September 07, 2022

State AG Updates: California, Pennsylvania, Illinois, Washington State, Connecticut and Coalitions of AGs

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

  • The California AG’s first enforcement action involving the California Consumer Privacy Act, which resulted in a $1.2 million settlement
  • The Pennsylvania AG’s cooperation with federal authorities leading to the indictment of two Pennsylvania nursing homes for Medicare fraud
  • The Illinois AG’s settlement with construction subcontractors relating to allegedly unpaid overtime and an associated lawsuit against a nonsettling contractor
  • The Washington AG’s settlement with Centene relating to alleged overcharges to the state’s Medicaid system
  • A coalition of AGs seeking authority from Congress to oversee the airline industry
  • The Connecticut AG’s settlement with Frontier regarding allegedly improper fees and consumer complaints
  • A joint FTC and AG action relating to a company allegedly purchasing fake reviews for its app
  • A $70 million False Claims Act settlement entered by the California AG and the DOJ with various health care systems

California AG’s First Filed Enforcement Action Pursuant to the CCPA Results in a $1.2 Million Settlement

The California AG entered a $1.2 million settlement with beauty retailer Sephora, Inc., in his first settlement pursuant to California’s Consumer Privacy Act (CCPA). The AG alleged that Sephora violated the CCPA through its use of third-party analytics vendors to learn more about its customers. Those vendors used cookies to track Sephora’s customers’ activity, including their location and what products they viewed or added to their cart, which the AG alleged that Sephora then used to target potential customers. While the CCPA does not bar such arrangements, it imposes various obligations on the retailer, including telling customers their data is being sold and allowing customers to opt-out. The AG alleged that Sephora violated both requirements. Under the terms of the settlement, Sephora will pay a $1.2 million fine, add certain representations to its online disclosures and privacy policy, create a mechanism for customers to opt out of the sale of their data, update its service provider agreements to comply with the CCPA and provide reports to the AG.

The AG used the announcement of the settlement to reiterate his focus on CCPA enforcement. Significantly, the CCPA contains a safe harbor provision, which allows companies 30 days to cure any alleged violation of the CCPA upon receiving notice. That safe harbor provision sunsets on January 1, 2023. The AG offered examples of violations for which his office recently issued notices to cure, including: (a) offering incentives, such as discounts or other rewards, in exchange for consumers’ personal information without providing the consumers with a formal notice of a financial incentive as required by the CCPA; (b) utilizing privacy disclosures that were not understandable by the average consumer and omitted certain required information; and (c) providing a “Do Not Sell My Personal Information” link that only worked with certain browsers and that required multiple steps to implement on “a confusing webpage.”

Copies of the complaint, settlement and the AG’s press release are available here. A list of notices of alleged violations of the CCPA for which the AG issued notices to cure is available here.

Pennsylvania AG Announces Indictment of Two Nursing Homes and Five Individuals for Medicare Fraud

The Pennsylvania AG announced that a joint investigation by his office and various federal agencies resulted in a federal indictment of two Pennsylvania nursing homes and five individuals (a part owner of the facilities and various high-level employees) for Medicare fraud. Specifically, the indictment alleges that senior employees knowingly provided, or directed others to provide, falsified staffing records to the Pennsylvania Department of Health in response to federally mandated surveys. The records were allegedly falsified to show the facilities met required staffing levels, when they did not. Additionally, three of the individuals allegedly provided false statements in “Minimum Data Set” assessments of nursing home residents, which are used to set Medicare and Medicaid reimbursements. A copy of the AG’s press release is available here.

Illinois AG Enters Settlement With Subcontractors Over Allegedly Unpaid Overtime and Files Action Against Others

The Illinois AG announced a settlement with two construction subcontractors — China-based Guangzhou MINO Equipment Co. and Florida-based BIW Automotive Solution, Inc. — that were hired to help build Rivian’s new production facility in Normal, Illinois. The AG alleged that the subcontractors failed to pay overtime for Mexican employees and engaged in a complex subcontracting arrangement to conceal that nonpayment. Specifically, the AG alleged that Rivian hired MINO to build assembly lines; MINO subcontracted with BIW, which in turn subcontracted with Mexico-based SDS Industrialservicio S.A. de C.V. Although SDS was responsible for paying the workers, the AG alleges that MINO and BIW had substantial control over the employees’ work and the conditions of their employment. The employees allegedly worked 60-80 hours a week but were not paid the required 150% of their regular hourly wages for hours worked in excess of 40. The AG’s investigation started in response to a tip from a local union that alleged workplace violations were occurring at the site. Under the terms of the settlement, MINO and BIW will pay a combined $315,000 to 59 affected employees, which the AG estimated was 150% of the overtime wages to which the employees were entitled. SDS refused to cooperate with the AG’s investigation, and the AG initiated a suit against it and its president seeking recovery of unpaid overtime wages. A copy of the AG’s press release is available here.

