(Hour 1b, c) Mark Chenoweth of the Washington Legal Foundation called in to express his concern over “extortion by lawsuit” cases and how they are undermining our legal system and economic competitiveness.
A troubling precedent was set right here in NH when the MTBE lawsuit was launched against two dozen energy producers including Exxon.
Tune in for the troubling details on how private companies were sued over an FDA-approved gas additive, using out of state attorneys working on contingency fees, with no guarantees that moneys collected would even be used for a cleanup, despite there being NO evidence that a cleanup is even necessary.
Sure sounds like extortion to us.
(Hour 1b) 06-24-2014 Hour 1b
What is the history of such lawsuits? The mold was set with the tobacco companies in the late 80’s.
Chenoweth explained why attorneys working on contingency fees should never be the arrangement in such cases. We discussed speculative litigation, market share liability and why the incentives of the state should always be to pursue justice, not the deep pockets of private companies.
(Hour 1c) 06-24-2014 Hour 1c
Below are an OpEd piece published by Chenoweth in the Union Leader.
New Hampshire’s Shameful Jackpot Justice Case Against Oil Companies
By Mark Chenoweth
NEW HAMPSHIRE has played proud host to many firsts: the first-in-the-nation primary, the first American in space, and the first free public library, to name a few. But New Hampshirites should not be proud of the latest first: the state’s first jackpot justice verdict — $236 million.
New Hampshire officials courted this injustice by hiring out-of-state plaintiffs’ attorneys to file a massive lawsuit on a contingency-fee basis. They alleged that leaking underground storage tanks contaminated local groundwater with the chemical MTBE. But rather than sue gas stations that owned the leaking tanks (and violated EPA rules), the state’s hired guns went after deep-pocketed oil companies (that were following EPA rules). The lawyers calculated that they could win a large payday, regardless of those companies’ actual responsibility, by putting deep pockets and pollution claims in front of a jury.
Their plan worked, which raises the question: if pollution occurred and oil companies put MTBE in their gasoline, why is the verdict unjust? For starters, EPA specifically approved adding Methyl Tertiary Butyl Ether to comply with federal Clean Air Act mandates for cleaner-burning gasoline. The agency presumably decided the benefits of reducing air pollution and replacing harmful octane enhancers like lead outweighed the water pollution risk. If fuel manufacturers wanted to keep supplying cleaner-burning gasoline, they had little option but to add MTBE and allow stations they did not own to store the gas.
Moreover, although neither Congress nor the oil companies find spills acceptable, they did anticipate the possibility of leaks. That is why they created something called the LUST Fund—which sounds much more exciting than it is. The Leaking Underground Storage Tank Fund is a pile of money previously collected from gasoline manufacturers to pay for cleaning up leaks. Yet the trial judge did not allow the oil companies to tell the jury that the LUST Fund exists.
New Hampshire officials could have tapped the LUST Fund, but the catch is that they would have had to spend the money cleaning up leaks, which assumes there were some they wanted to clean up. By suing the deep-pocketed oil companies instead, the state escaped that restriction. Despite telling jurors that any recovery would be used to test for and rid the local environment of MTBE, the state has tried mightily to avoid that. Attorney General Joseph Foster, for example, has staunchly opposed placing the money in a state-managed trust devoted to testing and clean-up. Could it be that the state never intended to use this money for environmental remediation from the start?
Politicians would rather treat the $236 million as found money they can spend freely. It is a staggering sum (15 times the next largest verdict in state history), particularly for a case where no physical harm to any person and no property destruction were alleged. But if the harm was overblown—so that the verdict won vastly exceeds the cost to test and, if necessary, clean up—doesn’t that fact itself make the verdict unjust? After all, New Hampshire water suppliers consistently tell customers their drinking water is safe. Very little pollution has been reported, and state environmental experts say reports of contamination are at levels that do not require clean up.
Or, if the harm really is severe, why don’t New Hampshire’s elected officials want to clean up the MTBE now that they have the money to do it? Were the state’s lawyers lying to jurors then about the extent of the problem, or are the politicians lying to citizens now?
This is what happens when states hire contingency-fee attorneys. These unsavory deals pollute our much-revered jury trial system with serious conflicts of interest. Allowing contingency-fee counsel to help manage state litigation perverts the pursuit of justice into the pursuit of money. The entertaining sideshow of a fee dispute between out-of-state plaintiffs’ firm Sher Leff LLP and in-state firm Pawa Law Group, P.C. hardly inspires confidence that a search for justice was the firms’ primary concern in this case. The state should make citizens whole and keep the environment clean, but lawyers with contingent fees at stake have money-grubbing incentives to seek the highest possible verdict. That’s why more and more states have expressly forbidden hiring them.
So far trial judge Peter Fauver has insisted on creating a trust fund. The final decision on that question, and others, likely will rest with the New Hampshire Supreme Court. Ideally, that Court will not approve holding companies liable for more pollution than they caused. Failing that, New Hampshire should stop cozy contingency-fee arrangements going forward and agree to a trust fund ensuring this money will clean up MTBE.
Unless the state fixes the mess its civil justice system has made of this case, the verdict will remain a source of embarrassment, not pride. Although New Hampshire introduced the first modern state lottery, it surely does not want its courtrooms dispensing jackpot justice.
Mark Chenoweth is General Counsel of the Washington Legal Foundation.
