In this edition of Faegre Drinker’s State Attorneys General Update, we discuss:
- Dismissal of the disgorgement claim brought by a coalition of AGs in the Generic Pharmaceuticals Pricing Antitrust MDL
- The New York AG’s settlement with Verizon relating to Legionnaire’s disease as a result of alleged inadequate maintenance of building cooling towers
- The New Mexico AG’s $13.7 million settlement with Centene Corporation over allegations it overbilled the state’s Medicaid program
- The Washington AG’s $500,000 settlement with a stem cell clinic to resolve false advertising claims
- The Texas AG’s:
- $372,000 settlement with a contact lens company regarding allegedly false advertisements
- investigation of Twitter regarding bots
- The Michigan Supreme Court’s decision that officials indicted in the Flint water crisis were improperly charged
Court Dismisses AGs’ Disgorgement Claim in the Generic Pharmaceuticals Pricing Antitrust MDL
The Eastern District of Pennsylvania judge who oversees the Generic Pharmaceuticals Pricing Antitrust MDL dismissed the disgorgement claim brought by multiple state attorneys general. The court agreed with the defendants that Section 16 of the Clayton Act does not authorize disgorgement as a form of injunctive relief. The court explained that “both the plain language of the text and the fact that ‘injunctive relief’ appears in the context of forward-looking harms such as ‘threatened loss or damage’ and ‘the danger of … loss’ supports the conclusion that disgorgement, a backward-looking form of relief, does not fall under the term ‘injunctive relief’ as it is used in § 16 of the Clayton Act.”
The court, however, did find that the state AGs had standing under a theory of parens patriae to pursue prospective injunctive relief. Specifically, the court stated that “the States have a quasi-sovereign interest in ensuring that their citizens are not denied the benefit of lower-priced drugs that would result from market participants’ adherence to fair marketplace regulations and an interest in ensuring that those who sell medication to their citizens abide by the federal antitrust system.”
The court’s full opinion is available here.
New York AG Settles Allegations Against Verizon Regarding Deficient Maintenance Alleged to Cause Legionnaire’s Disease
Verizon New York Inc., a subsidiary of Verizon Communications Inc., entered a settlement to resolve allegations that it violated various state and city laws regarding proper maintenance and monitoring of rooftop cooling towers on various buildings it owns. Cooling towers are common on large buildings. They are used to cool the buildings and emit a mist into the atmosphere that can spread disease, if it is contaminated. The AG alleged that Verizon failed to test water used in the cooling towers for Legionella (the bacteria that causes Legionnaire’s disease); failed to take corrective action in response to positive test results; and failed to complete cleaning, disinfection and inspection of cooling towers — all of which violated state or city laws. The settlement agreement suggests that the alleged violations resulted from a disjointed organizational structure, inadequate resource commitment, and a lack of centralized policies and procedures. Pursuant to the settlement, Verizon will implement policies to comply with New York State and City cooling tower laws, provide an annual report to the AG for the next three years regarding its cooling towers, and pay the AG’s office $118,000, which will be used to address air pollution or its health impacts. In reaching the settlement, Verizon neither admitted nor denied the AG’s allegations. Copies of the AG’s press release and the settlement agreement are available here.
New Mexico AG Enters Settlement With Centene Corporation Regarding Alleged Overbilling of Medicaid
Centene Corporation agreed to pay New Mexico $13.7 million to resolve allegations that it overbilled the state’s Medicaid program. Specifically, the New Mexico AG alleged that Centene’s subsidiaries, which acted as pharmacy benefit managers (PBMs) for the state’s Medicaid program, layered fees and did not pass discounts they received for medications onto the state. The settlement came shortly after the FTC announced an investigation into vertically integrated PBMs. Centene neither admitted nor denied any wrongdoing in the settlement. A copy of the AG’s press release is available here.
Washington AG Settles Lawsuit Alleging Stem Cell Clinic Deceptively Marketed Stem Cell Treatments
The Washington AG settled a lawsuit alleging that US Stemology and its owner, Dr. Tami Meralia, engaged in deceptive marketing by promoting stem cell treatments for COVID-19, asthma, lupus, heart failure and other ailments. Stemology allegedly told patients that they were participating in clinical trials, but Stemology allegedly did not follow scientific standards and its employees led the claimed independent review of the trial data. Patients paid up to $10,000 for the treatments. Under the terms of the settlement, the company will pay $500,000 in restitution. Provided the company complies with the terms of the settlement, which include not marketing stem cell treatments as effective against a variety of diseases, $300,000 in penalties will be suspended. Copies of the AG’s press release and the consent decree are available here.
Texas AG Settles Deceptive Trade Practices Allegations Against Contact Lens Company
The Texas AG entered a settlement with Vision Path, Inc., to resolve claims that its Hubble contact lens business violated the state’s Deceptive Trade Practices Act. Specifically, the AG alleged that Vision Path, through its Hubble contact lens business, failed to provide refunds when customers sought them in accordance with Hubble’s policies, provided contact lenses that were uncomfortable or did not fit well, and failed to adequately inform consumers that it did not offer “toric” lenses when their prescriptions specifically called for such lenses. Further, the AG took issue with Hubble advertising its lenses as being “high quality” despite using a 20-year-old technology. Under the terms of the settlement, Vision Path agreed to pay approximately $372,000 in civil penalties, attorney costs and restitution. Further, it agreed to refrain from engaging in certain alleged misconduct — such as failing to provide refunds or failing to adequately verify prescriptions. The AG’s press release and the Assurance of Voluntary Compliance are available here.
Texas Issues a Civil Investigative Demand to Twitter Probing Its Bot Reporting
Texas Attorney General Ken Paxton initiated an investigation into Twitter “for potentially false reporting over its fake bot accounts in violation of the Texas Deceptive Trade Practices Act.” Bots are automated, nonhuman accounts that essentially do the same things as accounts operated by real people. According to the AG, such accounts “inflate followers and reach, and often push deceptive and annoying activity.” They also “reduce the quality of users’ experience on the platform” and “may also inflate the value of the company and the costs of doing business with it.”
To determine whether Twitter’s reporting on real versus fake uses is false, misleading or deceptive under the Texas Deceptive Trade Practices Act, the AG issued a civil investigative demand (CID) to Twitter. It seeks documents related to how Twitter “calculates and manages its user data and how these numbers relate to Twitter’s advertising businesses.” A copy of the CID can be found here.
Michigan Supreme Court Rejects Indictments by “One-Person Grand Jury” in Flint Water Crisis Cases
The Michigan Supreme Court heard consolidated appeals of three officials charged in the Flint water crisis. All three were charged by a judge appointed to serve as a “one-person grand jury” at the request of the Michigan AG pursuant to specific Michigan statutes. (The statutes were created to address situations where a traditional grand jury proceeding may prove unwieldy, such as instances of public corruption.) Two of the officials argued they were improperly denied their right to a preliminary examination — essentially, a mini-trial to assess whether probable cause exists — which the AG argued they were not entitled to as a result of the judge’s charges. The third argued that the judge lacked authority under the one-person grand jury statute to issue indictments. The court agreed with each defendant. Individuals charged by a one-person grand jury are entitled to a preliminary examination, and the judge who served as the one-person grand jury may not serve as the examining magistrate at the preliminary examination. Further, one-person grand juries may charge an individual, but they lack authority to indict those they charge. The legislature did not grant one-person grand juries that authority and in fact previously repealed statutory authority for three-judge grand juries to issue indictments. A copy of the opinion is available here.