhumane conditions and sold sick puppies which caused customers to spend thousands of dollars on medical bills after the puppies fell sick.

Pennsylvania

  • Attorney General Henry resolved pending litigation against Great Conventions LLC, and its owner, Christopher Wertz, with the defendants agreeing to pay $20,000 in restitution to be distributed to individuals who purchased tickets to Great Philadelphia ComicCon in March 2021 and filed a complaint with the attorney general’s office. Attorney General Henry alleged that Great Conventions violated the Unfair Trade Practices Act and Massachusetts’ Consumer Protection Act by failing to reschedule the event or refund consumers.
  • Attorney General Henry reached a settlement with Vantage Travel Services, Inc. that permanently prevents bars the company from engaging in tour operations in the state. Vantage and its owner, Henry Lewis, allegedly engaged in unfair and deceptive business practices by promising risk-free traveling services to consumers who never received their trip or a refund. The settlement resolves only the pending litigation against Vantage, not Lewis. 

What You Need to Know

Key takeaway #1: To reduce risk of litigation and regulatory exposure, companies should review, verify, and substantiate any green claims, especially claims regarding generalized corporate environmental stewardship and net zero commitments.

Last week, New York Attorney General Letitia James filed a lawsuit against JBS USA Food Company and JBS USA Food Company Holdings (JBS USA), which together make up the American subsidiary of the world’s largest beef product producer, JBS S.A. The suit alleges that JBS USA engaged in “greenwashing,” misleading consumers about its environmental impact goals. The suit is one amongst many state attorney general lawsuits related to greenwashing or ESG claims, which have spanned across the aisle and been initiated by both Democratic and Republican attorneys general.

JBS USA claimed it would achieve “net zero” greenhouse gas emissions by 2040, despite alleged contrary documentation related to expansion efforts. JBS USA has made several public statements about its commitment to achieving net zero operations, including a full-page advertisement in the New York Times that highlighted the net zero claim in 2021. And, in September 2023, JBS USA’s CEO announced that the company “pledged to be net zero in 2040” at a New York City Climate Week event. As of March 2024, the company’s website maintains this claim on its home page. Although statements on the company’s website or features in newspapers are more immediately discernable as advertisements, public statements by a corporate official are also considered advertisements that require substantiation.

JBS USA has made several other specific claims about the sustainability of its business operations that Attorney General James alleges are greenwashing, including:

  • “Agriculture can be part of the climate solution. Bacon, chicken wings, and steak with net zero emissions. It’s possible.”
  • “We will cut our own emissions by 30% in 2030 and eliminate Amazon deforestation from our supply chain within five years.”
  • “JBS will achieve net zero greenhouse gas emissions, reducing its direct and indirect emissions and offsetting all residual emissions.”

In June 2023, JBS USA received a warning from BBB National Programs’ National Advertising Review Board (NARB), the appellate advertising body related to the National Advertising Division (NAD). Both the NAD and NARB function as the advertising industry’s self-regulatory bodies. The NARB agreed with a prior NAD decision, determining that JBS USA’s evidence did not support its net zero claims and recommended that JBS USA stop making these claims.

New York Attorney General James is seeking injunctive relief that would require JBS USA to cease its “Net Zero by 2040” advertising and submit to a third-party compliance audit, as well as disgorgement and civil penalties of at least $5,000 per violation (the number of violations must be determined at trial).

New York Attorney General James asserts that JBS USA misled consumers with these net zero claims as a means to remain competitive within the food industry, and that in fact, JBS USA had not calculated the company’s total greenhouse gas emissions, and thus had no way to assess whether it could successfully reduce its emissions to net zero by 2040. The lawsuit alleges that JBS USA “could not feasibly meet its pledge because there are no proven agricultural practices to reduce its greenhouse gas emissions to net zero at the JBS Group’s current scale, and offsetting those emissions would be a costly undertaking of an unprecedented degree.”

Accelerating public enforcement of greenwashing through suits based on state unfair trade practices statutes should caution companies to verify and substantiate the claims they wish to make about their environmental impacts before incorporating them in advertising. Not only should companies ensure that all green claims are substantiated, but overstated, generalized, broad, or vague environmental benefit claims should be avoided entirely. And, companies should avoid omitting pertinent information related to any environmental claims. But, customers appreciate and reward commitments to environmental stewardship and sustainability, so companies with proper substantiation should continue to make – and tout – these commitments.

The New York Attorney General’s action adds to a growing list of greenwashing enforcement efforts arising across international jurisdictions. These actions reflect broadening efforts by regulators to combat deceptive advertising practices by private businesses attempting to capitalize on consumers’ environmental interests. American adults say they are willing to pay more for sustainable products, and recent studies have shown that people are willing to change their habits to switch to more environmentally friendly products.

Regulatory enforcement related to greenwashing claims will remain a top enforcement priority throughout 2024. Although the various attorneys general may have different approaches or underlying goals, the state enforcers will continue to scrutinize corporate green claims, especially those claims that are traditionally viewed as more difficult to substantiate such as net zero claims. Beyond the state attorneys general, the Federal Trade Commission is working to finalize its proposed updates to the Guides for the Use of Environmental Marketing Claims in 2023 (the Green Guides). The updated Green Guides should provide companies with further examples and advice related to green marketing, but will also provide enforcers with additional tools for suits against greenwashing.