Attorneys general (AGs) are not only lawyers for their states; they are enforcers, regulators, and even public policy advocates. With a broad consumer protection mandate, a state AG is able to reach a wide range of industries that have a consumer touch. When joining in multi-state actions, and even more so those with public policy implications, AGs have a significant voice nationally to affect interests of business. We attended a series of multi-state AG meetings in June that highlighted three areas emblematic of these issues and powers.
“Top Cop” is often the name by which an attorney general is known in his or her state. However with little criminal prosecutorial power, state AGs rely on their broad consumer protection authority. In doing so, an AG acts in the state’s interest and can pursue claims on behalf of states’ citizens, under a parens patriae theory, to seek recovery on behalf of an entire class of consumers.
To do so, every state AG utilizes a version of unfair and deceptive acts and practices (UDAP) statutes to investigate and litigate. Under these UDAP laws, state AGs pursue allegations such as false advertising, lack of proper disclosures and fraudulent billing. Importantly, UDAP allegations require no intent or knowledge standard—so if a company may materially harm consumers, a state AG has a case. And an AG can even pursue litigation without any actual consumer harm—rather the likelihood to mislead consumers is sufficient to sue in the state’s interest.
With their UDAP authority, state AGs have powerful investigative tools, often broader than their federal counterparts. Most AGs utilize civil investigative demands (CIDs). While similar to subpoenas, CIDs are grounded in statutory, rather than judicial, authority. Unlike traditional subpoenas, CIDs do not require a court’s approval; they are information-gathering tools used at the discretion of the AG. CIDs allow AGs to demand information prior to filing a lawsuit and even when a company is not (yet) the target of a particular violation of the law.
Furthermore, UDAP statutes bring penalties in the thousands of dollars per violation—for instance in Texas, fines can reach $20,000 for each violation on each consumer!
In addition to UDAP claims, AGs can bring actions in areas such as antitrust, false claims, Medicaid fraud, and data breach and privacy. State AGs can join with their federal counterparts including the Department of Justice, the Federal Trade Commission (FTC), and the Consumer Financial Protection Bureau (CFPB) to bring joint enforcement actions. AGs can even independently enforce certain federal statutes such as in the area of consumer finance, and they can enforce FTC and CFPB rules from telemarketing to mortgage.
A particular threat of state AGs is with concerted multi-state investigations and enforcement actions. Well-known examples include the tobacco master settlement agreements, the recent diesel engine investigations, and the current opioid litigation. When state AGs bind together in multi-state actions, they combine their powers and often seek fines that match that of their federal counterparts. Recall the state AGs led the $25 billion national mortgage settlement. The National Association of Attorneys General (NAAG) provides a platform for multi-state interaction. While NAAG does not run investigations, it is the communication and coordination hub among AG offices. NAAG can escalate concerns by cueing AG offices to collaborate, acting as a clearinghouse for information, and even setting agenda items for AG conferences.
In June, three major conferences of state AGs were held. Discussions featured such topics as: state AGs taking the lead in a post-active CFPB federal administration, student loans, health care policies, cybersecurity/internet privacy, disruptive technologies, robo calls, synthetic identify fraud, marijuana legalization, antitrust, over-regulation and the future of the administrative/regulatory state, and regulation of conversions from nonprofit to for-profit institutions.
Above all, state AGs are highly motivated by public policy affecting both consumers and businesses. AGs, as political officials, respond to the concerns of their citizens and consider the public impact in the actions they take. This regularly occurs in industries such as pharmaceutical and health care, technology and telecommunication, and financial services. One recent and interesting consideration for state AGs discussed this June was “bike-share” and “scooter share” businesses.
Popping up in major cities, these bicycles and scooters can be stored on a rack or parked dock-less on the sidewalk. These systems can involve a consumer using a smartphone app to identify bike/scooter locations and destinations, or using a credit card to unlock and pay for the bike/scooter. Similar to ride-sharing and car-sharing, bike/scooter-share implicates a variety of consumer issues under a state AG’s purview including ADA compliance, privacy, consumer data collection and use, public safety, and even anticompetitive acts. Significantly, bike/scooter-share involves issues that create regulatory conflict between potential city ordinances versus statewide legislation.
In short, with over a 100 AG lawsuits against the Trump administration, with AGs championing U.S. Supreme Court decisions, and with a number of AG elections this fall, there is no doubt that policy and politics play in the issues addressed by state attorneys general.
Engaging state AGs effectively requires knowing their interests and their motivations—on legal, policy and political levels. In addition to on-the-ground local state AG experience, it can take a 50-state approach to personally know the AGs, understand how AG offices operate distinctively from private litigation, and stay abreast of current concerns on which AGs will take action. It may seem counter-intuitive, but when appropriate, companies should consider how approaching state AGs early can educate them on proper business practices, as well as keep adverse matters from escalating.
Reprinted with permission from the July 6, 2018 issue of Corporate Counsel. ©2018 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.