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Recent Powers and Duties Cases
Emily Myers, Antitrust and Special Projects Counsel
This is the second in an occasional series of articles about cases affecting the powers and duties of state Attorneys General. The following are some recent decisions from across the country.
Power of Attorney General to Hire Outside Counsel
Rhode Island brought a case against lead paint manufacturers alleging, among other claims, public nuisance claims. The Rhode Island Supreme Court dismissed the suit, but also analyzed the Attorney General’s authority to hire outside counsel on a contingent fee basis.
The court began by noting the broad authority given to the Attorney General by Rhode Island’s constitution and statutes, and stated, “In view of the Attorney General’s position as a constitutional officer and in view of his or her considerable discretionary powers, this Court has historically tended, whenever appropriate, to give deference to the strategic and tactical decisions made by those who hold that high office.” The court then held that “the Attorney General is not precluded from engaging private counsel pursuant to a contingent fee agreement in order to assist in certain civil litigation, so long as the Office of Attorney General retains absolute and total control over all critical decision-making in any case in which such agreements have been entered into.” (emphasis in original). The court articulated four factors that must be included in an agreement with contingent fee counsel: “(1) that the Office of the Attorney General will retain complete control over the course and conduct of the case; (2) that, in a similar vein, the Office of the Attorney General retains a veto power over any decisions made by outside counsel; and (3) that a senior member of the Attorney General’s staff must be personally involved in all stages of the litigation. The court also held that the Attorney General must not only “have absolute control over all stages of the litigation, but he or she must also appear to the citizenry of Rhode Island and to the world at large to be exercising such control.” Finally, the court held that the payment of the contingent fee was not a misappropriation of funds that rightly belonged to the General Treasury of the state, but was rather in the nature of an equitable lien on the amount recovered in the lawsuit. Rhode Island v. Lead Industries Ass’n, 951 A.2d 428 (R.I. 2008).
Parallel Criminal and Civil Proceedings
A person was killed when a section of ceiling tile fell from a tunnel in Boston’s “Big Dig” road project. The Attorney General convened a grant jury to investigate the design, construction and maintenance of that section of the tunnel. Powers Fasteners had supplied the epoxy that held the ceiling in place. Shortly thereafter, the state’s Highway Department (MHD) sued Powers Fasteners and fifteen other defendants, alleging gross negligence and contract and warranty claims. The MHD is represented by the Attorney General. The Attorney General appointed a special assistant attorney general to prosecute the manslaughter case against Powers Fasteners. Powers argues that the Attorney General could not prosecute the case because she represented parties pursuing a civil case based on the same facts.
The court held that there was no reason to prevent the Attorney General from pursuing the criminal case. Although Massachusetts statutes say that the prosecutor shall not be involved as counsel or attorney for either party in a civil action based on the same facts, the court held that this is meant to apply to situations where the prosecutor has private clients, as was the practice many years ago. Massachusetts prosecutors are now prohibited by law from having private clients. The court stated, “The Attorney General is ‘empowered, and perhaps required . . . to set a unified and consistent legal policy for the Commonwealth’ and has a ‘common law duty to represent the public interest.’ . . . Bringing the parallel criminal and civil cases is consistent with these roles.” (citations omitted) The court also held that the Attorney General’s interests in the civil and criminal cases are the same: the interests of the people of Massachusetts. The court concluded, “When the Attorney General represents the Commonwealth in parallel criminal and civil cases, she represents the same public interest in both, without the dangers that come with concurrent representation of a private party.” Commonwealth v. Powers Fasteners, Crim. No. 07-10802 (Sup. Ct. Suffolk Cty. Dec. 12, 2007).
State May Obtain Damages for Harm to the “General Economy” Under Connecticut Antitrust Law
Connecticut law specifically permits the Attorney General to recover damages in an antitrust action for harm to the “general economy” of the state, provided those damages are not duplicative. Connecticut law also states that the courts are to be guided in interpreting state antitrust law by federal court interpretations of federal antitrust statutes. Federal precedent does not allow parens patriae actions by state Attorneys General for recovery of damages to a state’s “general economy.”1
Connecticut sued Marsh McLennan and other insurers, alleging various antitrust claims under state law and alleging damage to the state’s economy as a result of Marsh’s anticompetitive actions. The trial court dismissed the case on standing grounds, stating that the state did not have the authority to seek damages to its economy because no such recovery was possible under the Clayton Act. The Court of Appeals reversed. The appellate court noted that Connecticut law explicitly permits recovery for damages to the general economy. Although Connecticut law also requires that the court’s be guided by federal case law in interpreting state antitrust law, the appellate court cited earlier caselaw to the effect that “§35-44b merely gave legislative imprimatur to what this court had been doing long before its enactment, namely, looking to case law construing relevant federal statutes as persuasive authority.” Because Connecticut law differs substantively from federal law, and because prohibiting damages to the economy would render that provision of the law superfluous, the appellate court ruled that the state had standing to pursue the claims. The court also rejected the defendants’ argument that it would be too difficult to prove the damages to the economy of the state, as distinct from damages to parties within the state. The court held that those issues went to proof, and did not affect standing. State v. Marsh & McLennan Companies, Inc., 286 Conn. 454, 944 A.2d 315, (Conn. 2008).
