In this five-part podcast series, I consider the use of monitors by state Attorneys General. I am joined in this podcast series by Jerry Coyne, the Managing Director of State Monitoring Services at Affiliated Monitors, Inc. who is the sponsor of this podcast series. In this series we introduce the role of state Attorneys Generals as enforcers of state law and bringers of civil litigation; the reaction to the big-tobacco settlement and the criticism of state Attorney Generals over that process; multi-state settlements in the post-tobacco era; challenges in multi-state litigation and the road ahead. Today, in Part 2, we consider the reaction to the Big Tobacco settlement and criticisms directed at the state Attorney Generals.

In the immediate aftermath of the tobacco settlement, state AGs basked in the praise of bringing millions and millions of dollars to their states, perhaps even in perpetuity. Among those most appreciative were the nation’s governors and state legislatures, to whom the tobacco settlement represented a new and unexpected source of state revenue. For their part, the state AGs now realized that they had greater power working collectively than individually. This lesson was particularly clear to smaller states, which lacked the resources to sue a national industry on their own. But even the larger states recognized that forcing a defendant to fight against multiple states gave them leverage they had not previously enjoyed.

One of the major criticisms was the use of private lawyers who, having been retained to represent the states, began to collect unprecedented fees, since they had represented the states on contingent fee agreements.In retrospect, the cases were not without risk to the trial lawyers. The costs to litigate would be large, and the tobacco industry had been sued approximately 400 times and had never lost or settled a case. Additionally, despite the well-established injuries caused by smoking, and the apparent merits of a lawsuit, no state AG had the existing resources to take such a challenge on alone.

This led to state AGs around the country to hire private law firms to lead the litigation effort. Some firms represented multiple states, while others represented a single state along with several other firms. The manner in which firms were selected proved controversial and the process was far more transparent in some states than in others. While the percentage of the contingent fee agreement varied from state to state, the settlement of litigation had a single meaning. Based on the size of the settlement, the law firms that had represented the states were in for a payday of historical proportions. In the State of Texas alone the plaintiff’s lawyers were awarded $3.3 billion.

Some state AGs challenged the amount of the fee awards, with very limited success. The law firms had, after all, taken on the costs of the case, and under the terms of the agreements, a large award would inevitably lead to a larger fee. Fueled by criticism of these extraordinary fees, critics charged that the state AGs had abandoned their traditional governmental role to become nothing more than super-powered personal injury lawyers. Sworn by their oaths of office to do justice, critics claimed the state AGs had instead become blinded by their quest for money. The legal argument was that it was unconstitutional for a state AG to give the power of his or her office to a private lawyer whose motive was personal profit.  The term activist AG emerged as a label intended to have the same connotation as ambulance chasing lawyer.

Meanwhile, the payments of tobacco money began to flow to the states. As the purposes of these funds were not restricted by the settlement, nearly all states used the money for purposes unrelated to tobacco.  To be fair, in the wake of the settlement the number of smokers, and in particular the number of young smokers, dropped to historically low levels. Without question, nearly every state spent at least a portion of their funds on further tobacco reduction and enforcement. But on the whole, the vast amount of monies that flowed to the states were directed to states’ general funds, most often to balance the state budget.

Despite the criticism, the world of the state AGs had changed, perhaps permanently. If the activist state AGs were not checked, the argument went, they would simply look to the next deep-pocketed industry to sue. The targeted industry, whomever it may be, would be left to make a very difficult decision. Could they afford to simultaneously defend litigation brought by multiple states? How many states can an industry afford to fight before the effort becomes unaffordable? If an industry as well funded as the tobacco industry reached a point where settlement as a business decision became inevitable, what about those industries that lack tobacco’s resources? As industries waited for the state AGs to make their next move, many state AGs were consumed with another challenge arising out of the tobacco settlement, and, despite the public attention given to the attorney’s fee issue, this issue was potentially of greater long-term concern.

For all its costs to the defendants, the several hundred-page Master Settlement Agreement (MSA) did not put any of the settling companies out of business. The MSA laid out a complex set of agreements that would define how the tobacco industry would need to conduct itself in the future. So rather than closing, each of the participating manufacturers would emerge to do business in a newly regulated landscape to be sure but would nevertheless still operate. Perhaps most troubling to some was the fact that tobacco’s continued success was necessary to fund the future stream of tobacco revenue to the states under the MSA. Rather than putting the tobacco industry out of business, critics charged, the states and the tobacco industry were now partners with a mutual interest in the tobacco industry’s financial success.

With this potential conflict in mind, the challenge facing the state AGs was how the MSA would be enforced. Under the MSA, the states had agreed to diligently enforce the agreement. Sales by non-participating manufactures had to be particularly scrutinized. Some settlement funds went to the National Association of Attorneys General to start and fund a new project specifically dedicated to tobacco enforcement, but at the state level, every AG was faced with the need to dedicate existing resources to this new responsibility.

If there was going to be more tobacco like lawsuits, the state AGs would need to find a way to enforce the agreement that didn’t involve simply trying to add more employees to accomplish the task.

I hope you will join us tomorrow for Part 3, where we discuss multi-state litigation by state AGs in the post-tobacco era.

For more information on Affiliated Monitors, Inc. visit their website here.

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