State AGs In The News - March 13th, 2014

Hot News

National Consumer Protection Week: Attorneys General List Top Consumer Complaints

• In honor of National Consumer Protection Week, a number of AG offices have posted lists of the top consumer complaints received by their offices in 2013. Topics have included debt collection, telecommunications (mobile phones, cable, satellite television), lending, identity theft, health services, and more. For additional coverage, please see our in-depth blog post.

Filing Deadline and Primary Update: AG Races in Arkansas, California, Georgia, Nebraska, and Texas

• With the 2014 election season well underway, the filing period for candidates in state elections closed last week in Arkansas, California, Georgia, and Nebraska. In addition, Texas recently held its primary election. We have compiled a list of those who have declared their candidacy for AG in these states, as well as the Texas primary results. Please see our recent blog post to learn more.

Antitrust/Energy

Michigan Attorney General Files Criminal Charges Against Two Energy Companies for Alleged Conspiracy to Cause Oil and Gas Lease Price Decline

• Michigan AG Bill Schuette filed criminal charges against Chesapeake Energy Corporation and Encana Oil and Gas USA alleging that the two companies conspired to cause oil and gas lease prices to drop by collaborating to avoid bidding wars against each other both in Michigan public auctions and private negotiations for these leases.
• The companies allegedly agreed to divide counties so that each company would be an exclusive bidder for public and private leases in those counties. In the auction that followed the alleged agreement, the state-held lease price dropped from $1,510 per acre to less than $40 per acre.
• The companies were charged with one count each of antitrust violations relating to a contract or conspiracy in restraint of commerce and one count each of attempted antitrust violations. Representatives from each company are scheduled to be arraigned on March 19, 2014 before Cheboygan County's 89^th District Court.

Consumer Protection

North Dakota Attorney General Issues Cease and Desist Order Against Massachusetts Telemarketer

• North Dakota AG Wayne Stenehjem issued a cease and desist order against Northshore Publishers (also doing business as Northshore Publishing and North Shore Marketing) for alleged violations of North Dakota's consumer fraud, do not call, and home solicitation laws.
• The AG alleges that Northshore Publishers solicited magazine renewal subscriptions from North Dakota consumers by telephone, including consumers who were registered on a do not call list, and charged their credit cards immediately in violation of a state law requiring a signed sales contract from the consumer.
• The order prohibits future advertising, solicitation, or selling of merchandise to North Dakota consumers. Violations of the order are subject to a $1,000 penalty per violation, with additional penalties provided for violations of any consumer protection laws.

Missouri Attorney General Files Multiple Lawsuits Against Telemarketers

• Missouri AG Chris Koster filed five lawsuits recently against telemarketers for allegedly violating the state's no call and telemarketing laws. The AG seeks $5,000 per violation of Missouri's No Call Law and $1,000 per violation of the Telemarketing Law, as well as injunctive relief prohibiting future telemarketing calls in the state.
• Three of the lawsuits involved telemarketers allegedly attempting to sell home security systems by falsely telling consumers that law enforcement officials had reported an increased number of burglaries. According to AG Koster, home security companies generate the second highest number of complaints related to the state's no call law. The other lawsuits relate to solicitations for timeshare liquidation services and home health care supplies.
• AG Koster also recently settled two other telemarketer suits, for $30,000 and $75,000, and received a $150,000 judgment against another telemarketer.

Environment

In Second Lawsuit Against KCBX Terminals, Illinois Attorney General Alleges Water Pollution and Open Dumping Violations

• Illinois AG Lisa Madigan sued KCBX Terminals Company alleging that it violated state laws by insufficiently storing piles of petroleum coke and coal, allowing storm runoff to contaminate a nearby river. KCBX allegedly maintained a narrow concrete walkway as a barrier between the mounds of petroleum coke and coal and the river, which the AG argued was insufficient to prevent runoff into the river.
• AG Madigan previously sued KCBX in November 2013 for alleged air pollution violations at another site. AG Madigan also recently proposed legislation to strengthen regulation of bulk materials storage facilities that handle petroleum coke and other refinery production materials.

