State Attorneys General Updates From Michigan, New York, South Carolina, Pennsylvania, California, Texas, New Hampshire, Iowa and Minnesota

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

• The Michigan AG’s notice of intended action, issued to three pharmacies regarding their pricing of COVID-19 tests
• A joint action by attorneys general, state regulators and the Commodity Futures Trading Commission alleging fraudulent sales of precious metals
• A criminal complaint filed by the Pennsylvania AG relating to a natural-gas pipeline explosion
• The California AG’s application of California’s Consumer Privacy Act to customer loyalty programs
• The California AG’s letter to a COVID testing company seeking support for certain representations the company made to customers
• The Texas AG’s suit against Meta for collecting biometric data
• The New Hampshire AG’s settlement with Monsanto relating to alleged PCB contamination in the 1970s
• A joint investigation by nine states of fertilizer price increases
• The Minnesota AG’s suit against a landlord for allegedly failing to make repairs

Michigan AG Uses Michigan Consumer Protection Act to Seek Reduction of COVID-19 Test Costs

The Michigan AG’s Office sent three pharmacies a notice of intended action directing them to reduce their pricing for COVID-19 home test kits. The pharmacies were allegedly charging $50 to $80 per kit, but the AG found the same kits available at other stores for less than $20. In responding to the AG’s investigation, two of the pharmacies provided invoices from the third pharmacy to justify the costs they were charging but, according to the AG, they failed to disclose that the third was a related entity. The AG alleges that the pharmacies’ conduct violates the Michigan Consumer Protection Act by charging consumers prices that are “grossly in excess of the price at which similar property or services are sold.” See Mich. Comp. Laws § 445.903(1)(z). The AG’s press release and the notice of intended action are available.

Joint Action Seeks $64 Million and Injunctive Relief for Sales of Precious Metals at Above-Market Prices

The Michigan, New York and South Carolina attorneys general partnered with state regulators around the country and the Commodity Futures Trading Commission to file a civil action alleging violations of the Commodity Exchange Act (CEA) by Safeguard Metals LLC (Safeguard) and its owner. Safeguard sold precious metals to consumers, primarily in the form of silver coins. The government alleges that Safeguard misled consumers by misrepresenting its experience and by charging consumers as much as 50% above the markup that it disclosed to consumers. Further, Safeguard allegedly targeted elderly consumers and convinced them to liquidate existing retirement accounts to create self-directed retirement accounts through which they would buy Safeguard-marketed precious metals. Relatedly, the government alleges Safeguard frequently convinced customers to open such accounts through a Safeguard custodian, which would give Safeguard sole authority to manage sales of the precious metals that Safeguard sold and allow Safeguard to charge maintenance fees. The government claims that these actions constitute fraud under the CEA. It seeks restitution of approximately $64 million and a variety of injunctive relief including barring Safeguard and its owner from trading commodities. The case is Commodity Futures Trading Commission v. Safeguard Metals LLC, 2:22-cv-691 (C.D. Cal.).

Pennsylvania AG Charges Gas Pipeline Company With Environmental Crimes

The Pennsylvania AG has charged ETC Northeast Pipeline LLC (ETC) with multiple violations of the Commonwealth’s Clean Streams Law. According to the AG, ETC ignored protocols and plans to prevent erosion when constructing a natural gas pipeline, including after receiving citations for its alleged misconduct. This allegedly resulted in two landslides, with the second puncturing the pipeline, allowing gas to escape and causing an explosion. As a result of the incidents, the AG alleges pollutants entered Pennsylvania’s waterways in violation of the Clean Steams Law. The AG’s press release and criminal complaint are available.

California AG Sends Warning Letters for Alleged Violations of the California Consumer Privacy Act (CCPA) to Businesses Operating Loyalty Programs

California AG Rob Bonta sent notices alleging violations of the CCPA to a number of businesses, including data brokers, marketing companies, media outlets and online retailers. The notices assert that the businesses failed to provide notice of financial incentives to customers that joined the businesses’ customer loyalty programs, which allowed the companies to collect and use the customers’ data. The CCPA allows businesses to offer consumers financial incentives, such as lower prices, in exchange for the ability to collect the consumer’s personal data. Businesses offering such incentives, however, must provide notice of the incentives to the consumers. Those notices must include specific information, such as a good-faith estimate of the value of the customer data the customer is releasing in exchange for the financial incentive. The AG alleges that these businesses were failing to provide the required notice. Under the CCPA, businesses have 30 days to cure any alleged violation before the AG can take enforcement action. (As a result of an amendment to the CCPA, the right to cure will cease to exist on January 1, 2023.) The AG’s press release is available.

