Justinian C. Lane, Esq.
Let Justice Be Done, Though the Heavens May Fall

Justinian Lane's Blog

Justinian's Blog

Trial Lawyers Can’t Fix Regulatory Capture

I wish I had the drive and passion for Internet advocacy that Lou Lombardo has.  He is the force behind Care For Car Crash Victims, and he is the definition of a tireless advocate.  Every fifteen minutes (it seems) I get an e-mail from him regarding auto safety in America.  If you are interested in auto safety, visit his website and subscribe to his newsletter.  It’s excellent and I have an enormous amount of respect for him.  That’s why it made me a little upset to read an article from him in which he called out trial lawyers for not doing enough to fix regulatory capture.

First, for those who don’t know: Regulatory capture means that the entity that’s supposed to be regulated has basically taken over the agency that’s supposed to regulate it.  When the mafia buys off police chiefs, that’s basically regulatory capture.  Here’s what Lou had to say:

Hopefully someday trial lawyers will examine the auto industry-supported removal of "Rollover Crashes" from the Triage Guidelines by CDC and NHTSA.

Source: Attached CDC Report and for $250,000 from GM to CDC Foundation see http://www.cdc.gov/news/2007/06/CrashResponse.html

Nationwide, about 22 Americans die of rollover crash injuries on an average day.  Many more suffer serious injuries.

See http://www.careforcrashvictims.com/CareForCrashVictims/AAST_Rollover_Paper.html

What would happen if Trial Lawyers won a case that resulted in an investigation of the captivity of regulatory agencies?

Imagine an online wall of Crash Victims published by Public Justice.  Imagine the online wall searchable by State, Date of Crash Injury, Injury and by Vehicle.  See http://www.publicjustice.net/

More Americans have died of crash injuries since President Obama took office than were killed in the wars in Viet Nam, Iraq, and Afghanistan - combined.

We can and must do better at protecting people from crash injuries.   Trial lawyers need to do more - and better.

What Lou alludes to here and has written about extensively elsewhere is that auto manufacturers have too much influence over the agencies that regulate them.  They’re able to manipulate the kind of rollover and other crash tests that the government requires, and they make things like “five star safety awards” completely meaningless because they’re not objective enough.

Lou’s rhetorical question asks what would happen if a trial lawyer won a case and it resulted in the investigation of a regulatory agency.  In this sad world we live in that simply cannot happen because the system is designed to prevent such an occurrence.

Back in 2001, the Supreme Court decided Buckman Co. v. Plaintiffs’ Legal Comm..  In that case, a group of injured plaintiffs tried to sue a pharmaceutical company for committing fraud against the FDA by submitting data the company knew to be false to the FDA.  The Supreme Court held that plaintiffs cannot sue companies who defraud the FDA.  From the decision:

Given this analytical framework, we hold that the plaintiffs’ state-law fraud-on-the-FDA claims conflict with, and are therefore impliedly pre-empted by federal law. The conflict stems from the fact that the federal statutory scheme amply empowers the FDA to punish and deter fraud against the Agency, and that this authority is used by the Agency to achieve a somewhat delicate balance of statutory objectives. The balance sought by the Agency can be skewed by allowing fraud-on-the-FDA claims under state tort law.

    Accompanying these disclosure requirements are various provisions aimed at detecting, deterring, and punishing false statements made during this and related approval processes. The FDA is empowered to investigate suspected fraud, see 21 U.S.C. § 372; 21 CFR § 5.35 (2000), and citizens may report wrongdoing and petition the agency to take action, §10.30. In addition to the general criminal proscription on making false statements to the Federal Government, 18 U.S.C. § 1001 (1994 ed., Supp. IV),3 the FDA may respond to fraud by seeking injunctive relief, 21 U.S.C. § 332 and civil penalties, 21 U.S.C. § 333(f )(1)(A); seizing the device, §334(a)(2)(D); and pursuing criminal prosecutions, §333(a). The FDA4 thus has at its disposal a variety of enforcement options that allow it to make a measured response to suspected fraud upon the Agency.

In other words, only the FDA can decide to punish those who commit fraud against it.  Well, if the FDA is in bed with the company that defrauded it, we have the same situation as if the local mafia buys off the police chief.  The same rationale will hold true with those agencies that police auto safety: No trial lawyer can plan on winning a case on the grounds that some auto maker has either defrauded or taken over a regulatory agency.  The Supreme Court’s answer to such a claim would be to take it up with the Executive Branch and get a new head of the agency appointed.  Which is only slightly less realistic as advising someone that the solution to their problem is to click their heels three times and wish the problem away.

What makes regulatory capture even worse is that big business is always lobbying to make the finding of a federal agency so conclusive that it prohibits injured people from suing.  For example, the pharmaceutical industry tried to argue that if the FDA approves a drug, no one should be able to sue the drug manufacturer because it complied with federal law.  That argument basically failed, but the industry still pushes it.  And of course, auto makers always argue that if the car meets federal safety standards, no one should be able to sue alleging the car is defective.

You can see the danger if the agency has been captured by the regulated entity: The agency will write one-sided rules that favor the industry, and injured folks will never be allowed to sue.

So how can we cure regulatory capture?  We can’t right now because there is big money in doing the bidding of big business.  It’s not uncommon for an agency insider to spend five or ten years inside an agency doing work that the regulated entities approve of.  Then, the insider goes and works for the big company and makes three, five, or even ten times as much money as the agency paid them.  It’s called a revolving door.  You go in and due your time being deferential to the companies you regulate, then you leave the agency and work for the companies you regulated.

The cure of course would be if agency employees were prohibited from working for any company that was affected in any way by the agency they worked for.  Such a law would probably create a host of other problems, so it’s not a realistic solution.

Of course, that’s a more realistic solution than the “click your heels” goal of making citizens more educated and concerned about regulatory capture.  I don’t mean to be a downer, but the older I get the more convinced I am that whoever has the most money will always get their way.  And unfortunately, trial lawyers and injured consumers have far, far less money than the auto industry or the pharmaceutical industry…