There’s a new corporate sheriff in town, with a different name: state attorney general. Well, maybe not so much new, as increasingly fearsome for general counsel.
State attorneys general have expanded their roles in recent years to fill an enforcement void left by some federal agencies, and they are often joining together to form a multistate juggernaut of litigation, according to Daniel Suvor, counsel in the Los Angeles office of O’Melveny & Myers.
Suvor said that he’s been warning his clients about “big changes happening at the state level, with the emergence of state attorneys general as the most feared regulators that big business has.”
In the most recent example, New York Attorney General Barbara Underwood on Tuesday announced a nearly $5 million settlement with Oath Inc. (a Verizon Communications Inc. subsidiary formerly known as AOL Inc.) for violating the federal Children’s Online Privacy Protection Act. It was the largest-ever penalty in a COPPA case in the United States. COPPA is usually enforced by the Federal Trade Commission.
And there’s more state action to come, Suvor said: Democrats picked up AG seats in four key battleground states in the recent midterm elections, and now hold a 27-24 majority of the nation’s AG offices, he noted.
“Each one of the new attorneys general is intent on increasing enforcement over big companies,” Suvor said. “I think in part that trend was set in motion through the national tobacco settlement and the national mortgage settlement, bolstered by a lack of enforcement by the FTC, the CFPB [U.S. Consumer Financial Protection Bureau], the FDA [U.S. Food and Drug Administration] and other agencies. AGs are intent on filling that void.”
He said AGs appear especially active on matters involving the environment, health care, privacy, data security, deceptive practices and other consumer issues, financial services, and the food and drug space.
New York, California and Massachusetts have “some of the most aggressive laws to give state attorneys general the most power, especially in consumer protection,” Suvor said.
“Companies need to get smarter about ensuring they are compliant with state laws,” he said. And, Suvor added, they need to build stronger relationships with state AGs through direct meetings, trade groups or the National Association of Attorneys General.
Both the Republicans and Democrats have their own AG associations, RAGA, the Republican Attorneys General Association, and DAGA, the Democratic Attorneys General Association.
In a recent newsletter, Suvor and his law firm colleagues wrote that with more Democratic attorneys general elected to office, there will certainly be an increase in enforcement activity in those states. For example:
• Newly elected AG Dana Nessel vowed to seek an end to sexual harassment in the workplace and to aggressively sue companies that contributed to chemical contamination of Michigan’s drinking water.
• In Wisconsin, newly elected AG Josh Kaul said he would seek new firearms regulations, including universal background checks in his state.
• And in Nevada, Aaron Ford promised to better protect the environment through more enforcement of regulations there.
The newsletter also said the midterm elections marked historic spending on state attorney general campaigns—with over $100 million spent in 2018, at least two times more than has ever been spent on previous AG elections.
Midterm contribution records from Political MoneyLine show corporations gave big to both parties in the AG races. For instance, DAGA’s top contributors were unions such as the International Brotherhood of Electrical Workers ($350,000), its top donor. But Altria Group Inc. ($200,000), the law firm of Bernstein Litowitz Berger & Grossmann ($155,000), Anthem Inc. ($150,000), Home Depot Inc. ($150,000), Reynolds American Inc. ($150,000) and Germany’s Deutsche Telekom ($130,150) were also among its top 20 donors.
Similar figures for RAGA showed Altria ($440,000) and Anthem ($285,000) covering their bets. The largest RAGA contributors included the Judicial Crisis Network, a conservative judicial think tank ($1.59 million); Citizens for a Working America Inc. ($930,000); and the National Rifle Association ($835,000).
Among companies, the largest RAGA contributors were Noble Energy Inc. ($520,000); Koch Industries ($515,000); and Anadarko Petroleum Corp. ($500,000).
Bruce Freed, president and co-founder of the Center for Political Accountability, told Corporate Counsel that companies need to be careful making political donations “in this hyper-polarized environment. It’s like nitroglycerin, when you shake the bottle you never know when it might explode.”
Freed referred to his group’s report released earlier this year, “Collision Course: The Risks Companies Face When Their Political Spending and Core Values Conflict and How to Address Them.”
“If companies do spend on campaigns,” he said, “they need to do so much more carefully and with strict policies in place, rigorous board oversight and full transparency.”