Bill McCollum

State AGs Tackle COVID-19 Related Issues: Some Companies Likely to Face Investigation

With the escalation of the COVID-19 pandemic and the steps taken by the federal and state governments to stem its community spread, state attorneys general (AGs) are confronting new issues that have emerged as a result of the public health emergency.

Deceptive Advertising: AGs are using state Unfair and Deceptive Acts and Practices (UDAP) statutes to investigate advertising by companies, or hosted on company websites, that may be false, deceptive or misleading to consumers about products (i.e. masks, hand sanitizer, etc.), treatments or risks associated with COVID-19. One AG recently filed a lawsuit against a televangelist for misrepresenting a product sold through his show as a cure for the novel coronavirus. Another opened an investigation of allegations a cruise line instructed staff to use scripts which may have misled customers as to COVID-19 risks. Investigations may be confined to a single state AG office or they could become part of a much wider multi-state AG investigation.

Outreach to the Lending Industry: AGs are beginning to advocate for financial relief for their consumers who are unable to pay bills due to the COVID-19 crisis. The Arizona Attorney General recently sent letters to more than 1,000 financial institutions that do business in his state, urging them to halt foreclosures, evictions, and repossessions for at least 90 days for customers who can demonstrate economic hardship due to this unforeseen crisis. The Colorado AG recently urged student loan servicers, creditors, and debt collectors to refrain from mandatory debt collection efforts from those who are unable to pay because of their financial circumstances. The AG indicated that his office would explore relevant legal avenues to protect borrowers going forward.

Price Gouging: AGs across the country have stepped up public awareness campaigns and civil enforcement efforts to crack down on reported instances of price gouging by unscrupulous sellers of items that consumers and health care workers need to protect themselves from the spread of COVID-19. Many AGs have established special hotlines to receive complaints of suspected price gouging and the AGs are issuing cease and desist letters to those sellers suspected of taking advantage of the public health crisis. 

The Dentons State Attorney General practice is a full-service, nationwide practice to advise and assist clients when dealing with state AGs and their staff. The practice features bipartisan leadership from four former state AGs along with former deputy AGs, assistant AGs, chiefs of staff from some of the most active offices in the nation and top notch litigators experienced in defending lawsuits brought by state AGs. Receipt of an AG letter of inquiry or civil investigative demand (a subpoena AGs may issue without going to court) does not mean a lawsuit is coming, but it does mean an investigation has been opened and should not be taken lightly. If you receive an AG inquiry or investigative demand, or think the nature of your business might make it at risk of AG scrutiny, or have an interest in more information on any of the COVID-19 matters above and would like to discuss with the Dentons State AG team, contact Bill McCollumThurbert Baker or Dan Gibb.  

Ohio Attorney General petitions for writ of mandamus to stop opioid trials

The US District Court for the Northern District of Ohio is the home of a multidistrict litigation (MDL) aggregating more than 2,000 lawsuits from across the country in which state political subdivision plaintiffs have sued manufacturers, distributors and others they claim responsible for the nation’s opioid epidemic. The court has scheduled a consolidated seven-week bellwether trial for two of those subdivisions (Ohio’s Cuyahoga and Summit Counties) seeking $8 billion, to begin on October 21, 2019. On August 30, 2019, in the US Court of Appeals for the Sixth Circuit, the Attorney General of Ohio filed a petition for writ of mandamus on behalf of the State of Ohio. The petition states that if the consolidated trial proceeds on the theories pleaded in the complaints, it will include claims that belong to the State of Ohio and presents the following question:

Should a writ of mandamus issue to stop or delay the trial in order to protect Ohio’s sovereign right to litigate on behalf of its citizens as parens patriae?

