Looking for Love in All the Wrong Places

The allure of being a state attorney general is not the riches, notoriety, or duties, but the career opportunities the post provides. President Bill Clinton used his position as Arkansas Attorney General to run for governor; John Ashcroft did the same in Missouri. North Carolina Attorney General Mike Easley made the jump to governor of his state in the 2000 election, while Virginia Attorney General Mark Earley narrowly lost in his gubernatorial bid. The position has become such an infamous launching pad for the governorship that the National Association of Attorneys General (NAAG) is colloquially referred to as the “National Association of Aspiring Governors.”

As one might imagine, ambitious politicians are rarely satisfied with the day-to-day issues – car theft, confidence, scams, and intervention in public utility rate disputes – addressed by the office of state attorney general. These issues fail to garner the media headlines and corporate awareness necessary to launch a run for higher office. Consumer protection, civil suits filed on behalf of state residents, and antitrust enforcement provide more fertile ground, but the limitations on state AG staff size and resources made successful litigation against large corporations difficult, given corporate budgets and personnel resources.

This changed in the early 1980s when state AGs pursued cooperative arrangements with other states launching similar investigations or prosecutions. This allowed states to pool resources, evidence, and legal theories. By the late 1980s, this “multistate litigation,” as it has become known, had become so coordinated that NAAG issued guidelines so various states could pursue the same defendants on similar causes of action in different states. As a result, state cooperation and multistate suits reached a critical mass and the news media, not to mention corporate targets, had no choice but to take notice.

The rise of multistate litigation has been attributed in large part to the relative quiescence of the Reagan administration’s antitrust and consumer fraud enforcement. The Reagan Federal Trade Commission (FTC), chaired from 1981-1985 by James C. Miller, III, brought less than half as many consumer fraud cases as President Carter’s FTC, and the number of antitrust challenges to mergers also fell dramatically. But with only one or two states on a suit, large corporations still did not pay the sort of attention to state-based claims as they would to federal complaints. As Iowa Attorney General Tom Miller remarked to The New York Times, “What (the AGs) found is that by coming together, the dynamics of the cases change…When a corporation discovered that it has to face 30 states, instead of one, it suddenly became much more serious about dealing with the issue.”

The most notorious of multi-state actions was undoubtedly the civil suit launched against the tobacco industry. In what was actually different state complaints filed in each state party to the litigation, but negotiated jointly, the tobacco industry agreed to pay over $200 billion over 25 years to states and class action parties. One of the champions of the action, New York State Attorney General Dennis Vacco, even revoked the charters of the Council for Tobacco Research and the Tobacco Institute, both of which Vacco called “propaganda arms of the tobacco industry.”

In 1998, 20 states joined to prosecute Microsoft under federal antitrust laws. Instead of 20 different cases brought cooperatively, the Microsoft case was a single complaint filed jointly, with the State of New York serving as chief representative. When the federal government and nine states agreed to settle the case in November of 2001 – two other states dropped from the suit earlier – nine states pushed on to seek stiffer penalties against Microsoft.

Microsoft argued that the states had no standing to sue and that their claim should be thrown out. In response to a request by U.S. District Court Judge Colleen Kollar-Kotelly, the Department of Justice disagreed with Microsoft’s claim, citing “no definitive case law that would require granting the relief Microsoft seeks as a matter of law.” This was not surprising: past legislation specifically authorized state antitrust enforcement.

But the time has come for Congress to reconsider concurrent state authority in such matters. If, as Tom Miller and others argue, corporations are much more responsive and much more likely to alter interstate trade practices when many states work cooperatively, then the supremacy of the federal government is called into question. Under current law, when federal regulators show restraint, states are invited to collaborate to pursue their own claims. This sort of federalist arrangement usurps federal authority by vesting ambitious state AGs with the same powers to regulate interstate commerce that the Constitution reserved only for Congress.

Consider the implications: When federal authorities fully vet the legal issues surrounding antitrust, civil justice, and consumer protection matters and decide to settle, or not to file a complaint at all, states should be preempted from pursuing their own action. After all, who is better suited to enforce federal law, federal regulators constitutionally empowered to regulate such matters, or ambitious state attorneys general with jurisdiction over their individual states?

The most obvious reason state-based regulation of interstate commerce is a bad idea is the deleterious effect it has on interstate commerce. This principle serves as the basis for the Commerce Clause of the constitution, which gives Congress the sole authority “to regulate commerce…among the several states.” If each state were able to set and enforce its own set of laws on interstate businesses, the regulatory costs would be enormous, domestic producers would likely be rewarded, and the legality of virtually every business practice challenged.

Yet, this is precisely what has happened with state antitrust enforcement. State attorneys general, looking for the adulation of the media and certain corporations, have banded together to get their names in the paper and fill their campaign coffers through coordinated action. Every state AG persisting with the Microsoft case has either accepted money from a Microsoft rival or counseled Microsoft rivals on the appropriate penalties, or both. Moreover, the Justice Department’s decision to settle the case only rewarded the non-settling states by making their continued litigation that much more valuable to corporate suitors.

When the question involves state litigants enforcing federal law, as is the case in Microsoft, Congressional preemption of state authority would eliminate duplicative enforcement, lower transaction costs, and reassert federal authority. But in cases like tobacco where the states are coming together to share resources and strategies on several different state-based actions, resolution of the issue is not as clear.

While the tobacco litigation suffered from the same problems of self-interest and personal ambition – the attorneys general played the role of concerned public citizen to bolster re-election efforts and earn the plaudits of the trial lawyers who benefited from their suit – the funds the AGs attempted to recover from the suit were state-specific.

The tobacco suit was just the most egregious example of what can happen when the trial lawyers wield the power of multistate litigation. Instead of just suing for a class of consumers, trial lawyers appointed by the states sued on behalf of the interests of all state residents. This led to $25 billion in legal fees for the tobacco suit alone, which is certain to be reinvested to encourage more of these suits – against gun manufacturers, advertisers, and long distance phone companies, among others – in the future.

Federal regulation of state lawmaking and enforcement may be an anathema to state-rights conservatives, but given the make-up of state AGs and their inclination to throw their weight around, markets will not be free of haphazard and unpredictable intervention unless something is done. Aspiring governors cannot be expected to act against their own self-interest; institutional safeguards on multistate litigation may be the only way to limit the excesses of state AGs, while preserving state sovereignty in the process.