January 09, 2023

State AG Updates: Florida, Massachusetts, Pennsylvania, Vermont, New York, Washington State, Iowa, Oregon and 36-State Settlement

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

  • Carmax’s multistate settlement relating to alleged nondisclosure of safety recalls for vehicles it sold
  • Suits against a national realty company for allegedly misleading consumers regarding lockup provisions in the company’s contracts
  • The Vermont AG’s settlement with a social services agency over alleged deficient and fraudulent care
  • The New York AG’s:
    • Joint settlement with the Pennsylvania AG and a cap and gown producer relating to a 2021 data breach
    • Settlement with health care provider relating to alleged Medicaid fraud and underpayment of employees
  • The Washington AG’s suit against a plastic surgery practice for allegedly manipulating patient online reviews
  • Centene’s $44.4 million settlement with the Iowa AG and $17 million settlement with the Oregon AG relating to alleged Medicaid overbilling

Carmax Enters Multistate Settlement Relating to Alleged Nondisclosure of Safety Recalls

Carmax Auto Superstores Inc. entered a settlement with 36 state AGs to resolve allegations that it did not adequately disclose that certain vehicles it sold were subject to recalls for issues that had not yet been repaired. Under the terms of the settlement, Carmax will pay $1 million. It will also include hyperlinks to any outstanding recall notices for any vehicles it sells online, provide QR codes linking to the recall notices on cars sold in person and present customers with paperwork relating to any open recalls before giving them any other sales paperwork.

National Realtor Faces Actions in Three States Relating to Allegedly Confusing Lockup Provision

The Florida, Massachusetts and Pennsylvania AGs each filed suits under their respective consumer protection laws alleging that MV Realty engaged in deceptive and unfair business practices. Specifically, they allege that the company offered consumers $300 to $5,000 in exchange for the consumers’ agreement to use MV Realty as the exclusive listing agent for their home. Although consumers had the option to opt out of the agreement every 60 days, the agreement allegedly required them to return the upfront payment and 1.5% of the value of their house to do so. After the consumers entered such agreements, MV Realty allegedly took 40-year liens against the consumer’s homes, which required the consumer to pay the company 3% of the home’s value upon transfer of title to a third party, regardless of whether the homeowner used MV Realty as the listing agent or whether the title transferred due to foreclosure, death or sale. The AGs allege the company engaged in high-pressure sales tactics and targeted low-income and elderly consumers. Further, according to the Massachusetts AG, the company’s salespeople took steps to discourage consumers from reading the agreements, including not providing the agreements in advance, printing the agreements in 8.5-point type, not providing copies of the signed agreements to the consumers and providing consumers with mobile notaries who were not familiar with the terms of the agreements. The AGs are seeking injunctive relief, restitution and civil penalties.

Copies of the Florida AG’s press release and complaint are available here.

Copies of the Massachusetts AG’s press release and complaint are available here.

Copies of the Pennsylvania AG’s press release and complaint are available here.

Vermont AG Settles Abuse and Fraud Claims With Social Services Agency

The Vermont AG entered a settlement with Upper Valley Services — an agency providing services for developmentally disabled individuals — over allegations that the company submitted false claims in violation of its Medicaid agreements with the state relating to care the company provided and that the company violated various state statutes relating to vulnerable adults. The AG focused on three specific acts as evidence of Upper Valley’s alleged failure to provide the contracted care. First, the company allegedly approved the placement of a disabled individual with a shared-living provider at a home with a pond, when the individual could not swim and subsequently drowned. Second, the company allegedly failed to investigate how a different shared-living provider used a basement room in the home he shared with an elderly disabled individual. The shared-living provider allegedly locked the disabled individual in the basement when he needed a break, and Upper Valley allegedly did not learn of this practice for approximately five years. Finally, the company employed an individual included on the Vermont Adult Abuse Registry. Upper Valley knew the employee was on the registry, but relied on a letter provided by the employee stating that he had been removed from the registry, allegedly without rechecking the registry to confirm he had been removed from it or otherwise verifying the accuracy of the letter, which was a forgery.

Pursuant to the terms of the settlement, Upper Valley will (a) pay $112,000; (b) create a permanent position of director of quality, who will provide written performance reviews for three years; (c) establish a clinical review committee to review and approve changes to care plans for Upper Valley’s clients; (d) conduct environmental risk assessments for any clients moving to a new home or when there is a change in shared-living providers; (e) review and revise service agreements for each client to ensure they adequately address safety and “honor the human rights of each client”; (f) have case managers confirm, on a monthly basis, that shared-living providers are providing appropriate supervision; (g) create a standard home-visit form that documents where clients receive care and any potential dangers in the home; (h) develop policies relating to “transitions in clients’ care and living environments, respite review, and screening of new hires”; (i) improve employee training; and (j) create a training and informational program to serve shared-living providers, families, respite care personnel and clients.

