AG Watch

Connecticut does not seem to like unhealthy drinks either. The Connecticut AG and twenty-eight of his colleagues are now targeting alcoholic energy drinks, concerned that these drinks may “appeal to underage drinkers.” It seems that energy drinks are popular among teenagers. Unlike alcohol. Anheuser-Busch even has the audacity to sell these drinks in attractive, bright colored cans.

Like any booze, these drinks are already illegal for anyone under the age of twenty-one and must be labeled.

For a decade it has been illegal to raise electricity rates in Illinois. When this freeze expired in January Illinois residents got to enjoy ten years of rate increases all at once. This was not very popular with the voters, naturally, so the legislature is considering making those rate hikes illegal too. The only problem with this scheme is that just when it began to look promising the Wall Street bond rating agencies downgraded Illinois electricity companies to junk bonds.

The response of the Illinois AG: Investigate the rating agencies.

AGs are not the only state officials who do not understand the principles of federalism–the New Mexico legislature has decided to dabble in interplanetary politics. This Tuesday they declared that Pluto is still a planet when passing over New Mexico. Terrestrial observers suspect that the fact that Pluto was discovered by a native of New Mexico may have influenced their thinking.

The state of Connecticut seems to have a problem with health drinks. Last year their AG went after one which claimed to help prevent colds, and this year they are launching an investigation into Coca Cola and Nestle’s new green tea drink Enviga—which claims to cut calories. The drink makers have to produce all the scientific studies and papers within a week or else.

Our nation has a two step process for drink labeling. First a company needs to comply with the FDA’s strict labeling restrictions, then it gets to face the Attorney General of Connecticut.

State Farm’s settlement in Mississippi will catch most AG-related headlines today, but another settlement deserves attention as well. In 2001, Bayer voluntarily removed Baycol, a “statin” cholesterol-lowering drug, from the market after learning that the drug carried higher risks than other statins. Bayer notified FDA.

Six years later, 30 state AGs led by Vermont’s William H. Sorrell have settled with Bayer for $8 million, following a brief sortie over Bayer’s alleged failure to notify consumers. As always, the AGs exercised after-the-fact interpretations of the Bayer’s legal obligations—there were no laws or guidelines for Bayer in these states at the time—to say nothing of the questionable desirability of state Attorneys General deciding public health policy. Bayer’s wrongdoing could easily have been handled by FDA and the DoJ.

It seems doubtful that $8 million six years later will really assist the affected consumers. If any of the money is distributed to specific individuals at all. And will $8 million have a significant deterrence effect on a company whose total net income approached $2 billion in 2005? We won’t hold our breath.

It seems most likely that the $8 million only really affects the states themselves. AGs boost the budget, get a nice news clipping, every beneficial pill in the universe gets slightly more expensive, and no one is any the wiser.

According to the Chicago Tribune, Mississippi will soon settle with State Farm insurance regarding Katrina damages. Mississippi AG Jim Hood, with some assistance from Dickie Scruggs, has a civil suit against State Farm about the fine points of the fine print in the insurance contracts Mississippians held.

Hood has also filed criminal charges alleging fraud by State Farm. What are the odds that State Farm’s decision to settle the civil case was influenced by the threat of criminal punishment?

Just as importantly, as the article notes, “The Mississippi settlement would not involve any cases filed by State Farm policyholders in Louisiana or Alabama.” We have one guess what lesson the AGs in Louisiana and Alabama will draw from the Mississippi maneuver.

The political dynamic will certainly make these AGs popular in the short term, but in the long run, we doubt that most businesses will want to do business in states that toss out contractual rule of law and leverage criminal threats in order to extract civil fees.

One argument in favor of hyperactive AGs runs, “AGs have a special insight regarding the affairs of their particular state’s constituents.” While we doubt that pharmaceuticals or SUVs act any differently in each state, we’ll give them the benefit of the doubt for the moment. However, it is becoming terribly clear that AGs have very little insight into federal law, not to mention the finer points of the services and industries the AGs want to police. Consider West Virginia’s recent press release regarding cell phones and the Do Not Call list; the release was based on an urban legend concerning the federal law. Anyone the least familiar with cell phone use or with the federal law would have spotted the hoax.

AG Watch considers this a thumbnail sketch of the AGs’ lack of familiarity with the U.S. Code. Roughriders AGs don’t know the federal statutes or best business practices because they are usually too busy negotiating slice-o’-the-pie settlements to actually do much lawyering or much global good.

