Orrick State Attorneys General Newsletter – September 2021

September.09.2021

  1. Wisconsin Attorney General Hires Plaintiff’s Firm to Initiate PFAS Lawsuit
  2. Oregon Court of Appeals Rules 5-Hour Energy Did Not Violate State’s Consumer Protection Statute for Alleged Misrepresentations
  3. New Mexico Attorney General Sues Developer of Angry Birds Under COPPA
  4. New York Attorney General Reaches $14.3 Million Settlement With Health Care Insurer for Denying Mental Health Coverage and Substance Use Treatment
  5. States Submit Comment Letter to HUD Supporting Proposed “Restoring Discriminatory Effects Standard”
  6. Court Approves California AG’s $575 Million Settlement With Major Health Care Provider Over Alleged Anti-Competitive Practices
  7. Massachusetts Attorney General Reaches $27 Million Settlement With Subprime Auto Lender
  8. State Attorneys General Call on FDA to Regulate E-Cigarettes and Oral Nicotine Products
  9. Federal Court Determines It Lacked Personal Jurisdiction in Lawsuit Initiated Against Arkansas AG

1. Wisconsin Attorney General Hires Plaintiff’s Firm to Initiate PFAS Lawsuit 

Wisconsin Attorney General Josh Kaul announced that he has hired an outside plaintiff’s firm, Sher Edling LLP, to bring a lawsuit against manufacturers of chemical compounds known as per- and polyfluoroalkyl substances (PFAS). PFAS are a group of man-made chemicals that are used in many products, including stain- and water-repellent fabrics, nonstick products, food packaging paper, and firefighting foam, to name a few.

Sher Edling is a prominent plaintiff’s law firm that is often hired by local municipalities and state attorneys general on a contingency fee basis. Most recently, the plaintiff’s firm has brought lawsuits against oil companies and used public nuisance and state consumer protection claims. By hiring of the law firm, Attorney General Kaul signals that his office is proceeding with preparing a lawsuit against PFAS manufacturers in Wisconsin. 

2. Oregon Court of Appeals Rules 5-Hour Energy Did Not Violate State’s Consumer Protection Statute for Alleged Misrepresentations  

An Oregon Court of Appeals issued a decision holding that the manufacturer of the 5-Hour Energy drink did not violate the Oregon’s consumer protection statute, the Unlawful Trade Practices Act (UTPA). Oregon Attorney General Ellen Rosenblum filed a complaint against the manufacturer for violating UTPA by allegedly making false or misleading promotional claims regarding the drink.

The attorney general alleged two types of misrepresentations by defendants: 1) that defendants made misrepresentations concerning the effects of the noncaffeine ingredients in their products; and, 2) that defendants had misrepresented the results of a survey of physicians in several “Ask Your Doctor” advertisements, falsely implying that physicians recommended 5-Hour Energy to their patients.

In its decision, the court explained that in cases brought by the attorney general alleging misrepresentations under UTPA, the alleged unlawful conduct must be “material” to the consumer’s decision to purchase the product. Here, the court ruled the attorney general failed to carry its burden of proving the “materiality” requirement, meaning the attorney general failed to prove that the manufacturer’s alleged misrepresentations were “material” to consumers’ decisions whether to purchase the drink.

The court of appeals also ruled that the defendants were entitled to attorney’s fees and costs against the state. The case is being appealed by the Oregon Attorney General.

