May 05, 2022

State Attorneys General Updates From Colorado, California, Minnesota, New York and Arkansas

In this edition of Faegre Drinker’s State Attorneys General Update, we discuss:

  • The Colorado AG’s issuance of pre-rulemaking considerations for the Colorado Privacy Act
  • The California AG’s:
    • Settlement of deceptive trade practice claims relating to marketing of drinkable sunscreen
    • Settlement with a charity relating to misappropriation of funds
    • Investigation of the oil and gas industries for their alleged roles in plastics pollution
  • The Minnesota AG’s suit against a solar-panel sales company and its executives for allegedly fraudulent marketing practices
  • The New York AG’s settlement with a construction company over allegations it failed to pay the required prevailing wage to its workers
  • The Arkansas AG’s action against Family Dollar for an alleged rodent infestation

Colorado AG Issues Pre-Rulemaking Considerations for the Colorado Privacy Act

The Colorado AG issued Pre-Rulemaking Considerations for the Colorado Privacy Act (CPA), which was enacted in June 2021. Colorado is the third U.S. state to adopt a comprehensive privacy law. The CPA gives the Colorado Attorney General three distinct categories of rulemaking authority: (1) specific, required authority to draft technical specifications for one or more universal opt-out mechanisms; (2) specific, discretionary authority to create rules governing a process of issuing opinion letters and interpretive guidance; and (3) broader discretionary authority to create rules for the purpose of carrying out the CPA.

The Pre-Rulemaking Considerations for the Colorado Privacy Act outlines the Colorado Attorney General’s Office’s approach to the rulemaking process and is intended to provide guidance to parties about how they can engage with the Colorado Attorney General’s Office throughout the process. Although the formal notice-and-comment rulemaking phase will begin in the fall, the attorney general’s office is currently seeking informal input on various topics, including universal opt-out mechanisms, consumer consent, dark patterns, data-protection assessments, profiling, and offline and off-web collection of data, among others. The CPA comment portal is available here.

California AG Settles Case Alleging Drinkable Sunscreen Claims Were Deceptive or Misleading

California AG Rob Bonta entered into a settlement and stipulated judgment with dietary supplement businesses Dermatology Industry Inc. and Drink UVO (together, UVO) over allegations that they made unsupported and false or misleading statements regarding their sunscreen product. Specifically, UVO allegedly marketed a “drinkable sunscreen” and claimed, without proper support, that it would protect against the sun’s harmful rays for three to five hours when ingested. UVO stopped selling the product in advance of the settlement. Under the stipulated judgment, UVO must provide the AG’s office written notice within 60 days of starting to market any product related to sun protection and must pay a $42,500 fine. The AG’s press release, settlement and stipulated judgment are available here.

California AG Settles Claims With Charity Over Misappropriation of Funds

The California AG entered into a stipulated judgment with charity ZeroDivide and two of its officers over allegations that the charity misappropriated funds that donors designated to pay for specific programs. The charity was focused on spreading technology to low-income communities. The charity used approximately $606,000 in restricted donations to fund specific programs to pay salaries and benefits for staff and for other programs. According to the AG, ZeroDivide’s board was aware of the misappropriation of funds. The AG also alleged that the charity maintained inaccurate financial records on the receipt and spending of programs’ funds, failed to file required reports with the AG and failed to maintain adequate records. Under the terms of the settlement, ZeroDivide and its officers and directors will pay $326,008 in damages, and $138,525 in penalties, fees and attorney’s costs. Additionally, the charity will be dissolved and two of its officers will be barred for a period of three years from leading a charitable organization; working in a paid or volunteer capacity for any for-profit entity engaged in charitable fundraising in California; and from soliciting, holding, or managing funds or assets for a charitable purpose in California. The AG’s press release, complaint and stipulated judgment are available here.

