Recently, a matter involving North Carolina Attorney General (AG) Josh Stein made headlines when it was announced that Affiliated Monitors Inc. would take over monitorship of HCA Healthcare. This relates to HCA’s compliance with the conditions set forth in an asset purchase agreement involving six North Carolina hospitals it acquired when it purchased Misson Health System in 2019 for $1.5 billion.[1] In addition to approving the asset purchase agreement, Stein sued HCA in a separate matter at the end of 2023 based on allegations of mismanagement, including inadequate staffing and lack of sterile equipment among other cost-cutting measures. While HCA is seeking dismissal of the lawsuit, in the asset purchase matter, both HCA and Stein consented to the use of a monitor, as well as this change. Stein stated, “[a] strong, independent and transparent monitor will go a long way in ensuring that HCA upholds it commitments” and “ensur[ing] that the people of western North Carolina have access to high-quality health care.”

The headlines and Stein’s comments highlight a major advantage of monitorships for regulators seeking to enforce laws and regulations, as well as settlement and court orders, and, in this instance, as part of the approval of an asset purchase agreement. Over the past two decades, independent compliance monitors have become a frequently used tool for state and federal law enforcement authorities. Federal criminal prosecutors began using monitors in the mid-1990s and monitorships became increasingly popular with high-profile corporate misconduct cases like Enron. For state AGs, monitorships proved to be particularly useful with major settlements that established new, industrywide standards. For example, in 1998, 46 state AGs negotiated the Tobacco Master Settlement Agreement through which tobacco manufacturers agreed to pay $206 billion to the states over a period of 25 years, along with sweeping changes to advertising and other business practices. Rather than having each individual state AG office expend significant resources monitoring all tobacco manufacturers for compliance, the AGs could work with an independent monitor to lessen the burden and costs of ensuring compliance.

And, as Vin DiCianni, the president of Affiliated Monitors, Inc., has opined, using a monitor can also be good for regulators and the companies they oversee. As he explained in an episode of Regulatory Oversight, a monitorship is a sort of “alternative sanction.” A company may make a mistake that does not warrant the typical sanctions available to regulators like a suspended license or civil penalties. A monitorship allows the company to productively remedy the issues that led to legal action and stay in business.

DiCianni also explained that, as in the HCA example, Affiliated Monitors Inc. is seeing more and more cases in which a monitor is brought into a matter where conditions are established by a government agency regarding the approval of a merger or acquisition. He explained that the approval of a merger or acquisition, with conditions that need to be completed, often utilizes an independent monitor to oversee the fulfillment of those conditions: “an independent monitor offers an objective view of whether the conditions are being met in a timely and meaningful way. It allows the parties to the merger to move forward, and demonstrate that they take serious the conditions and are working to make the merger successful.” He further explained “that independent monitoring should not be seen in the negative light that sometimes it is, and it really should be seen as a resource for, number one governments,” particularly government agencies , “and others, because it should be considered part of the resolution.”

As the HCA case continues through the court, it will be particularly interesting to see what role, if any, the monitorship will play in the outcome of the case. Perhaps Stein will drop his suit if Affiliated Monitors determines that the company has complied with its obligations under the relevant asset purchase agreement. Or, if not, perhaps the parties can reach a settlement with injunctive terms related to any deficiencies the monitor finds in HCA’s practices. At a minimum, the use of a monitor is certainly helping the parties gather information and demonstrates the advantages of using a monitor for both the AG, the hospitals, and community in rural North Carolina.

[1] Gianna Ferrian, NC AG Greenlights New Monitor For HCA Hospital Amid Probe, Law 360 (Apr. 3, 2024), https://www.law360.com/compliance/articles/1820722/nc-ag-greenlights-new-monitor-for-hca-hospital-amid-probe.

Troutman Pepper State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
	Clay Friedman – Co-leader Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation.
	Judy Jagdmann Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
	Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries.
	Avi Schick A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
	Michael Yaghi Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues.
	Samuel E. “Gene” Fishel Gene is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) practice, based in the Richmond office. He brings extensive regulatory experience, having most recently served as senior assistant attorney general and chief of the Computer Crime Section in the Office of the Attorney General of Virginia, and as special assistant U.S. attorney in the Eastern District of Virginia for 20 years.
	Tim Bado Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others.
	Chris Carlson Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
	Natalia Jacobo Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work.
	Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising.
	Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
	Susan Nikdel Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes.
	John Sample John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims.
	Whitney Shephard Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
	Trey Smith Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation.
	Daniel Waltz Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom.
	Stephanie Kozol Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.