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 1, we consider the role of state AGs as enforcers of civil law and in bringing litigation to enforce consumer protect and related statutes.

Every US state and territory has an AG, whose role is to serve as the chief legal advisor for that state. State AGs are empowered to prosecute violations of state law, represent the state and its employees when sued, and usually to provide legal advice to state agencies and to the state legislature. But its most important and most challenging role may be the right to bring litigation – to file suit – in the name of the state.

States can sue for a number of reasons. For instance, if a company pollutes the state’s air or water, the state AG may file a suit against the polluter. If someone defrauds the state, the state AG may file a suit for damages under the state’s False Claims Act (FCA) or similar legislation. States receiving federal Medicaid funds each have a Medicaid Fraud Control Unit, which is federally subsidized and almost always housed in the state AGs office. These units investigate and prosecute Medicaid provider fraud, as well as patient abuse or neglect in any Medicaid funded healthcare facility or board and care facility, and frequently file suit in the name of the state to recover damages.

In many states, the AG represents state professional licensing boards, so that any enforcement action against a licensed professional’s right to practice is filed by the attorney general. State AGs also often represent the state’s ratepayers before state public utilities commissions and regulate charitable trusts that have been established to support some public purpose.

Two of the most important powers exercised by most state AGs are the enforcement of antitrust laws and consumer protection laws. Although there is a large body of federal antitrust law enforced by the Department of Justice (DOJ), nearly every state has its own antitrust statutes. Particularly if a state perceives that the federal government has declined to take an antitrust enforcement action under federal law, a state action can be initiated by the AG for a violation of the state’s antitrust acts.

However, perhaps the most visible, and arguably the most important enforcement authority that a state AG has is to enforce a state’s consumer protection laws. Often, the state AG receives that specific authority by state statute, or by federal law. Most AGs address individual consumer complaints and have a very visible public education role regarding consumer issues. In addition, the AG may file suit in the name of the state in cases involving unfair, misleading, unconscionable, or deceptive acts or practices.

Some actions are brought to enforce one of these areas of the law, many others are brought based upon several different theories. Several areas came together in the mid-1990’s to form the basis of the litigation that more than any other changed the role of the modern state AG, which was litigation brought against the tobacco industry.

Coyne said the state AG world changed when lawsuits brought across the country by numerous states were combined to form a single cause of action against the four largest US tobacco companies: Philip Morris, Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, and Lorillard Tobacco Company. The settlement between these four companies, called the Original Participating Manufacturers (OPM), and the AGs of 46 states was memorialized by the Master Settlement Agreement (MSA).

The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related healthcare costs. In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costsof caring for persons with smoking-related illnesses. The settlement funds were distributed to the states by a complex formula based up the population of Medicaid recipients in each state.

In the MSA, the OPM agreed to pay a minimum of $206 billion over the first 25 years of the agreement. Importantly, the MSA contained no restrictions on how the states could spend those funds. Prior to this time, civil litigation, whether involving public or private parties, was based upon the theory that a victim should be compensated if a defendant’s actions unlawfully caused an injury. That compensation would take the form of compensatory damages and in some cases, punitive damages if warranted to deter specific bad conduct in the future. The hope was that civil litigation would create an economic disincentive to future bad conduct, because the defendant would realize that such bad conduct cost him or her money.

Coyne related that in the case of some corporate defendants, monetary damages did not result in the type of permanent changed behavior that the states hoped for. In order to ensure the future conduct of the original participating manufacturers, the MSA included specific terms restricting the future sales of tobacco products to minors and limiting the types of advertising and promotional materials that the defendants could use. Moreover, the states agreed to diligently enforce the terms of the MSA to ensure that non-settling tobacco companies which were not bound by these restrictive conditions did not obtain an unfair competitive advantage over the settling defendants.

Due to the massive amounts of money flowing to the states, most states took on this responsibility by adding staff not just to their AGs, but to other agencies with tobacco enforcement responsibilities, such as taxation and revenue departments, and state police organizations. The entry of the MSA in 1998 brought unprecedented amounts of new revenue to the states, but also resulted in the states agreeing to take on the responsibility for new and unprecedented enforcement activities to enforce the settlement’s terms, lest the anticipated flow of monies be reduced or even eliminated.

I hope you will join us tomorrow for Part 2, where we discuss the reaction to the Big Tobacco settlement and the criticisms of state AGs for the process used.

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