By Noah Feldman
The analogy to Winston Churchill’s notorious defense of democracy isn’t an accident. In the American form of democracy, oil companies enjoy an almost unparalleled capacity to influence Congress and federal government regulators.
Local governments aren’t quite so captured. Recently, New York state’s lawsuit against Exxon began its trial; Massachusetts filed its own suit; and the Supreme Court declined an admittedly unusual request to stay suits being brought in state courts in Maryland, Rhode Island and Colorado.
Paradoxically, it’s precisely the splintered, self-interested nature of state and local lawsuits for damages that makes such litigation a potentially useful tool against big oil.
The proliferation of suits increases the likelihood that the oil companies will lose some suits, somewhere. That should be enough for analysts who cover oil companies to adjust their assessments of the probability of a lawsuit cascade like the one that culminated in the tobacco litigation settlement, and the one over opioids that is currently making its way towards a similar resolution.
And once enough states and localities start getting money out of the oil companies, the rest will jump on the bandwagon. Even if their political leaders would prefer to stay on the good side of big oil, the temptation of easy money will come to outweigh any instinct of restraint. Oil companies might respond by trying to get Congress to pass legislation protecting them from lawsuits. But by then, the states and municipalities will be lobbying in the other direction.
As I’ve noted before in the context of the opioid litigation, this is no way to run a railroad. Addressing major social crises by post-hoc lawsuits is not an efficient or logical — or indeed, particularly just — way to right wrongs on a large scale. The Anglo-American tort system was designed to resolve small-scale conflicts, not large ones, yet we’ve tried to reverse-engineer the system to deal with more fundamental social crises. The results have been mixed at best.
Nevertheless, the truth is that it’s particularly difficult to hold the energy companies responsible for the consequences of their conduct. Going back to John D. Rockefeller’s Standard Oil, which at its peak controlled more than 90% of all oil refining in the U.S., perhaps no other industry in American history has been as resistant to regulation designed to dilute its power and lawmaking aimed at meaningful taxation. The enduring lobbying power of the big oil companies has long affected U.S. policy, foreign and domestic. And, of course, oil remains necessary to lubricate the U.S. economy.
But all that might is of limited utility against radically decentralized adversaries. For a glimpse into how this could play out, look at what’s currently underway in opioid litigation: not only states but also local governments — frustrated by state-level distribution of the tobacco settlement money and eager to get in on the action — have brought scores of suits of their own. The local suits have also brought in the for-profit, contingency-fee driven plaintiff’s bar.
This decentralization is a vice when it comes to rational, organized policymaking. But it’s a virtue when it comes to subverting the lobbying power of the energy industry in Washington.
Sprawling litigation like this usually turns into a cascade of self-interested municipalities trying to get a piece of the pie. At some point, failing to bring a lawsuit starts to seem like governmental malpractice. There’s money on the table, and local government that doesn’t try to get some of it is doing harm to its own citizens.
The upshot is that, while decentralized litigation isn’t an ideal way to address fundamental social problems, it could at least drive the oil industry to internalize some of the costs of the tremendous externalities that the burning of fossil fuels has imposed on the public. That isn’t cause for celebration. But it’s probably better than nothing.