S.M. Oliva has a wonderfully depressing story about the Wisconsin Avenue theater after the District of Columbia Attorney General got big antitrust ideas in his head.

The best that can be said for this is that fewer people witnessed the crime that was Jackass Number Two.

Over the weekend, the Washington Post’s Kirstin Downey summarized the big players in Watters v. Wachovia Bank, which the Supreme Court will hear on November 29th. Banks and AGs figure prominently, of course. But the Federalism Project’s Federal Preemption event also had a hand, it seems.

The AEI Liability Project will hold an event discussing the case today.

In just two weeks, the Supreme Court will hear the oral arguments in Massachusetts v. EPA, the first in what might become a series of AG-led global warming suits.

On November 21, the Federalism Project will host a panel discussion of the case. The panel will include Jonathan Adler and Lisa Heinzerling, who authored briefs in the case, as well as Edward Warren and Barry Rabe, prominent authorities in the field of environmental law. You, faithful reader, are invited. Please RSVP at your earliest convenience.

Election junkies and law junkies can now their fixes in one place: Point-of-Law is holding an Election Roundtable discussion.

Of course, AGs are elected officials, so AG Watch has thrown in our two cents.

According to Jerome Carr’s motion to submit his amicus curiae brief in Massachusetts v. EPA, which the Supreme Court will hear on November 29th, Mr. Carr tried to contact the Massachusetts AG’s office in order to get help submitting his brief, but was redirected to the Sierra Club’s attorneys. The truth trumps any joke AG Watch could make.

The AEI Federalism Project will host a panel discussion of Massachusetts v. EPA on November 21, from 2-4 p.m. Registration is open. You may register with us directly.

On Bloomberg.com, Jonathan D. Salant provides a must-read look at the nationwide political fallout in AG races after Eliot Spitzer’s attorney generalship.

Why are AG races receiving such attention? Mr. Salant writes, “Business groups say overly aggressive state law-enforcement officials are driving up costs, making it harder to compete and forcing companies to shed jobs.” Mr. Salant also quotes John Engler, former governor of Michigan, saying, “Eliot Spitzer has done more to raise costs than most legislation passed by legislatures across the country.”

That is the second most distressing item in the column. Most distressing, of course, is the use of the word “Spitzerism,” which makes both philologists and rule-of-law types shudder.

Once again, a cadre of AGs and tobacco makers have leagued up to decide national policy. They don’t want cigarette brands to have sweet and/or alluring names because, they insist, sweet and/or alluring names target children. The settlement is only between R.J. Reynolds and 39 AGs at present, but we can guess that others will soon climb aboard.

At the present pace, NAAG settlement agreements will soon run everything from international trade bargains to national financial policy to MLB commissioner duties. Why waste time passing legislation through national democratic institutions when parochial litigacrats can decide everything at a whim?

What is the attorney general? What is the duty of the office? And should we worry that these questions are surfacing in an election race between would-be attorneys general?

The fascinating (to political theorists) race in Connecticut between Robert Farr and Richard Blumenthal has brought the very nature of the post to the fore as a campaign issue. As professional scrutinizers of AGs, we’re glad for the assistance—and by such qualified experts—in the What The Heck Are The AGs All About Department.

Pay attention to Connecticut, as this campaign will most likely shed much light on the future role of state AGs everywhere.

California et al. just sued the auto industry because, according to the complaint, the automakers harmed California. As AG Lockyer’s press release implies, this action is merely a tactical maneuver in a larger battle between California and the nation regarding emission standards preferences.

That debate centers on federal preemption questions. The Federalism Project’s Federal Preemption event answered many of those questions and raised many more.

When USA Today runs an article outlining the AG litigulatory MO—in this case Bill Lockyer’s investigation of Hewlett-Packard—one starts to hope that the jig is up.

Lockyer’s law-less approach is clearly suspect in the article, “There’s no one California law against the practice, called ‘pretexting.’ But Lockyer’s staff is considering prosecuting under fraud laws, including those that prohibit identity theft and unauthorized use of computer data.”

And the article captures the equally pertinent political score, “But independent tech analyst Rob Enderle says Lockyer may be going after HP mainly for publicity in an election year.”

HP is headquartered in California, making this AG sweep at least somewhat less egregious than most. However, the article also places the investigation squarely in the legal-economic context that undermines all AG claims to righteousness: “The Department of Justice, FBI, House Energy and Commerce Committee, and Securities and Exchange Commission also have launched inquiries.” So, while Lockyer and Massachusetts AG Tom Reilly roust about for loose change in Hewlett’s couch, they also interfere with an integrated federal investigation.