California Attorney General Announces Investigation Into Oil and Gas Industries for Their Alleged Roles in Causing Global Plastics Pollution

The California AG announced an “investigation into the fossil fuel and petrochemical industries for their role in causing and exacerbating the global plastics pollution crisis.” The announcement alleges that these industries “aggressively promoted the development of oil-based plastic products and campaigned to minimize the public’s understanding of the harmful consequences of these products.” The investigation will “examine the industries’ historic and ongoing efforts to deceive the public and whether, and to what extent, these actions may have violated the law.”

Minnesota AG Sues Solar-Panel Sales Companies

The Minnesota AG announced that he filed a lawsuit “against four Utah-based solar-panel sales companies and three company executives for engaging in deceptive and fraudulent practices in marketing and selling residential solar panel systems that cost Minnesota homeowners anywhere from $20,000 to over $55,000.” The AG is also suing several lenders that partnered with the solar companies to finance the sales.

The lawsuit alleges these companies, individuals and lenders violated several Minnesota state laws against consumer fraud by making a variety of alleged misrepresentations, such as: representing themselves as being partnered with local utilities; tricking homeowners into believing they were signing a document seeking more information, which was, in fact, a contract; exaggerating the potential savings on monthly energy costs from installing solar panels; and representing that the homeowners were automatically eligible for tax credits. Additionally, the AG alleges the companies threatened lawsuits and charged exorbitant termination fees when customers attempted to cancel their purchases. The suit seeks restitution, civil penalties, the state’s costs and a declaration that the defendants’ conduct violates state law. The lawsuit also asks the court to order that all prospective and current customers be able to cancel their installation contracts and loans in a reasonable period.

New York AG Enters Settlement With Construction Company That Allegedly Failed to Pay Required Minimum Wages

The New York AG entered into a settlement with Lintech Electric (Lintech) over allegations that the company failed to pay the required prevailing wage to construction workers. Specifically, the AG alleged that various prime contractors were retained by the New York City Housing Authority to complete various work between 2015 and 2018. The prime contractors, in turn, retained Lintech to complete certain electrical work. Under the state’s prevailing wage law, electricians should have been paid $74–110 per hour, but Lintech allegedly paid its employees $20–60 per hour. It allegedly concealed the violation of the law by classifying various electricians as supervisors. Under the terms of the settlement, Lintech will pay approximately $900,000 in restitution, interest, and penalties and be barred from any public works contract for five years. The AG’s press release and the associated assurance of discontinuance are available here.

Arkansas AG Files Lawsuit Against Family Dollar Due to Rodent Infestation

The Arkansas Attorney General announced that she filed a lawsuit “against Family Dollar Stores, Inc. for selling potentially harmful or contaminated products following a massive rodent infestation at its West Memphis, Arkansas distribution center.” The complaint alleges that the company “knew about the rodent infestation for years but allowed unsafe products to be sold at hundreds of stores in Arkansas and five other states throughout the region.” The complaint further alleges that the company’s “total disregard for public safety endangered Arkansas consumers and forced hundreds of employees to work in unsafe conditions at the West Memphis Distribution Center.” As a result, the lawsuit seeks punitive damages, restitution and civil penalties through the Arkansas Deceptive Trade Practices Act.

In March of 2022, the FDA had issued a safety alert regarding the distribution center, noting the following conditions:

Conditions observed during the inspection included live rodents, dead rodents in various states of decay, rodent feces and urine, evidence of gnawing, nesting and rodent odors throughout the facility, dead birds and bird droppings, and products stored in conditions that did not protect against contamination. More than 1,100 dead rodents were recovered from the facility following a fumigation at the facility in January 2022. Additionally, a review of the company’s internal records also indicated the collection of more than 2,300 rodents between Mar. 29 [2021] and Sep. 17, 2021, demonstrating a history of infestation.

The AG’s announcement also noted that the “contaminated products included human foods, animal foods, cosmetics, medical devices, and over-the-counter medications for both adults and children.” After the FDA’s safety alert, the company issued a recall and “was forced to temporarily close 404 stores, including 85 Arkansas stores, so that hazardous and contaminated products could be removed from its shelves.”

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