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See You in Court: Cities Launch More Lawsuits Against Private Companies

For the past 30 years, state attorneys general have successfully sued major businesses across the country. Now cities and counties want to get in on the action.

More than a dozen cities are suing Kia and Hyundai over design flaws that make their cars comparatively easy to steal.
In Brief:
  • Local governments are attempting to address major issues such as climate change and teen depression through litigation.

  • This is fueled both by successful settlements against opioid makers and examples from states.

  • Business groups are alarmed, but political incentives are pushing cities to pursue lawsuits that gain attention and have limited costs.

  • Teenagers in America are having a rough time. Levels of anxiety, depression and suicidal thoughts are running high, particularly among girls. Nearly 60 percent of teen girls say they feel persistently sad or hopeless, while almost one in three have seriously considered suicide — an increase of 60 percent from a decade ago, according to a report released this year from the federal Centers for Disease Control and Prevention.

    Experts point to any number of causes — the pandemic, peer pressure, parental expectations. But a lot of people are blaming social media and addiction to phones. “As time has gone on, the algorithm (has) gotten stronger and stronger,” said Joseph Tann. “It caused more harmful, sensational content that directly leads to students missing class, to anxiety and depression.”

    Tann isn’t a psychologist or an expert on technology. Rather, he is an attorney who is representing Mesa and five other Arizona school districts that are suing social media giants over the alleged harm they’re causing kids. Those districts aren’t alone. Around the country, more than 600 school districts have sued social media companies for the same reasons.

    If you name a prominent issue, chances are some cities, counties or school districts are suing a business over it. More than a dozen cities are suing Kia and Hyundai over design flaws that make their cars comparatively easy to steal. Baltimore, New York, Honolulu and other cities are suing oil companies for the harmful effects of climate change. And hundreds, if not thousands, of cities, counties and special districts have joined lawsuits seeking damages from opioid manufacturers, distributors and retailers. “If you are a city or county and you’ve got some policy goal you’re trying to solve, you’ve got a bunch of tools in your toolbox, and one of them is litigation,” says Howard Erichson, a law professor at Fordham University.

    It's a tool local governments are reaching for more often. City and county officials see the success state attorneys general have enjoyed in recent decades going after private businesses or even entire industries. They’re well aware that states have not always been generous about sharing their settlement dollars with localities, so they might as well pursue their own.

    If there are potential gains to be had from such lawsuits, local officials can often file them with little to no risk. There are growing numbers of private attorneys promoting lawsuits to cities and counties, offering to work on a contingency basis, meaning local governments don’t have to pay anything until and unless they win.

    While there may be no upfront costs, political points can be scored right away. Mayors and school superintendents can brag about standing up to social media or Big Oil, even if the lawsuits ultimately go nowhere. “It’s a way for cities — mostly liberal big cities — to express their political preferences,” says Nadav Shoked, a law professor at Northwestern University. “It’s a way for cities, especially in red states, to express their beliefs respecting guns or respecting climate change.”

    Danger to the Economy?

    When there are legitimate policy disputes, the way to resolve them is through legislation, not municipal litigation, argues Page Faulk, a senior vice president at the U.S. Chamber of Commerce Institute for Legal Reform. Suing companies for selling legal products, she suggests, marks a dangerous path. What’s more, the sheer number of local governments threatens to turn tort law into a “monster that’s going to swallow all of courts.”

    “We view the cities and counties and even school districts as a dangerous legal trend threatening to upend the economy,” Faulk says. “Trial lawyers are absolutely pitching cities and counties, saying there’s no risk to you and we’re going to see billions of dollars.”

    Private businesses naturally don’t like being sued, but it turns out that state attorneys general — who pioneered the idea of pursuing big payouts and policy changes through legal action — don’t like cities and counties horning in on their act, either. AGs not only have more lawyers working for them but generally stand on firmer legal ground than municipalities going after private companies. What’s more, bringing in more parties — the countless cities and counties and their private attorneys — makes it more complicated for AGs to reach global settlements with industry.

    But they recognize that this particular horse has already left the barn.

    “The incentives are definitely there to continue filing cases that are proposed by private firms,” says Rob McKenna, a former Washington state attorney general who has written about the dangers of municipal lawsuits for the Institute for Legal Reform. “The reasoning will be similar in each case: low risk and potentially high reward.”

