Litigation

The AGs of 21 states and the District of Columbia, along with the U.S. Department of Justice, have announced an $863.3 million settlement with Moody’s Corporation, “a business and financial services company, to resolve federal and state civil claims related to the company’s misconduct in inflating ratings of residential mortgage-backed securities,” according to a Press Release from California Acting AG Kathleen A. Kenealy. The AG’s investigation showed that Moody’s “systematically misrepresented . . . that its ratings of structured finance securities were based on an objective and reliable analysis and not influenced by Moody’s economic interest,” according to the Press Release. As part of the settlement, Moody’s “agreed to a statement of facts which indicate that, despite its claims of independence and objectivity, the desire for market share resulted in it using more lenient rating criteria than it publicly claimed to be using, resulting in ratings which were higher than they would have been if Moody’s had used its publicly stated criteria.” Moody’s clients “relied on these ratings to invest in the structured finance securities, the collapse of which led to the 2008 financial crisis,” according to the Press Release.

Shire Pharmaceuticals LLC and other subsidiaries of Shire plc (“Shire”), a multinational pharmaceutical firm headquartered in Ireland, will pay $350 million to settle “allegations that Shire . . . employed kickbacks and other unlawful methods to improperly promote a medical device called Dermagraft,” according to a Press Release from Florida AG Pam Bondi. Dermagraft is a bioengineered human skin substitute approved by the Food and Drug Administration for the treatment of diabetic foot ulcers. The Press Release states that the settlement resolves allegations that “from 2007 to 2014, Dermagraft salespersons unlawfully induced clinics and physicians to use Dermagraft with payment of remuneration.” The “federal Anti-Kickback Statute prohibits the payment of remuneration to induce the use of medical devices covered by Medicare,” and under the False Claims Act “claims filed in violation of the Anti-Kickback Statute are considered false or fraudulent,” according to the Press Release. The settlement in part resolves allegations that “Shire’s improper promotion and marketing of Dermagraft caused false claims to be submitted to government health care programs,” and the settlement “represents the largest False Claims Act recovery by the U.S. in a kickback case involving a medical device,” according to the Press Release.

A coalition of 23 states led by West Virginia AG Patrick Morrisey has filed an amicus brief in the Supreme Court “supporting the Gloucester County School Board in a lawsuit over Title IX bathroom regulations,” according to a Press Release from Texas AG Ken Paxton. The Press Release states that Title IX “prohibits discrimination on the basis of sex.” A “transgender student sued the school board after they were given the options of using the restroom corresponding to their biological sex, a private facility, or a unisex restroom,” according to the Press Release. The transgender student “previously agreed to use a separate restroom in the nurse’s office, but then expressed a preference for the boys’ bathroom at the high school,” per the Press Release. The school board “argues that the definition of one’s sex in Title IX . . . by its express terms does not include gender identity, but instead pertains to biological sex.” The coalition of states argues in its amicus brief that “the view that Title IX requires States to permit access to sex-separated facilities based on gender identity is indisputably ‘new’ and ‘novel.’”

Advocacy

In a January 10 Press Release, Illinois AG Lisa Madigan “applauded the Illinois Senate’s approval of legislation to protect children from drinking water contaminated by lead and urged [Illinois Governor Bruce] Rauner to sign the bill into law.” The legislation would require lead testing in schools and day cares throughout Illinois, and was “initiated” by Madigan and the Illinois Environmental Council “in response to alarming levels of lead found in water in many Chicago and suburban school districts,” according to the Press Release. The bill passed the Illinois Senate on January 10. The Press Release further states that according to “the Centers for Disease Control and Prevention, there is no safe level of lead in drinking water,” and that children “are particularly vulnerable to lead exposure, which can lead to irreversible brain damage and lifelong intellectual, emotional and behavioral consequences.” AG Madigan said of the legislation that “[t]esting our children’s drinking water for lead is a commonsense and inexpensive way to protect them from the serious and lifelong developmental impacts of lead exposure.”