Copies of the AG’s press release and the settlement agreement are available here.

New York and Pennsylvania AGs Enter Settlements With Company Over Data Breach

Following a joint investigation, the New York and Pennsylvania AGs entered a $200,000 settlement with Herff Jones — a supplier of yearbooks, class rings, caps and gowns, and graduation memorabilia — relating to a December 2020 data breach exposing approximately 206,000 customers’ debit or credit card information. According to the AGs, Herff Jones told customers it took security measures to protect against the loss or misuse of their data, but the company allegedly was not in compliance with the Payment Card Industry Data Security Standard (PCI DSS) requirements. In addition to the fine, the company agreed to strengthen its security policies by (a) designating an employee to oversee its information security program; (b) conducting annual security risk assessments of its networks storing personal information; (c) providing annual training regarding data security policies to relevant employees; (d) promptly installing software patches, conducting penetration testing, and implementing multifactor authentication; and (e) complying with PCI DSS and validating its compliance through a PCI Qualified Security Assessor.

Copies of the New York AG’s press release and assurance of discontinuance are available here.

Copies of the Pennsylvania AG’s press release and assurance of voluntary compliance are available here.

New York AG Settles Allegations of Medicaid Fraud Through the Underpayment of Employees

The New York AG and the U.S. Attorney for the Eastern District of New York entered a $3.2 million settlement with home health agency White Glove Community Care, Inc., for submitting allegedly false claims to Medicaid. The AG alleged that White Glove did not pay required minimum wages to employees providing home health aide and personal care services, as required by the New York Wage Parity Act, but nonetheless certified that it was complying with the law in submitting claims to Medicaid. Pursuant to the terms of the settlement, White Glove will (a) pay $1.2 million to Medicaid and $2 million to the AG to distribute to employees; (b) revise its policies and procedures and submit them to the AG for approval; (c) provide training to relevant personnel on the updated policies; and (d) provide the AG regular reports on the implementation of the new policies and on staff wages for the next three years. Copies of the AG’s press release and the two assurances of discontinuance (one with the Labor Bureau and one with the Medicaid Fraud Control Unit) are available here.

Washington AG Sues Plastic Surgery Practice for Allegedly Manipulating Patient Online Reviews

The Washington State AG sued plastic surgery provider Allure Esthetic and its owner, Dr. Javad Sajan, for allegedly illegally manipulating the practice’s online ratings. According to the AG, the company: (a) required patients to sign nondisclosure agreements (NDAs) after paying a $100 consultation fee, but before meeting with a doctor or receiving treatment, which prevented them from posting truthful, negative reviews; (b) posted fake positive reviews; (c) threatened to sue patients if they did not remove negative reviews; (d) offered cash or free services to patients to take down negative reviews and required patients who agreed to such an exchange to sign a second NDA providing for damages of $250,000 in the event of a breach; (e) edited before and after photographs to make the results of procedures appear better than they were; and (f) used fake email accounts to apply for and receive rebates for skincare products on behalf of patients and then kept those rebates. The AG alleges this conduct violated the federal Consumer Review Fairness Act, the Health Insurance Portability and Accountability Act (commonly known as HIPAA), and Washington’s Consumer Protection Act. He is seeking injunctive relief declaring the NDAs are void and unenforceable, and monetary penalties in the form of refunds of the $100 consultation fees, penalties of $7,500 for each of the allegedly more than 10,000 NDAs that patients signed and the cost of the AG’s investigation. Copies of the AG’s press release and complaint are available here.

Iowa and Oregon AGs Enter Settlements With Centene Relating to Alleged Medicaid Overbilling

Centene entered a $44.4 million settlement with the Iowa AG to resolve allegations that it overbilled the state for the pharmacy services it provided Iowa’s Medicaid program, and a $17 million settlement with the Oregon AG to resolve similar allegations. The settlements are the latest of more than a dozen Centene has entered to resolve allegations that it failed to pass on discounts that its subsidiaries received while working as the pharmacy benefit managers for various states’ Medicaid programs. Centene expressly denied any wrongdoing in entering the settlements. A copy of the Iowa AG’s press release is available here, and a copy of the Oregon AG’s press release is available here.

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