    It All Started With Tobacco

    Beginning in the late 20th century, state AGs started going after national companies for harms caused by products such as asbestos and lead paint. The springboard for contemporary multistate lawsuits, however, was tobacco. In 1998, states reached settlements with tobacco companies that promised payouts at the time valued at $246 billion, notably a case settled by 46 AGs that not only provided the bulk of that money, but also led to major changes in the way tobacco products are marketed.

    AGs have since gone after banks, mortgage companies, tech firms and the pharmaceutical industry, including, of course, opioids. “State AGs have been very successful for the last 30 years, at least, in shaping the regulation of entire industries,” McKenna says. “Tobacco was not the first time that had happened, but it’s still the most prominent example.”

    Local officials thought this was potentially an arena that they could enter. In the decade following the tobacco settlements, more than 40 cities filed suits against gun manufacturers. “Ed Rendell (then the mayor of Philadelphia) wanted to bring 100 cities to the table for bargaining power,” says Timothy Lytton, an associate dean at Georgia State University who edited a book about the gun lawsuits.

    Smith and Wesson agreed to some changes in terms of gun safety and sales to settle the suits, but the industry as a whole successfully lobbied Congress to pass a law in 2005 that shields gun makers and sellers from most civil liability.

    But while the generally disappointing results from the gun cases had a dampening effect on cities’ desire to sue, the bounties they’ve enjoyed from opioid settlements have ignited many more lawsuits. “The cities want to address issues in the media,” says Faulk, of the Institute for Legal Reform.

    Can Cities Sue?

    The right of cities to sue as corporations dates back to the Middle Ages. Some courts have ruled that cities lack independent power to sue, absent authorization from the state. A key Supreme Court case back in 1907 found that cities “are political subdivisions of the state.” But that case determined that cities can’t try to block state laws in federal court — not that cities can’t sue private companies under state law.

    Cities and counties have wide latitude to sue under public nuisance law. Traditionally, this has meant they’ve been able to sue polluters, for example, for causing harm to air or water. Lately, localities are using it to address a wider range of harms, such as problems with students due to social media.

    “It’s really useful for the plaintiff to be a government entity,” says Erichson, of Fordham law school. “There are cases that are really hard because jurors will see plaintiffs as wrongdoers, that it’s their fault for smoking or for taking opioids. It’s different for Baltimore or Cook County to say we’re spending a ton of money on law enforcement and education because of the overmarketing of tobacco or opioids.”

    But if cities and counties can gain sympathy for having to spend money through no fault of their own, they might quickly encounter a legal problem. The free public services doctrine holds that municipalities can’t seek to recoup money they’ve spent for certain services that are their expected responsibilities, such as law enforcement, and are supposed to be paid for by tax revenues, not tort cases. (These limitations vary by state.) “That is what cities do,” says Lytton, the Georgia State associate dean. “They’re not supposed to go after individuals to recoup that.”

    States may put up other hurdles. In Texas, local governments can’t hire private attorneys without the consent of the state attorney general. As a general rule, that’s an impractical approach, according to Northwestern’s Shoked, who coauthored a recent study on cities’ right to sue. “You can’t really block outside counsel, because for a lot of cities, that’s the only counsel they have, or they rely heavily on outside counsel,” Shoked says. “Most American cities are small and don’t have inside counsel at all.”

    Cat’s Out of the Bag

    By contrast, big cities are stepping up their game. Chicago and Philadelphia have created units within their city attorney’s offices meant solely to work on these types of “creative” lawsuits, while San Francisco is partnering with UC Berkeley’s law school. “More and more of these lawsuits are being brought with inside counsel,” Shoked says. “Use of outside counsel is in decline for major cities.”

    One lawsuit can help fund the next. Hundreds of millions worth of settlement dollars from opioid cases are enough by themselves to make further pursuits seem profitable.

    It’s possible that some states will set some sort of limits, whether by tightening public nuisance laws or limiting cases to injunctive relief, meaning private companies would have to change their behavior but wouldn’t have to pay out big cash settlements that act as honey for both elected officials and private attorneys.

    But erecting effective barriers won’t be easy. The entire phenomenon is itself something of a workaround. Under American federalism, policy actors often go venue shopping, looking for a level of government or legal case that could lead to victory when they’ve been blocked elsewhere.

    The specific lack of state or federal action on some issues is what’s leading cities and counties to try to take matters into their own hands, or those of their attorneys. “If it’s tough for you to do anything on regulation because the state is stopping you,” Shoked says, “you go to the courts because that’s the only avenue left.”
    Alan Greenblatt is the editor of Governing. He can be found on Twitter at @AlanGreenblatt.
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