State Contractor Sentenced for Wage Theft, Pays $20 Million in Employee Compensation

• Pennsylvania AG Josh Shapiro announced that state contractor Glenn O. Hawbaker, Inc. (“Hawbaker”) pleaded nolo contendere to four counts of theft relating to Hawbaker’s alleged underpayment of more than $20 million to its employees in violation of the Pennsylvania Prevailing Wage Act, the federal Davis-Bacon Act, and/or the Davis-Bacon Related Acts.
• As previously reported, the complaint asserted theft by failure to make required deposition of funds because Hawbaker allegedly miscalculated and wrongly claimed fringe benefit credits by using money intended for prevailing wage workers’ retirement funds to contribute to the retirement funds of all Hawbaker employees, including its owners and executives, and also allegedly used funds intended for prevailing wage workers’ health and welfare benefits to subsidize the cost of the self-funded health insurance plan that covered all employees.
• Under the terms of the plea, Hawbaker will pay $20.7 million in compensation for stolen wages to 1,267 employees, will reimburse the AG’s office for over $240,000 in costs, will be sentenced to five years’ probation, and its compliance with all state and federal prevailing wage laws and regulations will be overseen by a corporate monitor, among other things.

Democratic Attorneys General Urge EPA to Repeal Trump-Era Rule Curtailing State Permitting Authority Under Clean Water Act

• A group of 19 Democratic AGs, led by California AG Rob Bonta, New York AG Letitia James, and Washington AG Bob Ferguson, sent a comment letter to the U.S. Environmental Protection Agency (“EPA”) urging it to repeal a Trump Administration rule curtailing state authority to deny permits for projects deemed harmful to state waterways under the Clean Water Act (“CWA”).
• The letter argues that the CWA Section 401 Certification Rule is incompatible with Congress’s intent for passing the CWA, which was to allow the states to retain broad authority to protect water quality within their borders. Because the rule altered Section 401 to block states’ ability to refuse water permits for any reason other than direct pollution into state waters, states were no longer able to consider include such factors as climate change or harm to aquatic wildlife habitats in making their permitting decisions. The letter also argues that the rule infringes upon state administrative procedures for water permit applications by dictating the timing and scope of state review, among other things.
• The AGs urge the EPA to abolish the rule quickly, arguing that it causes current and future harm by limiting states’ ability to take urgently needed action to address crises like the drought conditions in the West.

Federal Court Declines to Protect Smith & Wesson from New Jersey Subpoena

• Acting New Jersey AG Andrew Bruck obtained a ruling from the U.S. District Court for the District of New Jersey dismissing a lawsuit brought by gun manufacturer Smith & Wesson Brands, Inc. and related entities (collectively, “Smith & Wesson”) challenging the constitutionality of a subpoena issued by the AG’s office.
• The amended complaint sought to enjoin enforcement of a New Jersey Superior Court order upholding the validity of the AG’s office’s subpoena seeking documents relating to Smith and Wesson advertisements concerning home safety, concealed carry, and personal protection, among other things. The amended complaint asserted constitutional challenges to the subpoena, including on First Amendment grounds, and alleged that the AG’s office’s subpoena enforcement action in state court was retaliation for Smith & Wesson’s federal suit.
• In dismissing the suit, the District Court held that all relevant factors supported its abstention from exercising jurisdiction over Smith & Wesson’s claim because doing so would interfere in ongoing state proceedings and thereby offend the principles of comity. The court noted that, because Smith & Wesson appealed the Superior Court’s order to the New Jersey Supreme Court, the state proceedings were ongoing, and that the state proceedings provided an adequate avenue to present constitutional arguments.

FTC Changes Merger Review Process Under Flood of New Filings

• The Federal Trade Commission (“FTC”) Bureau of Competition Director Holly Vedova announced an adjustment to the FTC’s process for reviewing mergers in response to a surge in merger filings that is straining the FTC’s resources.
• According to the announcement, The FTC continues to review mergers under the Hart-Scott-Rodino (“HSR”) Act, which requires companies in transactions valued above a certain threshold to provide advance notice to the FTC and the U.S. Department of Justice for antitrust review. Under the new procedures, if the FTC is unable to fully investigate a transaction within the time period set forth under the HSR Act, it will now send a standard form letter informing the parties that the investigation remains open and that choosing to proceed with a deal not fully investigated carries the risk of it being determined to be unlawful after the merger had been consummated.
• The announcement also notes that the FTC always has the right determine that a merger is illegal under the antitrust laws after the companies have merged, even if the deal was subject to premerger review.

Bipartisan Group of Attorneys General Seeks to Increase Consumer Protections for Distance Education Students

• A bipartisan group of 25 AGs, led by Maryland AG Brian Frosh, sent a letter to the National Council for State Authorization Reciprocity Agreements (“NC-SARA”)—which oversees reciprocity agreements joined by 49 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands and sets standards and policies for participating institutions—urging it to institute stronger consumer protection policies for students enrolled in postsecondary distance education institutions.
• The letter argues that NC-SARA’s prohibition on member states’ enforcement of their education-specific consumer protection laws against out-of-state institutions hampers the ability of AGs to effectively protect consumers from unscrupulous actors and cites multiple examples of misconduct by for-profit institutions, including false and fraudulent recruitment and enrollment practices. The letter notes that NC-SARA’s policies impact over 3 million students enrolled in nearly 2,300 institutions, and recommends multiple changes to these policies to strengthen protections for these students, including requiring participating institutions to attest that they comply with all consumer protection laws and to self-report any government investigations, among other things.
• The AGs also ask NC-SARA to reconstitute its board of directors to include a majority of member states and territories, as well as individuals with consumer protection expertise such as state AGs.

AGs Argue Trump-Era Student Borrower Defense Rule is Unlawful and Should Be Repealed

• A group of 22 Democratic AGs, led by California AG Rob Bonta and Massachusetts AG Maura Healey, filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in New York Legal Assistance Group (“NYLAG”) v. Cardona, Case No. 21-888, in support of NYLAG’s position that the Trump administration’s federal borrower defense rule, which made it harder for students to obtain debt relief, is arbitrary and capricious in violation of the Administrative Procedure Act.
• The complaint alleged that, among other things, the Department of Education (“ED”) unlawfully delayed the implementation of Obama-era borrower defense regulations designed to help students seeking relief from their federal student loans because they have been defrauded by their schools. ED later repealed and replaced these regulations with the 2019 Borrower Defense Rule, which was allegedly based on inaccurate, unsupported, and inconsistent assumptions, including that borrowers submitted many frivolous applications for relief. The U.S. District Court for the Southern District of New York granted partial summary judgment to ED, and NYLAG appealed.
• The amicus brief argues that the rule violates the Administrative Procedure Act because it was not promulgated through lawful agency decision making, including because it used illogical and unsupported contentions regarding the benefits of the rule and ignored relevant information and record evidence contradicting these contentions, and that some of ED’s assertion are negated by the experience of state AGs who have helped tens of thousands of student borrowers through these processes.
• The brief also argues that the rule makes it all but impossible for student borrowers to obtain relief rescinding key borrower protections and eliminating most of the grounds on which such relief could be sought, and that it contradicts longstanding agency practice because it does not provide a clear, fair, and transparent process for students seeking relief.