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The 2020 Election: What to Expect From State Attorneys General11月 24, 2020
The headlines since Election Night have focused on the presidential election, but voters also elected 10 state attorneys general—key regulators whose impact on companies could rival that of the incoming Biden Administration.
Going into Election Night, four states featured significant attorney general races. In swing states North Carolina and Pennsylvania, Democratic incumbents faced tough competition from well-funded Republican challengers. And traditionally red states Indiana and Montana held hard-fought open-seat races for the attorney general position.
Three weeks later, the results are in. Republicans kept the open seats in Indiana and Montana. Pennsylvania Attorney General Josh Shapiro held onto his seat for a second term and North Carolina Attorney General Josh Stein held on to his seat, narrowly defeating a Republican challenger. In eight of the 10 races, incumbent attorneys general were reelected. Republicans will hold onto a majority of the nation’s attorneys general offices next year at 26-25.
One thing was clear even before Election Day: State attorneys general will remain key political players and regulators, and they will continue to expand their litigation and enforcement efforts in areas including consumer protection, data privacy, financial regulation, and healthcare. State attorneys general will also continue to reach across the political aisle to form multistate committees that investigate and punish wrongdoing.
Joe Biden’s election as President of the United States and the inevitable increase in federal regulatory enforcement will not alter this course. During the Trump era, many Democratic attorneys general expanded their civil rights units to litigate against regulations and policy actions by the Trump Administration. For instance, in September, recently reelected Washington Attorney General Bob Ferguson filed his 80th lawsuit against the Trump Administration—the equivalent of two lawsuits every other month since President Trump was elected.1 Under the incoming administration, Ferguson and other Democratic attorneys general may reassign these civil rights attorneys to bring more regulatory strength to other priority areas, such as consumer protection and financial fraud. Conversely, as has become custom, certain Republican attorneys general will likely begin repurposing staff to litigate against Biden-Harris Administration policies.
We expect continuing and increased enforcement from states, particularly given the fiscal pressure the COVID-19 crisis has created. As budgets shrink, attorneys general may look to litigation as an alternative to state funding, just as they did after the 2008 mortgage crisis and ensuing recession. The substantive priorities of the COVID era—price gouging, data privacy, consumer protection, false claims act enforcement—will likely continue into 2021. Such efforts are a particular concern for pharmaceutical, consumer products, and healthcare companies, but could also impact banks, other financial institutions, and telecommunications companies. In August, California Attorney General Xavier Becerra sent a letter to 33 mortgage servicers about their obligations to California homeowners and tenants under the Homeowner Bill of Rights, raising the specter of enforcement activity in this area.2
Most states have laws prohibiting unfair or deceptive acts or practices, and those laws generally empower attorneys general with broad discretion to pursue enforcement actions. California’s Unfair Competition Law, for example, provides for injunctive and other relief, including restitution and penalties of up to $2,500 per violation for any business practice that is “unfair,” “unlawful,” or “fraudulent.”3 This power gives the California attorney general wide-ranging regulatory and enforcement authority over several major sectors of our economy. In New York, the Martin Act gives the attorney general unique and expansive latitude to investigate many publicly traded companies by regulating the advertisement, issuance, exchange, purchase, or sale of securities, commodities, and certain other investments within or from New York. Notably, courts interpreting the Martin Act have held that the attorney general does not need proof of intent to deceive or defraud to begin an investigation or even to initiate an enforcement action.4
State false claims acts will also incentivize budget-strapped states to bring more litigation. As of 2020, 29 states, the District of Columbia, Guam, the Virgin Islands, and Puerto Rico have false-claims laws modeled on the federal False Claims Act to protect their publicly funded programs from fraud and to recover money at the state level. New budget pressures could bring more states into the fold of aggressive false claims enforcement in 2021.
These statutory developments and the increased prominence of the attorney general role will create new legal challenges for companies. Recent major multistate settlements include a May 2020 $550 million settlement between 34 attorneys general and Santander Consumer USA Inc. related to its subprime auto loans.5 In August 2020, American Honda Motor Co., Inc. and Honda of America Mfg., Inc. settled with 48 attorneys general for $85 million for alleged violations of consumer protection laws related to defects in the frontal airbag systems installed in certain Honda and Acura vehicles sold in the United States.6
Major settlements like these only the bolster the strength of attorneys general and present new challenges for many businesses. While we will certainly see more regulatory enforcement from the federal government, attorneys general remain the regulators to watch.
3 California Business and Professions Code § 17200, et seq.
4 New York General Business Law Article 23-A.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Daniel R. Suvor, an O’Melveny partner licensed to practice law in California, and Lauren Kaplan, an O’Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted. © 2020 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, T: +1 212 326 2000.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Daniel R. Suvor, an O’Melveny partner licensed to practice law in California, and Lauren Kaplan, an O’Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
© 2020 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, T: +1 212 326 2000.
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