In 2017, the Ohio Attorney General brought a civil action in a state court against several opioid manufacturers. In the petition the Ohio AG asserts that (i) the writ of mandamus is necessary to preclude a US district court from trying non-justiciable claims in a trial which, if unchecked, would cripple the federal dual sovereignty structure of the US; and (ii) only a state AG has parens patriae standing to prosecute claims vindicating generalized harm to a state’s inhabitants and that political subdivisions do not have parens patriae standing. The petition argues that the trial would fragment the State’s claims, pose a high risk of inconsistent verdicts, result in duplicative or overlapping damages and misallocate funds in the state. The AG further asserts that the counties advance claims that belong to the State in an effort to commandeer moneys that rightfully should be distributed across the state by Ohio.

Thirteen other states and the District of Columbia filed an amicus brief in support of the petition. At this writing, no hearing on the petition has been scheduled.

Newly elected state AGs outline enforcement priorities

Eighteen new state attorneys general will take office in 2019. There will be new AGs in Alaska, Colorado, Connecticut, Delaware, Florida, Hawai`i, Illinois, Maine, Michigan, Minnesota, Missouri, Nevada, New York, Ohio, Rhode Island, South Dakota, Wisconsin and Wyoming. Politically speaking, the impact of the 2018 midterm elections on the AG landscape was decidedly mixed, with Democrats flipping four AG seats previously held by Republicans, and the GOP maintaining their strongholds in Florida and Ohio. Overall, the midterms shifted the balance of state AG seats nationwide to a Democratic majority. Democrats now occupy 27 AG seats (including in Washington, DC) and Republicans, 24.

Companies should be aware that the newly elected AGs are expected to be as aggressive, or more so, than their predecessors. In Connecticut, for example, AG William Tong is succeeding AG George Jepsen, who led some of the largest bipartisan multistate investigations, including into opioid manufacturing and distribution, alleged price fixing in the generic drug market, and data privacy issues. Tong has signaled his intention to continue with these efforts, recently declaring: “I’ve always been activist in the legislature and I’m going to be activist as an attorney general because that’s what you need right now.”[

Other new AGs have started identifying their enforcement priorities. Some newly elected Democratic AGs have announced plans to investigate President Trump’s various business organizations. Others are targeting the administration’s policies. Illinois AG Kwame Raoul is challenging a recent ruling by a federal judge in Texas striking down the Affordable Care Act[, while Nevada AG Aaron Ford has indicated that he will reverse the course set by his predecessor, Republican Adam Laxalt, a staunch opponent of the ACA.

In Colorado, AG Phil Weiser, a Democrat, has outlined his intention to join a lawsuit against opioid manufacturers for allegedly misleading users as to the drugs’ addictive qualities, defend against federal overreach Colorado’s right to decide how it legislates and manages marijuana use, and protect consumers against financial scams. Minnesota AG Keith Ellison, a former Democratic congressman from the state’s 5th District, has pledged to address drug-pricing issues and allegations of anti-competitive activity in the nation’s agricultural sector. “We want to stand with Minnesotans against the big entities in this world as you are trying to make a go in this economy,” he recently told his constituents. “The middle class, I believe, is hanging on barely, and I think the attorney general ought to stand up against the fraudsters, against the monopolies, against these folks who would make your life so much more difficult to afford.”

New elected Republican AGs, for their part, are expected to continue their party’s stalwart defense of the Trump administration through the filing of amicus briefs in high-profile lawsuits challenging his executive orders and final agency actions. But they will also ramp up state enforcement actions in certain areas. For example, Ohio Republican AG Ted Yost is expected to continue his scrutiny of pharmacy benefit managers (PBMs), an industry that he focused on during his time as Ohio State Auditor.

State attorneys general will continue to combine their resources in an ever-growing number of multistate and multi-defendant investigations and civil and criminal enforcement actions, raising the stakes for both individual companies and entire industries. In addition to the issues the AGs campaigned on in the midterm elections, there’s no telling what new issues they will involve themselves in, given the unpredictability of the Trump administration. More relevant to assessing and addressing a business’s regulatory risks is understanding the scope of a particular AG’s authority, its level of activity and the political dynamics framing its choices.