And this is by design, folks. Enjoy your weekend.

35 state attorneys general have “offered” anti-smoking Public Service Announcements to movie studios.

Anything anti-smoking makes for popular policy. And unless the worst libertarian suspicions are confirmed, the AGs have not encroached on the studios’ liberties.

But why are AGs injecting themseves into the movie making business at all? Even if this were a state-by-state policy question—and we rather doubt that it is—shouldn’t governors and state legislators be handling this sort of policy making? Since when do AGs handle policy making, Hollywood or elsewhere?

If the AGs need to concern themselves with Hollywood, perhaps they could figure out where all of Brendan Fraser’s good scripts went.

In September 2005, AG Watch described the mess of chickens and litigation moving between Oklahoma and Arkansas. The situation has only deteriorated since then. Both sides have lawyered up and the interest group moneyfights have begun in earnest.

However, recent news items have captured one phoenix that seems to be rising from the smolder: as interstate environmental litigation proliferates, even the aggressors have started to appreciate the benefits of one national rule for interstate issues.

In a recent Stories That Matter piece, Oklahoma’s AG Drew Edmonson, the bearer of the suits against Arkansas chicken farmers, says of the interstate environmental suits, “This is a national problem, and there really should be a national solution applied equally to everyone.”

In the Washington Post’s full account of the ArkLahoma battle, New York’s Eliot Spitzer—himself no slouch at suing out-of-state for environmental causes—confessed, “Long term, states cannot supplant the role of the federal government in addressing these issues,” he said.

Of course, these AGs have their own environmental policy preferences in mind when they suggest a national fix, but the fact of their mutual emphasis on a national standard for interstate concerns signals (hopefully) the beginning of the end of states’ Attorneys’ General extraterritorial romp across the U.S. Or perhaps AG Watch has set our hopes a little too high.

Today, Diane Levick of the Hartford Courant gives us a heads-up on what might be the next big AG SuperLawsuit Sweep. St. Paul Travelers, a Minnesota-based insurer, seems about to join the Hartford Financial Services Group as targets of Connecticut Attorney General Richard Blumenthal’s cleansing of insurance call center identification practices. According to the article, several state attorneys general have had their litigulatory hackles raised because “some insurers’ service centers did not identify their company name when fielding customer calls at the request of independent agents.”

While Mr. Blumenthal may have discovered a potential principal-agent problem, Ms. Levick notes, “It’s unclear how deeply or often consumers were harmed by not realizing they were talking directly to insurers, and how far back the problem started.” Indeed, Ms. Levick reveals that Mr. Blumenthal “wouldn’t provide specific examples of consumers being hurt, or comment on whether service centers tried to discourage consumers from filing claims when they called for advice.”

General Blumenthal claims, “The brokers certainly did not do their job, and the harm was higher premiums.” Elsewhere in the article, however, it becomes clear that agents joined this call center arrangement in order to reduce their costs. Is it Mr. Blumenthal’s claim that none of those lower costs made it to consumers? This is surely a difficult econometrics problem, but without any sort of actual economic analysis, Mr. Blumenthal’s allegations remain empty .

The absence of proof of real harm is not the only suspect piece of Blumenthal’s puzzle—vaguery edifies vaguery in his legal model: “Shifting customers to the service centers is not illegal, but deception is.” Deception, AG Watch agrees, is a nasty business, but “deception” implies an intent to harm, which these crimes manque may lack. Levick describes the matter as “one more example of how investigators have raised alarm over behavior the industry considered acceptable.” These companies were simply doing what they had been doing, and no one had balked before. Of course, attitudes toward certain behaviors may change over time, but that cannot make those behaviors illegal ex post facto.

Consider as well that the appearance of jurisdiction in these cases is at least as misleading as the call service itself. Both Hartford Financial Services and St. Paul Travelers have strong operational ties to Connecticut (Hartford, of course, headquarters there), but the real crime here—if any crime actually occurs—is committed by Connecticut agents against Connecticut consumers; the seemingly independent agents, after all, are the ones who are redirecting their phones. But if the Blumenthal went after the Connecticut-based agents involved, he would not reap deep-pocket profits. And those profits, after all, are the object of this pursuit.

Such a legally and economically flimsy strategy shouldn’t provide Connecticut with a blank settlement check, nor should it allow Connecticut’s AG to design every detail of nationwide insurance practices.