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March 2018

Gordon & Rees Multi-Office Team Successfully Resolves Michigan Attorney General’s $3+ Billion Lawsuit

After several months of negotiation, and in the face of a highly watched Gubernatorial campaign, Gordon Rees Scully Mansukhani Phoenix managing partner, Leon Silver, successfully negotiated a settlement of a $3 billion lawsuit filed by the Michigan Attorney General against the firm's Houston-based client. Gordon & Rees partners Dennis Brown of the Hartford office and Barry Flynn of the Houston office provided substantial assistance wending through the politics of the dispute. 

The firm’s client is a nationwide textile recycler who contracts with local charities to fundraise on their behalf through placement of donation bins, soliciting donations of gently used textiles from the public. The client pays the charity a pre-determined amount per pound for the textiles with no charge for the cost of collection or maintenance of the bins. The client then seeks to recycle, reuse or redistribute 100 percent of the textiles. This includes selling some of the textiles for profit, some at cost or at a loss to spur economic growth in challenged areas, and donating others to disaster relief victims.

The Michigan Attorney General is currently running for Governor and has actively and aggressively sought to shut down any fraudulent charitable solicitors operating in Michigan. While Gordon & Rees's client sought to strictly comply with all reporting and advertising regulations, the Attorney General’s office determined that the signs placed on the client’s bins were misleading. When Gordon & Rees's initial attempts to satisfy the AG's concerns failed, the Attorney General’s office filed a civil lawsuit against our client seeking more than $3 billion in total fines.

To resolve the dispute, Silver met with three of the Attorney General’s top aides. After demonstrating the true charitable nature of the client’s business, an agreement was reached under which the client would modify its bin disclosure, and pay the AG’s costs and a small fine. The client considers the agreement reached in the face of the political campaign and public pressure a great victory.

“When the Michigan Attorney General suggested that some of the language on the disclaimers on our donation bins was misleading, we took immediate action and modified all of our Michigan bins,” said the client's President and CEO.  “We then worked with the Attorney General’s Office to come up with language that would satisfy the legal requirements while providing accurate and easy to understand notice to people donating clothing as to how their donations benefit the Michigan Humane Society. And to show our commitment to the people of Michigan, we have agreed to reimburse the State of Michigan for the costs of the Attorney General’s investigation and pay an appropriate fine.”  

Barry G. Flynn