Corporations should be held accountable when they cause people legitimate harm, period. But corporations should not be targeted for baseless lawsuits brought by profit-motivated, entrepreneurial plaintiff attorneys acting on behalf of municipalities. When this happens, all of us — victims, employers, consumers, and our economy — suffer the consequences.
Too often, local governments are cash-strapped. Attracted by the prospect of fattening their bottom line, too many local government units are being recruited by litigators to become partners in lawsuits designed to gain high-dollar restitution for alleged corporate misconduct. Working on a contingency fee basis, the plaintiff attorneys bring suit for a wide variety of societal ills, from opioid abuse to climate change.
This legal business model is similar in intent to mass tort litigation, the rapidly growing segment of the legal system in which enterprising attorneys, typically bankrolled by hedge funds or other third-party investors, use advertising campaigns to generate huge numbers of often questionable personal injury claims against companies.
Frequently, the end game is not to go to trial at all but rather to coerce a settlement from the targeted defendant. Because of the costs associated with mounting a defense, the possibility of losing a court decision, and the public relations problems spawned by being accused of wrongdoing, companies often do settle, even when they have a strong argument that they are not at fault.
In municipality litigation, only a single complainant is involved, even if that governmental entity claims to be acting on behalf of the general population. The goal, however, is the same. Both mass tort and municipality litigations are designed to make businesses pay up, enriching city or county coffers and lining the pockets of plaintiff litigators.
In the past, state attorneys general have brought suits such as these. But in recent years, counties and municipalities have entered the field, filing thousands of lawsuits alleging corporate misconduct and disrupting the traditional balance of power between state and local governments. Targeting high-profile companies with high-profile issues, these localities attempt to legislate through the court system rather than work through state legislatures, as our constitution and the founding fathers intended.
We’ve seen the biggest explosion of municipal suits regarding the regulation of energy companies. Raising concerns about the effects of global warming, these municipal plaintiffs have alleged violations of state consumer protection laws. Fortunately, these efforts haven’t always succeeded. In 2021, the U.S. Court of Appeals for the Second Circuit rejected New York City’s suit against Chevron Corp., asserting that local taxpayers “should not have to shoulder the burden of financing the City’s preparations to mitigate the effects of global warming.”
The grievances with municipal litigation don’t stop there. The power to drag any company to court hinders economic growth by saddling businesses with extraneous legal costs, putting them at increased financial risk linked to liability, besmirching their public image, and discouraging employers from investing in product development and expansions.
Even plaintiffs with legitimate grievances are harmed as suits mounted by municipalities divert corporate funds that could otherwise be used to compensate victims of corporate misconduct. Individual claimants may get nothing if municipality litigations drive companies into bankruptcy.
So far, there have only been limited efforts to reform municipality litigation. Some state attorneys general have tried initiating parallel litigations to preempt municipality suits, but this strategy has not had much of an effect on the problem.
FARMERS RALLY AT STATE CAPITOL AS INDUSTRY LEADERS COMPLAIN ABOUT OVERREACH
Legal reform advocates suggest different approaches to limit municipality litigation, including modifying state statutes to discourage or even preclude local governments from serving as plaintiffs in some kinds of suits, restricting the range of defendants that can be targeted, modifying the causes of action under which municipalities are allowed to bring suit, and limiting courts’ jurisdiction to hear certain claims or order certain forms of relief.
However, action must be taken to address the problem of municipality litigation. Until that happens, these suits will continue to congest the legal system and hinder economic growth.
Bill Schuette served Michigan as a U.S. House of Representatives member, director of the Michigan Department of Agriculture, state senator, judge of the Michigan Court of Appeals, and the state’s 53rd Attorney General from 2011 to 2019.
