Strange Bedfellow


Why state attorneys general are suddenly suing everybody.

Dan Morales, the attorney general of Texas, was the first state attorney general to begin investigating Microsoft 18 months ago. In November he filed suit to void clauses in Microsoft’s contracts with computer manufacturers that he said were preventing them from assisting his probe. Though this case was dismissed, Morales persevered, joining with 20 other state attorneys general in preparing a wide-ranging antitrust suit against Slate’s parent company.

But last week, at the very last moment, Morales dropped out of the suit. Why? First, he received a letter from the heads of several Texas-based companies, including Compaq and CompUSA, urging him not to bring a case that would harm an industry employing more than 300,000 Texans. Then, Michael Dell, founder of the Austin-based computer company that is both a Microsoft ally and one of Texas’ largest employers, came by to see him. Just after that meeting, Morales announced he wouldn’t sue, explaining in a prepared statement that “several officials of Texas’ computer industry have expressed concerns that the filing of a lawsuit against Microsoft may negatively impact their companies as well as the consumers of the state.”

The antitrust case against Microsoft may or may not have merit. And it may or may not make sense for 50 states to run their own antitrust policies alongside or in opposition to the national one. But Morales’ decision is pretty shocking in any event. If Texas’ chief legal officer is going to take it upon himself to decide whether Microsoft should be prosecuted, that decision should be based on whether he believes the company has violated the law. Instead, Morales openly interpreted his duty as promoting his state’s commercial interests. Morales said, in effect, I don’t care whether Microsoft is breaking the law. The issue is whether Microsoft is good for business in Texas.

Of course, Morales was merely explicit where other AGs prefer to be coy. Tiny Utah, home to Novell, a Microsoft rival, is a vigorous participant in the states’ suit. Tiny South Dakota, home to Microsoft ally Gateway, is not. California, where Microsoft antagonists Netscape, Oracle, and Sun live, has signed on. Washington state, where Microsoft lives, has declined. Washington state Attorney General Christine Gregoire determined that there was “no need” to duplicate the federal effort.

In the curiously booming business of multistate lawsuits, economic factors often interfere with lofty considerations of the law. When Michael Moore, the attorney general of Mississippi, sued to recover Medicaid costs from the tobacco industry in 1994–a case that led to the $368.5 billion tobacco settlement now up for debate in Congress–41 other states eventually joined in. Among the few that did not were the biggest producers of tobacco: North Carolina, Virginia, Kentucky, Tennessee, and Georgia.

You’d have to be pretty naive to expect political considerations to play no part in the deliberations of any public prosecutor, even in criminal cases. But multistate actions, as these sign-up-sheet lawsuits are called, are almost pure politics. They generally reflect the ambitions of state elected officials rather that the claims of sound public policy.

If General Electric is selling an unsafe toaster, we have a Consumer Product Safety Commission with jurisdiction to investigate, regulate, and litigate. The CPSC must decide whether that toaster should be sold to consumers anywhere in America. Does it make sense for each state to be deciding that question all over again–either agreeing, in which case the effort is redundant, or disagreeing, in which case the result is a toaster that is legal in Ohio but illegal in Kentucky? It’s like every state having its own foreign policy–which happens to be another futility-generating trend. Multistate suits add another layer of absurdity: the states reinventing the wheel of federalism by attempting to act in unison.

The flurry of multistate lawsuits is the result of an odd alliance between liberal legal activism and conservative devolutionary zeal. In the 1970s, the consumer movement fired up state attorneys general to begin going after corporate malefactors. One of the first multistate actions was a suit filed by six attorneys general against oil companies for price fixing in 1973. Another was filed against General Motors in 1977 for falsely claiming that some of its cars contained rocket engines. Such suits increased with the falloff in consumer protection and antitrust enforcement during the Reagan years. The regulatory agencies in Washington have grown more aggressive since Bill Clinton arrived in 1993. But somehow, more federal activism has only spurred the litigious exuberance of the 50 AGs. Various states have recently gone after deceptive advertising in car leasing, sneaker price fixing, and telemarketing scams. At the moment, they are shadowing the Justice Department in an antitrust investigation of Visa and MasterCard.

Perhaps the biggest factor in the multistate litigation boom is Moore. As Peter Pringle recounts in Cornered, a new book about anti-tobacco litigation, Moore turned himself into a household name with his suit against Big Tobacco. As the suit progressed, Moore was featured in Vanity Fair and on every TV news program known to humankind. The National Law Journal named him lawyer of the year in 1997. Moore incurred some suspicion and jealousy from his colleagues. He also became their role model. Hubert H. “Skip” Humphrey III, the attorney general of Minnesota, filed his own suit against the tobacco companies. It was settled last week for $6.1 billion. Humphrey used the occasion to attack Moore’s settlement as a “sweetheart deal.”

Now all AGs want to be the next Michael Moore. There are folks willing to help. As one Washington PR person explains, these cases are often marketed to the state attorneys general by corporate and public-interest lobbyists. First they go to the most eager beavers: Skip Humphrey or Richard Blumenthal of Connecticut. Second tier, but nearly as promising, are Morales of Texas, Scott Harshbarger of Massachusetts, and Dennis Vacco of New York. Another good source of lawsuits is the National Association of Attorneys General (known informally as the National Association of Aspiring Governors). NAAG meets four times a year so its various committees can hash out ideas for litigation, like the billing fraud case now being developed against the hospital chains.

In the case of Microsoft, Blumenthal of Connecticut appears to have won the coveted prize, managing to eclipse Iowa Attorney General Tom Miller, who is chairman of the NAAG’s antitrust committee, and New York’s Vacco, who heads the consumer committee. Blumenthal’s face has been everywhere in the last week, and he is clearly enjoying his moment in the limelight, building valuable name recognition for the day when he decides whether to run for governor or senator. Others may pause to wonder why Connecticut–and 19 other states–needs an antitrust policy separate from that of the United States. The question whether regulation of commerce is a state or national affair was supposed to have been settled in 1789.