Centene Enters Settlement With Washington AG to Resolve Allegations of Medicaid Overbilling

Washington became the eleventh state with which Centene settled allegations that it overcharged for pharmacy benefit manager services that it, or its subsidiaries, provided to the states. The Washington AG alleged that Centene failed to disclose the actual costs of pharmacy benefits and services; failed to pass medication discounts Centene received on to the state; and charged inflated dispensing fees. Under the terms of settlement, Centene will pay approximately $19 million to Washington and $13 million to the federal government. The AG’s investigation began in response to a 2019 whistleblower complaint. A copy of the AG’s press release is available here.

Bipartisan Coalition of 38 Attorneys General Urges Congress to Grant State Attorneys General Enforcement Authority Over Airline Industry

A bipartisan coalition of 38 attorneys general sent Congress a letter urging it to pass legislation to enable states to address consumer complaints against the airline industry. According to the letter, over the past few years, state AGs “have received thousands of complaints from outraged airline passengers about airline customer service — including about systematic failures to provide required credits to those who lost travel opportunities during the pandemic.” However, because the authority to address such complaints rests primarily with the U.S. Department of Transportation, the AGs assert they are unable to help their constituents. The AGs claim that lack of state-level enforcement authority creates a “vacuum of oversight” that “allows airlines to mistreat consumers and leaves consumers without effective redress.” “For airline consumers to be properly protected,” the letter argues, Congress should “pass legislation that would authorize state attorneys general to enforce . . . state and federal consumer protection laws governing the airline industry.”

Connecticut Attorney General Announces Settlement With Frontier Communications

Connecticut AG William Tong announced a settlement with Frontier Communications “worth over $60 million to drastically expand access to high-speed internet for Frontier customers in economically distressed communities, end a hidden monthly $6.99 internet surcharge, and force significant improvements in Frontier’s marketing and customer service.” According to the press release, the AG’s Office and Department of Consumer Protection reviewed more than 1,400 consumer complaints regarding Frontier and found that in addition to quality and customer service issues, Frontier “tacked on hidden fees, charged families for returned equipment, and kept charging customers even after services had been cancelled.” Among other things, the settlement requires Frontier to invest $42.5 million over the next few years to upgrade existing internet service infrastructure. The settlement also requires Frontier to stop collecting the $6.99 monthly fee, make a $1 million payment to the state, and pay up to $200,000 in credits and refunds to consumers who filed complaints since 2019. A copy of the AG’s press release is available here.

Six AGs and the FTC File a Lawsuit Against Roomster Corp.

The FTC, along with the AGs of California, Colorado, Florida, Illinois, Massachusetts and New York, jointly filed a lawsuit against Roomster Corp. relating to the company’s roommate- and room-finding app. The suit alleges that app violated the FTC Act and various state consumer protection laws. Specifically, according to a press release issued by the California AG, Roomster illegally “purchased thousands of fake positive reviews to promote its app and fraudulently claimed that its room and roommate listings were ‘verified’ and ‘authentic’ despite featuring a myriad of scam listings.”

The California Attorney General and U.S. Department of Justice Secure $70+ Million in Settlements for Violations of the False Claims Act

The California AG announced that, in partnership with the U.S. Department of Justice, it “secured three settlements totaling $70.7 million” against county-organized health system Gold Coast Health Plan, and three Medi-Cal providers — Dignity Health; Clinicas del Camino Real, Inc.; and Ventura County — for allegedly “submitting fraudulent claims to Medi-Cal in violation of the state and federal False Claims Acts.” The settlements resolve allegations that the entities “knowingly submitted or caused the submission of false claims to Medi-Cal for ‘Additional Services’ provided to Adult Expansion Medi-Cal members.” The settlements also resolve associated qui tam claims brought under the California False Claims Act. A copy of the AG’s press release is available here.

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