3. New Mexico Attorney General Sues Developer of Angry Birds Under COPPA 

New Mexico Attorney General Hector Balderas filed a complaint against the developer of the popular video game “Angry Birds” for violations of the federal Children’s Online Privacy Protection Act (COPPA). The law “prohibits unfair and deceptive acts or practices in connection with the collection, use, and/or disclosure of personal information from and about children on the Internet.”[1]

COPPA further provides that it is “unlawful for an operator of a website or online service directed to children, or any operator that has actual knowledge that it is collecting personal information from a child, to collect personal information from a child in a manner that violates [relevant] regulations.”[2] Additionally, COPPA requires the operator to “obtain verifiable parental consent prior to any collection, use, and/or disclosure of personal information from children.”[3]

The complaint alleges the game developer violated COPPA by “failing to provide sufficient notice of information [it] collects, or is collected on its behalf, online from children,” failing to explain how the company uses the information, and for failing to provide the company’s disclosure requirements. The complaint also contains a claim under New Mexico’s Unfair Practices Act, which alleges that by violating COPPA the company also violated New Mexico’s consumer protection law.

The complaint seeks injunctive relief to prevent future violations and to remedy ongoing alleged COPPA violations. The complaint further seeks damages to the state of New Mexico, restitution, disgorgement, punitive damages or other compensation “on behalf of the residents of New Mexico.” It further seeks attorney’s fees and costs for investigating and conducting litigation.

4. New York Attorney General Reaches $14.3 Million Settlement with Health Care Insurer for Denying Mental Health Coverage and Substance Use Treatment 

New York Attorney General Letitia James announced that her office, along with the U.S. Department of Labor, has entered into a settlement agreement with the largest U.S. health care insurer for alleged failure to cover mental health and substance use disorder treatment. New York law and federal law require health insurance plans to cover mental health treatment. According to the complaint, the health care insurer illegally limited consumers’ access to mental health and substance use disorder treatment by “improperly” denying or reducing thousands of claims for these services.

Under the settlement with New York and the U.S. Department of Labor, the health insurer will pay approximately $14.3 million in restitution to New York consumers affected by the policies, including $9 million to more than 20,000 New York citizens with behavioral health conditions who received denials or reductions in reimbursement. In addition, the company will pay $2 million in penalties.

5. States Submit Comment Letter to HUD Supporting Proposed “Restoring Discriminatory Effects Standard” 

Twenty-one states and the District of Columbia issued a comment letter to the U.S. Department of Housing and Urban Development (HUD) supporting the proposed rule titled, Restoring HUD’s Discriminatory Effects Standard

Title VIII of the Civil Rights Act of 1968, as amended (Fair Housing Act), prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin.

The 2013 HUD rule formalized a burden-shifting test for determining whether a given practice has an unjustified discriminatory effect, leading to liability under the Fair Housing Act. The rule also added to, and revised, illustrations of discriminatory housing practices found in HUD’s Fair Housing Act regulations.

In 2020, the Trump administration amended HUD’s 2013 disparate impact standard by revising the burden-shifting test for determining whether a given practice has an unjustified discriminatory effect. The rule also established a uniform standard for determining when a housing policy or practice with a discriminatory effect violates the Fair Housing Act.

The attorneys general letter in support of the newly proposed HUD rule states that “[d]isparate impact liability provides Attorneys General and state fair housing enforcement agencies a critical tool to combat this form of discrimination where direct proof of overt bias is hidden or impossible to ferret out.”

6. Court Approves California AG’s $575 Million Settlement With Major Health Care Provider Over Alleged Anti-Competitive Practices 

A California state court recently approved the $576 million final settlement between California Attorney General Rob Bonta along with plaintiffs from a class action and a large California health care provider regarding alleged anticompetitive practices. The complaint alleged the health care provider “engaged in anticompetitive behavior” that resulted in higher health care prices by:

  • Establishing, increasing, and maintaining its power to control prices and exclude competition.
  • Foreclosing price competition by the provider’s competitors.
  • Enabling the provider to impose prices for hospital healthcare services and ancillary products that far exceed the prices it would have been able to charge in an unconstrained, competitive market.