Duties of Attorney General, Separation of Powers
The Kansas legislature enacted a statute addressing protests at military funerals. The statute provided that the provisions of the Act regulating the time and place of protests at funerals would not become operative unless the Kansas Supreme Court or a federal court determined the funeral protest provisions were constitutional. The Act also directed the Attorney General to file a lawsuit challenging the constitutionality of those provisions.
Rather than filing that suit, the Attorney General filed a quo warranto suit against the Governor, challenging the Funeral Privacy Act on two grounds:
First, according to the attorney general, the legislature usurped or intruded into executive and judicial powers by ordering the attorney general to file a lawsuit he believes would seek an unconstitutional remedy and, as a result, would lack merit. Second, the attorney general's conclusion regarding the merits of the suit is based upon an argument that the judicial trigger lawsuit would require a court to provide advice to the legislature as to whether the funeral protest provisions are constitutional and should become operative; he notes that courts do not have the judicial power to provide advisory opinions.
The Attorney General did not believe the provisions of the statute regarding the time and place of protests at funerals were unconstitutional, so he argued that the legislature could not direct the Attorney General to take an action that the Attorney General believes is without merit. The Kansas Supreme Court agreed, holding that neither the legislature nor the governor has the “constitutional authority to intrude into the attorney general's duties as an officer of the court.” The legislature cannot override an attorney's ethical duties to not “bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, . . . ” (citing Kansas Rules of Professional Conduct).
The Kansas Supreme Court went on to hold that the suit that the Attorney General was directed to file would result in an unconstitutional advisory opinion by the Court. State ex rel. Morrison v. Sebelius, 285 Kan. 875, 179 P.3d 366 (Kan. 2008).
Application of CAFA to State Parens Patriae Claims.
The state of Louisiana, represented by the Attorney General through private counsel, sued a number of insurance companies, alleging that they conspired to suppress competition in the recoveries by policy holders in Louisiana, in violation of Louisiana’s Monopolies Act. Defendants removed to federal court, and the state moved to remand to state court. Defendants argued that the case should remain in federal court under CAFA, because the case, although styled as a parens patriae case, is actually a class action or mass action which seeks treble damage recovery for Louisiana consumers. The district court held that the real “parties in interest” were Louisiana policyholders, rather than the state, regardless of how the state had decided to bring the case.
The Fifth Circuit affirmed the district court’s decision. The court found that the Attorney General had authority to bring parens actions and that the Louisiana Constitution gives the Attorney General broad discretion to vindicate the interests of the state. However, the court concluded that the sole issue in determining whether the action was removable under CAFA was who the real parties in interest were. In this case, the state’s antitrust statute provides that “any person who is injured in his business or property” under the Monopolies Act ”shall recovery [treble] damages.” Because individuals have the power to enforce this provision, the court determined that individual policy holders are the real parties in interest. With respect to the injunctive relief sought by the state, the court noted that the district court judge might want to sever the claims, returning the injunctive claims to state court while leaving the monetary claims in federal court.
The court also rejected the state’s argument that CAFA did not abrogate the state’s Eleventh Amendment rights and that the state should not be required to litigate in the courts of another sovereign. Citing Fifth Circuit precedent, the court held that Louisiana had waived its immunity by suing with private parties.
In dissent, Judge Southwick stated that this case should not be removable under CAFA because “the suit [must] be brought under a statute or rule of procedure that authorizes a representative action, that is, a state equivalent of Rule 23. As presently structured, this suit is not brought under such a statute or rule.” Judge Southwick stated that under his analysis, the “real party in interest” is not important, but whether the case is brought under Rule 23 or a state equivalent (which Louisiana has enacted) is the deciding factor. This case was not brought under a Rule 23 statute, so is not removable under CAFA. State of Louisiana ex rel. Caldwell v. Allstate Insurance Co., Inc. 536 F.3d 418 (5th Cir. 2008).
Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 264, 92 S. Ct. 885, 31 L. Ed. 2d 184 (1972).
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