AG Watch

The last week of March 2006 could go down as a watershed in the states’ Attorneys General assault on the national economy. An independent arbiter from the Brattle Group affirmed an earlier ruling to the effect that Big Tobacco has lost market share owing to the MSA and can withhold some of its upcoming payment to the states.

As the AGs lose their grip on the tobacco industry, they tighten the stranglehold on medicine, taking a $14M bite out of GlaxoSmithKline by filing some papers with Paxil-related jibberishy legalese written on them.

In response to the presumably strongly-worded WhateverItWas that the AGs cooked up, GlaxoSmithKline said, “We made the decision that settling was appropriate to avoid the expense and distraction of protracted litigation.” Looks like the AGs really scored a good point: companies realize that the opportunity cost of a long lawsuit makes them an easy target!

Now, let’s compare that statement to one made by NAAG Tobacco Committee co-chair Lawrence Wasden. Noting that the impasse between Big Tobacco and Big AG has only two possible outcomes, he said, “One of them is litigation; the other possibility is a negotiated answer.”

In other words, the AGs figure that if they can cause enough “expense and distraction,” they’ll get money.

So, if the quick math suggests that the AGs had a bad week—they are down about $1.19B and haven’t even hit the craps table yet—the longer calculus may yet cut against Joe Consumer. And the anecdotal evidence shows that the AGs are focusing on increasingly larger portions of the national economy, moving from tobacco in 1998 to pharmaceuticals, insurance, securities, entertainment, food, and even international antitrust.

Meanwhile, AG Watch sits, bags packed, still searching for some place away from the expense and distraction.

Mississippi Attorney General Jim Hood fought a fierce battle with Rhetoric this afternoon; all reports suggest that Rhetoric won. General Hood’s press conference in Jackson’s Carroll Gartin Justice Building was a brief, but brutal, three-round bare-knuckler.

In Round One, the forces of Rhetoric hit a solid blow, reducing Hood’s description of insurers to the playground jingle, “Delay, delay delay, we hope they go away.” Badly stung by petty assonance, Hood retreated to his corner at the bell.

With Hood reeling on the ropes of rhyme, Rhetoric slashed in a violent rhetorical hook (and a swift, ugly jab) in Round Two, forcing Hood to utter, “If they’re so sure of [victory], why are the cowards running?” With a round still to go, the bettors preemptively exchanged their dough; Mr. Hood was done.

But Rhetoric wasn’t finished. In a stunning combination, Rhetoric amplified the Round Two question in Round Three, making Mr. Hood follow his rhetorical question with another rhetorical question: “Why are they spending all of this money and dragging it out in federal court?”

Unfortunately for Mr. Hood, the answer to that last question undoes his whole argument. The insurers seek a federal venue precisely because a Mississippi chancery court trial would offer them about as much fair-mindedness as Mr. Hood himself. Their cowardice—if “cowardice” applies to those seeking an unbiased trial—owes to Mr. Hood’s extrajudicial statements and the accompanying statewide attitudes. The insurers have been reviled in Mississippi, indeed, by the Mississippian elected to execute justice; can they reasonably expect a fair trial in Mississippi?

Zurich American Insurance Company and a hodgepodge of AGs have reached a settlement. The AGs tacked on an extra $20M—11% of the $171.7M deal—in this nifty clause:

“the monies may be, at the sole discretion of the Settling Attorney General in each signatory state, applied for any of the following purposes: (i) payment of attorneys’ fees and costs, (ii) antitrust or consumer protection law enforcement, (iii) deposit into a state antitrust or consumer protection revolving fund or (iv) any other use in accordance with state law; provided further that the Settling Attorneys General shall be responsible for allocating the State Payment among the Settling Attorneys General and the Settling Insurance Regulators.”

Litigation fees, we can understand (the merits of the suit notwithstanding). But, items (ii), (iii), and (iv) look an awful lot like taxation: AGs funding themselves to do whatever AGs want to do; government by, for, and of government.

So the AGs gave themselves gas money for their free-wheeling litigulatory tour of national commerce. Good for them; we were starting to worry that we would run out of things to write about. We needn’t worry.

Florida Attorney General Charlie Crist has already kept the AG-wheeler truckin’ right on through the insurance interstate. He filed a suit against Marsh & McLennan, the world’s largest insurance broker. Marsh is somewhat blind-sided by this suit, because it already settled with another AG, New York’s Eliot Spitzer. Marsh forgot, it seems, that AG regulation of the national economy will not stop until each and every business in the country has been sued by—and settled with—each and every state in the union. No settlement is global enough, no payment high enough, for the one-way ratchet of state-by-state regulation.

We could all save a lot of time if we just gave AGs everything—cash, checks, homes, mutual funds, pants, fire hydrants, lawyers, guns, coffee mugs, matches, medicine, kitchen sinks, all fair and green things—right now.

Eliot “I Triple Dare You” Spitzer has sued H&R Block. The suit was filed in Kansas City federal court because H&R Block is a Kansas City-based company. Eliot Spitzer is the Attorney General of New York. There are about nine or eleven states between Missouri and New York, and we’d bet that H&R Block does business in all of them too.

AG Watch would write more, but we’re working on our big suit against Santa. We are hoping to file it the day after Thanksgiving. No doubt the old man will settle rather than suffer the PR headache during his busiest time of the year. We’ll be rich, I tell ya! Rich!