Under the settlement, the health care provider is required to pay $575 million to compensate employers, unions, and others covered under the class action, as well as to cover attorney’s costs and fees. The settlement also requires the health care provider to:

  • Limit what it charges patients for out-of-network services.
  • Increase transparency by permitting insurers, employers, and self-funded payers to provide plan members with access to pricing, quality, and cost information.
  • Stop measures that deny patients access to lower-cost plans.
  • Stop all “all-or-nothing” contracting deals, which will allow insurers, employers, and self-funded payers to include some, but not all, of the provider’s hospitals and clinics in their plans’ network.
  • Cease “anticompetitive” bundling of services and products.
  • Cooperate with a court-approved compliance monitor.
  • Requires the provider to meet certain standards beyond regional similarities or the mere sharing of an electronic health record.

7. Massachusetts Attorney General Reaches $27 Million Settlement with Subprime Auto Lender 

Massachusetts Attorney General Maura Healey recently announced the state’s largest ever settlement of $27 million against subprime auto lender, Credit Acceptance Corporation (CAC).  In August 2020, General Healey sued CAC alleging the company made unfair and deceptive auto loans to thousands of Massachusetts consumers, providing investors with false or misleading information regarding auto securities they offered, and engaging in unfair debt collection practices.

The complaint further alleges CAC failed to inform investors that the company topped off the pools of loans that the company packaged and securitized with higher-risk loans, despite claiming otherwise in disclosures to investors. The complaint also alleged CAC has made high-interest subprime auto loans to Massachusetts borrowers that the company knew borrowers would be unable to repay.

The settlement requires CAC to pay a total of $27.2 million and provide debt relief and credit repair to thousands of Massachusetts borrowers. Over 3,000 borrowers across Massachusetts are expected to be eligible for settlement funds. The settlement also requires CAC to make changes to its loan handling practices.

8. State Attorneys General Call on FDA to Regulate E-Cigarettes and Oral Nicotine Products 

Attorneys general from 31 states and territories submitted a letter with the United State Food and Drug Administration urging the agency to regulate e-cigarettes and oral nicotine products.

According to the letter, “high-potency nicotine products sold in youth-friendly flavors have swamped the marketplace” and are “inherently attractive to youth.” The attorneys general further state that a “lack of effective national regulation of such products would all but guarantee that a new generation of young people will needlessly become addicted to nicotine.” The attorneys general further call on the FDA to regulate these products.

9. Federal Court Determines It Lacked Personal Jurisdiction in Lawsuit Initiated Against Arkansas AG  

In March 2020, Arkansas Attorney General Leslie Rutledge initiated an investigation against Missouri-based Morningside Church and pastor Jim Bakker for the fraudulent and deceptive sale of colloidal silver as a treatment of COVID-19.

As part of the investigation, Attorney General Rutledge issued a civil investigative demand (CID) to the church and Bakker seeking information regarding the sale of the product to consumers in Arkansas. The church and Bakker objected to the CID and subsequently filed a complaint against Attorney General Rutledge in the U.S. District Court for the Western District of Missouri (Southwestern Division) seeking declaratory and injunctive relief. The plaintiffs alleged that Attorney General Rutledge violated their rights under the Establishment, Free Exercise, Free Speech, and Free Press Clauses under the First Amendment.

The Missouri federal court ruled that it lacked personal jurisdiction and dismissed the plaintiffs’ complaint. The court explained that Attorney General Rutledge has the authority under Arkansas’s consumer protection law (Arkansas Deceptive Trade and Practices Law) to protect Arkansas consumers from illegal, fraudulent, and deceptive practices. Using this authority, Attorney General Rutledge issued the CID for purposes of seeking information concerning the potentially fraudulent and deceptive sale of the product in Arkansas.

The court held that the contact between Rutledge and the church and Bakker did not satisfy the minimum contacts required for personal jurisdiction. According to the court, Attorney General Rutledge’s investigation “did not purposefully avail her to the benefits and protections of the forum state [Missouri] to such a degree that her office should reasonably anticipate being haled into court here based on” her actions.



[1] 16 C.F.R. § 312.1.

[2] 15 U.S.C. § 6502(a)(1).

[3] 16 C.F.R. §§ 312.3(b), 312.4(a).