California AG Demands Center for Covid Control Justify Its Claims Regarding COVID-19 Testing and Collection of Personal Information

On February 10, 2022, California AG Rob Bonta announced that his office sent a letter to Center for Covid Control (CCC) — an Illinois-based company that, until recently, had its name associated with nearly 300 COVID-19 testing centers nationwide — requesting that it provide information substantiating representations and claims CCC has made to potential California customers about its COVID-19 testing services. The letter is part of an investigation into complaints that CCC customers allegedly did not receive test results within the advertised timeframes, if at all, as well as concerns about the accuracy of the test results given and the collection of protected health information for services that were never provided. AG Bonta indicated that the letter to CCC “serves as a warning to all other COVID-19 testing sites operating in California,” and he further warned that, “If you are operating a testing site that is making false claims, failing to provide promised test results, or stealing people’s information, we will hold you accountable.”

Texas AG Files Suit Against Meta, Alleging Violations in Biometric Data Collection

Texas AG Ken Paxton filed suit alleging Meta (formerly known as Facebook) violated Texas’s Capture or Use of Biometric Identifier Act (CUBI) and its Deceptive Trade Practices Act (DTPA) by utilizing facial recognition software to capture and store biometric data of its users. CUBI prohibits companies from capturing a person’s biometric data, including their “face geometry,” unless the company informs the individual that it is doing so and obtains the person’s informed consent. Once a company obtains biometric data, it may not disclose the data to third parties, except in limited circumstances, such as to complete a financial transaction authorized by the individual or to respond to a search warrant. Companies must delete biometric data within one year of the expiration of the purpose for which the data was collected. The AG alleges Meta violated each of these requirements. 

Specifically, the AG alleges Meta processed photographs and videos with software to create a database of facial maps without informing its users or obtaining their consent. It allegedly did so by allowing users to “tag” other Facebook users and non-users in such photos and videos to help teach the software. (The AG made similar allegations regarding Meta’s Instagram platform despite Meta’s denial that it ever applied facial recognition software to Instagram.) Further, the AG alleges Meta disclosed the biometric data to “other Facebook subsidiaries and related entities” in further violation of CUBI. Finally, because Meta allegedly obtained the biometric data unlawfully, the AG alleges that maintaining possession of the data for any period of time violated CUBI. 

In addition to the alleged violations of CUBI, the AG alleges Meta violated the DTPA by stating or implying that it did not collect biometric data of users and non-users and by failing to disclose that it was collecting such data with the intent to induce Texans to use Facebook or Instagram. 

The AG is seeking a variety of injunctive relief, including the destruction of biometric data of Texans in Meta’s possession, and monetary penalties of $25,000 per violation of CUBI and $10,000 per violation of the DTPA.

New Hampshire AG Settles PCB Claims

New Hampshire AG John Formella announced a $25 million settlement with Monsanto Company and two affiliates (collectively “Monsanto”) resolving an October 2020 lawsuit in which the AG alleged that Monsanto concealed information regarding toxicity of polychlorinated biphenyls (PCBs), and continued to use PCBs into the 1970s despite allegedly knowing of their toxicity. The state alleged that PCBs can cause cancer and thyroid issues. PCBs were used in a variety of products, such as caulk and lubricants. The AG alleged that PCBs from Monsanto’s products contaminated 60,000 acres of the state’s waterways and caused New Hampshire to incur costs for water monitoring, enforcement and remediation. In entering the settlement, Monsanto denied any wrongdoing. Seeger Weiss LLP and Grant & Eisenhofer PA represented New Hampshire in the suit and will receive approximately $5 million of the settlement. A copy of the AG’s press release and the settlement agreement are available.

Nine States Are Investigating Fertilizer Prices

On February 24, 2022, Iowa AG Tom Miller announced that he is working with eight unspecified states to investigate increases in the price of fertilizer. The U.S. Department of Agriculture is assisting. AG Miller did not identify the other states participating in the investigation. Although the AG declined to characterize it as an antitrust investigation, he did express concern that the increase in fertilizer prices might be due to a small number of suppliers, who are responsible for a large portion of the market, artificially driving up prices, i.e., an antitrust issue. As part of the investigation, the AG retained an agricultural economist from Iowa State University to conduct a market study and sent letters to leading fertilizer suppliers seeking information. Additional coverage is available. 

Minnesota AG Sues HavenBrook Homes for Failing to Repair Rental Homes

On February 10, 2022, Minnesota AG Keith Ellison announced that he filed a lawsuit against HavenBrook Homes, a landlord of more than 600 single-family residential properties throughout the greater Minneapolis–Saint Paul metro area, for allegedly misrepresenting its property-repair practices and keeping its properties uninhabitable for tenants, in violation of Minnesota’s consumer-protection and landlord-tenant laws. Specifically, the lawsuit claims that HavenBrook misrepresented to its current and prospective tenants that it provides “24/7,” “around the clock,” “same day service” for emergency repairs. According to the lawsuit, however, these claims are false and misleading because HavenBrook allegedly ignored requests or did not properly make the repairs if it responded to a request at all. The lawsuit also claims HavenBrook violated other Minnesota laws, including laws regulating lead-paint removal and tenancy terminations during the COVID-19 pandemic.