I
At least one AG sees the light. Trey Walker, spokesman for South Carolina Attorney General Henry McMaster, described the Master Settlement Agreement: “one of the most disgraceful abuses of the legal system that [McMaster has] ever seen.” Mr. McMaster, who stepped into the office five years after the MSA was signed, understands that it has made the Attorney General “the tobacco regulator in South Carolina, and put in a position where he has to prop up big tobacco to make sure they sell enough cigarettes to make payments to the states.”

II
Mississippi Attorney General Jim Hood’s lawsuit against insurers in Mississippi has been remanded back to Mississippi Chancery Court. The case will be decided by an elected judge, rather than a jury, so the problem of home-staters deciding whether home-staters get money may not be as acute as it was in Rhode Island; however, the outcome of AG Hood’s case could drastically alter the nation’s insurance landscape—as well as the nature of the National Flood Insurance Program and FEMA. Once again, the nation is held at the whim of a state AG.

III
Our Least Favorite Website applauds us, which we’d usually be quite glad of. But if this administration is “libertarian,” we’d hate to think what true big government conservatism might look like. As Veronique de Rugy says, “This budget is all talk and no action.” We can’t accept the praise.

The National Association of Attorneys General used its “Meeting of the Minds” to take full credit for the nationwide drop in cigarette sales.

While the NAAGers were busy patting themselves on the back, the rich got richer. The #1 effect of the Master Settlement Agreement is to cartelize government and Big Tobacco. Fewer cigarettes are being smoked, yes, but the Big Three Tobacco makers got richer: Reynolds American made more money, Philip Morris domestic tobacco went up and up, and Lorillard not only got richer, but even sold more cigarettes.

Of course, despite NAAG’s claims to the contrary, the states plugged their budget holes with growing slices from the MSA pie as well. Heck, the Campaign for Tobacco-Free Kids even assuages fears that state budgets will be harmed by reduced smoking.

Well, if the big boys are taking the lunch money, who is losing it? The little guys, of course: smokers and small tobacco companies (most of whom never committed the “crimes” that underpin the “logic” of the MSA). As Jonathan Rauch quips, “The deal was Robin Hood in reverse.”

In fact, the deal is so unconscionable and illegal that it even baffles state legislators, who are frustrated that the AG agreement restricts legislative authority—or simply cannot understand the deal at all. Minnesota, as we noted in December, has all but sued itself over the MSA. But Minnesota at least gets the import of the deal. They know that the AG has boxed them in, and now they just have to find a way out.

The New Hampshire legislature, on the other hand, really has no clue what they’ve done at the behest of their own AG. State Senators Ted Gatsas and Robert Clegg are kicking around a bill that, in Clegg’s words, “makes everybody equal.” They seem to have the false notion that the Non-Settling Manufacturers escaped sanction (and tax). But what sort of shoddy cartel would that be?!?!?! New Hampshire, like all the other states in the MSA, already has a law that captures the small and new manufacturers (lest Big Tobacco lose business).

For anyone else who missed the point, the Big Tobacco companies are pushing for a refund of some of the MSA money. The MSA signatories built in a stipulation that if Big Tobacco actually lost market share, they would get a refund. Big Tobacco claims it lost market share between 1999 and 2003, and now it want its money back.

The smart money bets that government and Big Tobacco will mend the rift and continue their awkward dance, pockets stuffed with cash and with one foot each firmly on the neck of the citizen. And heaven knows that NAAG will maintain its righteous pose.

“And, of course, I’d like to thank the jury for their service, their attention to the facts and evidence that led them to this moment, and their courage in rendering a historic verdict that, ultimately, will help make Rhode Island a safer and better place to live.”—Rhode Island Attorney General Patrick Lynch

It was a dark and stormy midday in Rhode Island Superior Court,
The outlook wasn’t brilliant for the Lynch-mob lead-paint tort,
The Contingency Fees had been halved, expecting mega-settlements,
But the paint producers had fought it, as the suit evaded sense.

The alleged misconduct was 40 years ago—before Mr. Lynch’s time—
And said misconduct had never never never never never been a crime,
‘Seventy-eight federal law banned lead-paint nationwide;
Sherwin-Williams and the rest had perfectly complied.

The suit was on shaky legs and predecessors had fared poorly,
The smart set thought it a very atrocious public policy,
“How can these Rhode Island rams take cash from everyone?
For harms that were not harms at the time that they were done?”

But some overstated evidence about the li’l kiddies—and a local jury’s local love—
Just might get Rhode Island money heretofore undreamt of.
General Lynch hung home-state fate on a home-state jury readin’ home-state law to favor the ol’ home state—
And that pesky, courageous, noble, ne’er-say-die Juror Number 8.

“They’ve got such deep pockets. Let’s teach ‘em a lesson.”
“They’ve gotta clean up where they go a-messin’.”
“That clean-up will be costly; oh! what a nuisance!”
“Yes! Let’s find them guilty! A six-juror alliance!”

Now comes Judge Silverstein to weigh punitive damages…
“Hmmm..,” he judges (and judges, all weekend he judges),
No punitive award! “They’ve already learned their error—nothing further needed.”
(As if any lesson at all were needed, in light of 28 compliant years preceded.)

Oh, somewhere in this favored land the tort rules are just and right,
And extraterritorial jurisdiction cannot cause a blight.
Ah, somewhere harm-less lawsuits are given the boot outright.
But there is no providence in Providence,
The mighty Lynch has won tonight.