Extortion Lawsuites: The Games of Callem, Cheatem & Howe

Judy Cresanta

Back in February, Robert Reich, former Clinton Secretary of Labor, wrote an editorial in USA Today titled "Regulation is Out, Litigation is In." It was a liberal treatise extolling the merits of litigation as a tool for bureaucrats, not to mention mercenary-minded attorneys, announcing that "the era of big government is out, but the era of regulation through litigation had just begun." Reich was referring to the lawsuits levied against the tobacco industry and how governments at all levels would benefit— specifically by the revenue they would generate. But tobacco was just the beginning. Today we have the Microsoft antitrust lawsuit, cities throughout the country suing gun manufacturers, retroactive lawsuits against former manufacturers of lead paint and a federal suit against American Airlines. Attorneys generals throughout the country—including Nevada’s Frankie Sue Del Papa—have used these suits to promote their aspirations for higher office. But the cost to taxpayers is far too high.

How to Raise Taxes Without Legislation

Recently the Clinton administration, cashing in on the momentum of the tobacco suit, called for the Department of Justice to utilize radical measures to pursue further legal action against the tobacco industry to recover Medicare expenditures. President Clinton’s plan would use the muscle of the federal government and tax dollars to sue a legitimate business, in pursuit of revenue for federal programs. Attorney General Janet Reno went one step further by suggesting that the department enlist the services of the Democrat-controlled Trial Lawyers Association, whose members have already reaped billions of dollars in attorneys fees from the tobacco agreement with 46 states. To accomplish these goals Clinton requested $20 million to fund this effort for the FY 2000 budget.

When All Else Fails, Use Extortion

Government litigation is not new. Environmental, civil rights and even antitrust lawsuits have long been techniques governments have used to implement policies not acted upon by legislatures. To my knowledge, however, never has the President of the United States announced that the purpose of any federal litigation was to raise revenue. It is clearly a violation of the rule of law, and a usurpation of power by a willing judiciary—remember that it took the 16th Amendment to empower even the legislative branch to tax the people.

To date, Nevada is among 11 states that have petitioned Congress to check this awesome power grab—thanks to the efforts of Assemblyman Don Gustavson. If Nevada’s endorsement of a constitutional amendment seems an overreaction, consider that earlier this decade, in Missouri v. Jenkins—a case that received little coverage by the media—the U.S. Supreme Court ruled that the federal judiciary had the right and the authority to both levy and/or increase taxes. Later a district court judge in Missouri ruled to double the property taxes for citizens of Kansas City. Attorneys on behalf of homeowners argued rightly that the judicial branch of government has never had a right to tax—that power rests entirely with the legislative branch of government. The judge had no patience with their argument: "[I]f the Supreme Court declares the judiciary’s right to tax, then this power is constitutional, period." He added in a defiant retort, "It may be raining outside, but if the Court says the sun is shining, then the sun is shining."

When the assistance of so-called constitutionally minded congressmen were sought for a legislative remedy to Missouri v. Jenkins, the climate was non-receptive. In fact, Rep. Henry Hyde said: "While I’m sympathetic to your concern, on this issue, quite frankly, Congress doesn’t give a damn." He was right. It turns out that when the budgets of states are jeopardized by unfunded judicial mandates, Congress could not care less. But it would seem that when Congress’ fiscal turf is faced with such a threat, well, that’s another story.

Raising Taxes is Just One Policy Issue

The American Legislative Exchange Council (ALEC) has also expressed alarm. It recently issued a study on the subject, "Disorder in the Court: Litigating Public Policy." ALEC found the trend of bypassing legislative authority to create policy from the bench has manifested itself in four distinct but related ways:

  1. Judicial Nullification. In the last few years, State Courts have issued 85 rulings striking down tort reform laws passed by the legislatures. This is just the most egregious example of courts usurping the powers of the legislature.

  2. Activist Litigation. Activists unable to succeed in the legislative arena are increasingly joining forces with plaintiff attorneys and state and local officials to pursue mass litigation against entire industries. What they have been unable to impose through regulation, they are attempting to impose through litigation.

  3. Court-Created Causes of Action. Judges have issued a number of rulings that have created entirely new causes of action under tort law. The most recent example was in Louisiana, where a judge found that the mere expectation of possible injury is sufficient grounds for a suit and the awarding of damages.

  4. Court-Ordered Tax Increases. In at least 19 states—Nevada among them—state district courts have ruled education funding systems unconstitutional. As a result, legislatures have been forced to impose new taxes or raise existing taxes, in order to comply with these judicial mandates.

Let’s Get Real

Historically, government has encouraged private business and the production of lawful products by essentially staying out of the way. Now with courts being co-opted into instruments of social action by unethical layers, they are forcing companies to accept liability for the unlawful use of that product. These are legal products not shown to have ever been defective. Instead of sending manufacturers a bill for a defective product, government is billing companies—and ultimately, taxpayers—for social ills when they can’t impose their agenda through legislative means. The attitude of career politicians is appalling. Health and Human Services Secretary Donna Shalala, at a press conference following the tobacco suit victory, almost jumped with glee about all of the things government could spend the money on: "What are deep pockets for?"

Using Shalala’s reasoning, will automobile manufacturers be liable when a drunk driver causes death or injury? Will the Seagram Company be subjected to a lawsuit because someone chose to drink himself into cirrhosis or inflicts violence on another person while under the influence? How about fast food restaurants—will they be held responsible for someone’s high cholesterol level? Such abuses will redefine government power. But rest assured that the bucket industry, which some say is responsible for drowning deaths of toddlers, will be spared—its pockets aren’t deep enough.


Rep. Bob Barr recently introduced legislation to address regulation-through-litigation mania. His bill states that consistent with existing law, no one can bring a lawsuit against a corporation that manufactures a legal product which is essentially without defect. If passed, companies will no longer be liable for criminal misuse or irresponsible use of a product. The cash cow exploited by law firms like Callem, Cheatem & Howe will dry up—and the plaintiff bar will cease to be the fourth branch of government.

Judy Cresanta is president of NPRI. She can be contacted at jc@npri.org.

Judy Cresanta

Judy Cresanta

Nevada Policy Founder

Judy Cresanta founded the Nevada Policy Research Institute in the early 1990s following a life-changing trip to the former Soviet Union to educate pro-democracy leaders about free markets and free elections. Her inspirations included Paul Weyrich of the Free Congress Foundation; Jeff Coors of Coors Brewing and the Castle Rock Foundation; Bill Bennett, former secretary of education under President Reagan; and Morton Blackwell of the Council for National Policy. Ms. Cresanta served as the Institute’s president until 2001.

Nevada Policy was established as Nevada’s first free-market think tank, with the goal of confronting the state’s many eroding institutions, including government, the education establishment, the media and academia, with straight-forward, well researched information that would keep the public armed with the truth. The absence of truth, Ms. Cresanta learned while in the former Soviet Union, allows the state to enslave its citizens. Under Ms. Cresanta’s leadership, Nevada Policy worked with some of the top individuals and organizations from around Nevada and the nation to perform compelling research and provide it to the Silver State’s citizens and policymakers.

Ms. Cresanta has an undergraduate degree from St. Louis University and Masters Degrees in Public Policy and Public Administration from the University of Nevada, Reno.