False Claims Act/Medicaid Fraud

Several Attorneys General and the Federal Government Settle With Genzyme for $22 Million

• Several AGs and the federal government settled with Genzyme Corp. for $22.28 million to resolve state and federal Medicaid fraud and false claim allegations related to its product, Seprafilm.
• Seprafilm is an adhesion barrier approved by the U.S. Food and Drug Administration (FDA) for use in open abdominal surgeries to create a barrier between abdominal tissue and organs to reduce adhesions after surgery. Genzyme allegedly taught doctors and staff  how to make a Seprafilm "slurry" to be used in laparoscopic surgeries, allegedly causing false claims to be submitted to state and federal health care programs for uses of Seprafilm that were not approved by the FDA and therefore not reimbursable.
• The settlement stems from a qui tam action that was filed in the U.S. District Court for the Middle District of Florida.

Intellectual Property

Virginia Passes "Patent Troll" Legislation

• Virginia AG Mark Herring crafted "patent troll" legislation that was recently passed by the state General Assembly.
• Senate Bill 150, patroned by Senator Richard Stuart, and House Bill 375, sponsored by Delegate Israel O'Quinn, prohibit any person from making a bad faith assertion of patent infringement. Under the legislation, the AG is empowered to accept assurances of voluntary compliance and seek injunctive relief. The AG is also authorized to issue civil investigative demands.
• "I've signed on to efforts to fight patent trolling because far too many of our businesses, especially small business, are being forced to spend huge sums of money defending themselves against these frivolous claims," stated AG Herring.
• This legislation is part of a growing trend: as recently reported on our blog, Oregon became the second state, behind Vermont, to enact "patent troll" legislation and Nebraska was considering similar legislation.

Louisiana Attorney General Settles Software Piracy Allegations

• Louisiana AG Buddy Caldwell settled allegations of violation of the state's unfair trade practices law with Guangdong Canbo Electrical Appliance Co. Ltd. (Canbo).
• Louisiana's unfair trade practices law includes software piracy as a form of unfair trade practices. Canbo was allegedly running company operations using pirated software.
• The settlement requires Canbo to fully legalize all of its software and audit the software next year to ensure ongoing compliance.

Pharmaceuticals

Montana Attorney General Settles for $5.9 Million with Subsidiaries of Johnson & Johnson Over Allegations of Improper Marketing

• Montana AG Tim Fox settled for $5.9 million with Janssen Ortho LLC and Janssen Pharmaceuticals, Inc. (Janssen), subsidiaries of Johnson & Johnson, over allegations of unfair and deceptive marketing of the drug Risperdal. As part of the settlement, Janssen agreed not to make misleading claims in the sale of their drugs and to present information about the benefits and risks of any drugs in promotional material.
• Janssen allegedly concealed known risks associated with its antipsychotic drug Risperdal. According to the AG's office, most of the settlement will be used for a new prescription drug abuse prevention program, mental health services and programs, and ongoing consumer protection services.
• Johnson & Johnson and Janssen have had verdicts against them related to the marketing of this drug in cases with Louisiana (reversed on appeal) and Arkansas (on appeal) and have also entered into settlements related to the marketing of this drug with other states and the District of Columbia.

Ohio Attorney General Settles Conspiracy Allegations Against McKesson for More Than $18 Million

• Ohio AG Mike DeWine announced that he has reached a settlement with McKesson Corporation for $18.3 million resolving allegations that it inflated the price of drugs prescribed for beneficiaries of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, and the Bureau of Workers' Compensation.
• AG DeWine accused McKesson of conspiracy to inflate average wholesale prices of hundreds of brand-name drugs that are used by the two state pensions and the state workers' compensation system to set prescription drug reimbursement rates.
• "When companies mark up prices, it increases costs for our pension systems, workers' compensation system as well as their retirees and beneficiaries," stated AG DeWine.
• McKesson previously settled similar allegations of inflating prescription drug prices with other states, including Wisconsin, Virginia, and 29 other states and the District of Columbia. McKesson was also previously sued by Arizona, Oregon, Kentucky, and Michigan for similar claims.

