Curbing Government Lawsuit Abuse

Eleven years ago, in Morrison v. Olson, Justice Antonin Scalia was the lone member of the U.S. Supreme Court to vote to declare the independent counsel law unconstitutional. The beginning of his dissenting opinion is worthwhile reading. Justice Scalia wrote,

It is the proud boast of our democracy that we have "a government of laws and not of men." Many Americans are familiar with that phrase; not many know its derivation. It comes from Part the First, Article XXX, of the Massachusetts Constitution of 1780, which reads in full as follows:

"In the government of this Commonwealth, the legislative department shall never exercise the executive and judicial powers, or either of them: The executive shall never exercise the legislative and judicial powers, or either of them: The judicial shall never exercise the legislative and executive powers, or either of them: to the end it may be a government of laws and not of men."

The Framers of the Federal Constitution similarly viewed the principle of separation of powers as the absolutely central guarantee of a just Government.

Power Shift

The recent government suits against the tobacco and firearms industries trample upon this central feature of the rule of law. The aim of this litigation is to shift the awesome powers of legislative bodies--commercial regulation, taxation, appropriation, and the power to change law--to the judicial branch of government. Even some proponents candidly admit this agenda.

By utilizing litigation to achieve new regulation, the proponents of government expansion have a powerful new tool. If the new regulations are "voluntarily" accepted by the industry through a settlement agreement, then the constitutional and other legal objections become moot.

Through this form of extortion by litigation, what has become impossible legally and politically suddenly becomes possible, even attractive . . . or worse, inevitable. The historic respect of the common law for freedom of contract and private property is destroyed when the manufacturer of legal but dangerous products can be hauled into court to pay huge sums that were unforeseeable when the manufacturer first calculated the risks of investing in that market.

Revenue Raiser

The main objective of the tobacco lawsuits, despite the rhetoric of proponents, was to raise revenue. Indeed, the tobacco settlement represents the largest government-imposed increase in the price of a legal product in the history of the United States.

Using lawsuits to raise revenue is far easier than raising taxes the old-fashioned way. This method bypasses the need for representatives or the voters to approve the tax. Those "messy" restrictions, such as requiring the revenue measure to originate in the House of Representatives, can also be avoided.

The myth told by the proponents of the lawsuits is that the new revenue involves the payment of damages. From a legal perspective, compensatory damages would involve primarily retroactive relief (payment for past harm) plus limited prospective relief (payment for future harm caused by past wrongdoing).

The tobacco settlement involves neither: There are no damages for past losses. Indeed, Professor Kip Viscusi of Harvard Law School has proved that cigarette tax collections more than offset the cost to government for treating tobacco-related illnesses.

The tobacco deal instead requires the industry to pay a new revenue stream based on current government costs, with no credit for existing tax collections, and the revenue stream continues forever without regard to the good or bad conduct of the industry.

These lawsuits also invade the appropriations process. This intrusion has sparked some battles in states where governors and legislators want to control the spending of the new tobacco revenue. The most egregious example, of course, involves the billions of dollars to be paid to attorneys without a legislative appropriation.

A Familiar Tactic

At bottom, these lawsuits involve the familiar activist tactic of using the judiciary to change the law. Three years ago, the lead lawyer in the Mississippi tobacco suit said at a Federalist Society conference that, in the light of the misconduct of the tobacco industry, "it really doesn't matter what legal theory you use." His point was simple: The tobacco suits were vehicles for changing the law, not following established law.

The attorneys general used novel legal theories and crafted their complaints to avoid the traditional remedy of subrogation, which allows defendants powerful arguments of assumption of risk, contributory negligence, and statutes of limitation. These lawsuits were filed en masse to politicize the judicial process while a public relations campaign said it was all about kids. These lawsuits represent the antithesis of the rule of law: namely, the end justifies the means.

How To Stop It?

For legislators who want to curb this new form of lawsuit abuse, I offer four ideas.

First, there needs to be a legislative ban on government suits against industries for indirect harm, except for the traditional remedy of subrogation. If governments sue industries for harm suffered by citizens who received government benefits, then the industries should be able to assert well-established defenses of assumption of risk, contributory negligence, and statutes of limitation. Governments should not have rights to sue that are superior to the rights of the citizens on whose behalf the lawsuits are filed.

Second, there needs to be either a ban or tight regulation of contingent fee contracts for government attorneys. For a long time, contingent fee contracts were considered unethical, but that view gave way to the need for poor persons with valid claims to have access to the legal system. Governments do not have this problem.

Governments are wealthy, because they have the power to tax and condemn. Governments also control access to the legal system.

If you do not ban these arrangements in the context of government suits, you should at least consider legislative restrictions: caps on hourly rates or percentages; competitive bidding; detailed time and expense record-keeping; review by legislative committee of contracts with attorneys; and limits on campaign contributions by attorneys to government officials.

Third, government suits against industries should be subject to fair venue rules. There was a fair amount of forum-shopping in the tobacco suits, and I suspect it is occurring in the gun suits. The usual presumption in favor of the plaintiff's choice is unfair to an out-of-state corporation, especially when the government plaintiff actually controls the entire court system. The defendants in these suits should have an equal say in the choice of forum.

Fourth, these suits require special rules for appeals. In a bet-your-industry lawsuit, it could be impossible for the defendants to post an appeal bond. This problem has been a driving force in settlements of dubious lawsuits. When governments pursue novel legal theories against entire industries for enormous sums of money, there needs to be a fair chance for the appellate courts to ensure that the process is fair and the law is sound.

Conclusion

In American political thought, we have a rich history of trying to limit the power of government. Our forefathers understood the dangers of unchecked power.

The Federalists believed a federal government of enumerated powers with three distinct and competing branches would preserve our liberty, while Thomas Jefferson and his fellow Antifederalists insisted that a Bill of Rights was needed to restrain a powerful central government. Fortunately, we inherited gifts from both groups.

We should follow that tradition by prohibiting governments form using civil lawsuits for abuses against our citizens. For two years, I resisted intense pressure to join the tobacco litigation, because I am firmly committed to the rule of law and limited government. Lawsuit abuse by governments is the most serious challenge to the rule of law today. The free market and the cause of human liberty cannot survive much more of this litigation madness.

Bill Pryor is attorney general for the State of Alabama. This essay is derived from remarks he delivered to a meeting of the American Legislative Exchange Council in August 1999.