Pharmaceuticals/Medicaid Fraud/False Claims Act

Illinois Attorney General and the Federal Government Settle with Teva Pharmaceuticals for $27.6 Million

• Illinois AG Lisa Madigan and the federal government settled with Teva Pharmaceuticals USA Inc. and its subsidiary IVAX LLC for $27.6 million to resolve state and federal false claims and federal anti-kickback allegations related to the prescription drug Clozapine.
• Clozapine is a rarely used anti-psychotic medication that is generally regarded as a drug of last resort allegedly due to potential serious potential side effects. Teva and IVAX allegedly paid a psychiatrist kickbacks to prescribe the drug to thousands of patients at nursing homes and hospitals, which resulted in the submission of more than 100,000 false claims to state and federal Medicaid and Medicare programs.

State AGs in the News

National Association of Attorneys General Sends Letter to West Virginia Legislative Leaders Regarding Bill Potentially Limiting Attorney General Powers

• The National Association of Attorneys General (NAAG) sent a letter signed by 36 AGs to the West Virginia legislative leadership expressing concern about House Bill 4490, currently under consideration, which would allegedly impose unprecedented, strict new standards on the West Virginia Attorney General.
• The letter focuses on a section of the bill that requires an attorney general to withdraw from any matter in which the office holder or member of his or her immediate family received economic compensation. NAAG states, "We are not aware of any statute that imposes such a broadly sweeping prohibition on an attorney general's office— at the state or federal levels."
• The letter also expresses concern that the bill would prohibit the entire AG's office from ever representing a state agency, official, or political subdivision if the attorney general asserts any legal position that is contrary to the legal opinion ever taken by a state agency, official, or political subdivision of the AG's office.
• Judiciary Committee chairman Senator Corey Palumbo states that there is little interest in his committee to hear the bill and that the bill is "close to dead."

Five States Join Lawsuit Challenging California Farming Legislation

• Alabama AG Luther Strange, Kentucky AG Jack Conway, Nebraska AG Jon Bruning, Oklahoma AG Scott Pruitt, and Iowa Governor Terry Branstad joined a lawsuit filed by Missouri AG Chris Koster last month in the U.S. District Court for the Eastern District of California. The lawsuit alleged that a California farming law violates the Commerce Clause of the U.S. Constitution and infringes on the state's sovereignty.
• As we previously reported, California legislation (AB 1437) requires all egg producers selling in California to comply with Proposition 2, a California voter-approved ballot initiative. Proposition 2 requires enclosures to provide "sufficient room" for egg-laying hens.
• Plaintiff AGs believe that this lawsuit addresses the question of whether elected officials in one state may regulate another state's citizens. A spokesperson for California AG Kamala Harris stated that if the lawsuit is successful, "it will limit the ability of voters in any state to enact laws they deem in their best interest."

New York Attorney General Partners with Facebook to Curb Illegal Online Gun Sales

• New York AG Eric Schneiderman joined Facebook and gun safety organizations to announce new policies to curb illegal sales of firearms on Facebook and Facebook's photo-sharing platform, Instagram.
• While Facebook and Instagram are not e-commerce sites, users have allegedly used these sites to promote the sale of firearms and negotiate terms of sale using comment features on the sites, sometimes promising no background check required.
• The new educational and enforcement efforts will include:
  • Removing reported users that seek to circumvent gun laws
  • Taking action to prevent minors from viewing posts aimed at selling firearms
  • Providing education to better inform private sellers of guns
• "I congratulate Facebook and Instagram for taking these simple, common-sense steps to protect the safety and security of their users, and encourage other social media sites to follow their lead," stated AG Schneiderman.

Washington Attorney General's Open Government Bill Passed by Legislature

• The Washington state legislature recently passed AG Bob Ferguson's bill to strengthen state open government laws by requiring training for most public officials.
• AG Ferguson worked with Senator Joe Fain and Representative Gerry Pollet to secure approval of Washington Senate Bill 5964, also known as the "Open Government Trainings Act." The law is meant to improve public disclosure practices through mandatory training.
• "Open government is vital to a free and informed society. This new law will enhance government transparency and ensure that public officials know and understand our state's public disclosure laws, which were overwhelmingly approved by voters," provided AG Ferguson.

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