Cadwalader Partner Douglas Gansler on the Growing Power of State Attorneys General

The power of the state Attorneys General has grown significantly in recent years.

Douglas Gansler
Washington, D.C.

That’s according to Cadwalader partner Douglas Gansler, the former Attorney General of Maryland. Gansler heads up Cadwalader’s State Attorneys General Practice.

“The power of state Attorneys General has grown under the Trump administration because the Democrat Attorneys General feel that they are the last line of defense between this administration and protecting Americans, the Constitution and consumers,” Gansler told Corporate Crime Reporter in an interview last week. “Rightly or wrongly, that is the belief.”

For 22 years Gansler worked as a local, state and federal prosecutor.

Now he works exclusively on the defense side.

“When a state Attorney General has a concern with a company, I’m hired by the company to try and resolve that matter short of litigation and short of any reputational harm,” Gansler said. “Only a former Attorney General or a former chief deputy Attorney General can do that effectively, because they know the office. Some companies when they get in trouble, they will call their lawyer. They love their lawyer. Their law firm has done an amazing job for the company over time.”

“What more often than not happens is that company pays an awful lot of money and they are in a worse place than they were the first day they got the call from the state Attorney General. That’s because those law firms don’t know how to navigate the state AG world. It ‘s like taking your best outfielder in baseball and have him pitch because he’s probably a good pitcher. Well, he’s probably not.”

“They open investigations with what are called CIDs – civil investigative demands. And a civil investigative demand is a subpoena. It is extremely rare that you get leaks from an Attorney General’s office. A company can undergo a two year civil investigative demand with back and forth document production and the public may never know about it. The state AG may decide there is nothing there, and they are not going to bring a lawsuit.”

“Attorneys General bring cases for all kinds of reasons – they read something in a newspaper, they see something on 60 Minutes, the AG’s wife or husband has an issue with a company. The cases come in in a variety of different ways. The question is – how does a company address it? From the time of the initial inquiry – whether it’s a phone call, a letter or a CID, to the resolution of the case, there will be no publicity. Only if there is a settlement will it become public.”

“For the whole time prior to that, it is not public. When a company is notified that an Attorney General is looking at a matter, my job is to go in, figure out what the problem may or may not be, resolve it and try to get to yes. There is always a way to get to yes. Sometimes there is a misperception. Sometimes something went wrong. Sometimes it was inadvertent.  Sometimes somebody did something intentionally wrong that the company didn’t know about. We are there to try to resolve it.”

When it comes to corporations, who are the most aggressive Attorneys General now?

“By far, Maura Healey in Massachusetts and Bob Ferguson in Washington state. In that grouping you would add Karl Racine in DC, Brian Frosh in Maryland, William Tong in Connecticut and Xavier Beccera in California.”

You didn’t mention the New York Attorney General. Why not?

“Because she’s new. She is going to be equally as aggressive as her three predecessors. She may have different priorities. But remember, the new folks just took office in January of this year. There are growing pains. No one is an Attorney General until they are. It’s an enormous office with enormous power. It’s the second most powerful position in state government. It takes a little bit of a runway to get up to speed, but also to get your own people in.”

“Maura Healey was in the office with her predecessor Martha Coakley. She has been in the office for a long time. This is her second term.”

“I represent companies that have issues with state Attorneys General. I know where my plane lands. And my plane lands in Boston and Seattle a lot more than it lands in some other states.”

“Aggressive is not necessarily a bad thing. They are not necessarily unfair, they are doing what they believe is the right thing. Companies that are well represented and that are doing the right thing and playing by the rules will come in and explain that. And as long as you get a fair hearing, quite often the state will not go forward with the case.”

You were recently co-author of an article titled: State Attorneys General Jolt Antitrust Enforcement. What’s the nutshell?

“There are different areas where state Attorneys General and the federal government intersect. The biggest one is in the consumer protection space. That is the bread and butter of the state Attorneys General. Whether you are Republican or Democrat, north or south, east or west, the focus, the bread and butter issue is consumer protection. You are going after mostly companies to protect consumers.”

“The federal government did some of that with the Consumer Financial Protection Bureau (CFPB). During the Obama administration, there was a lot of coordination between the CFPB and the state Attorneys General to determine who would go after which companies. And the states would often be much more nimble and flexible and less bureaucratic. They would be able to go after companies more aggressively and more expeditiously than the federal government.”

“In the antitrust space, it really has been quite the opposite. On the bigger cases, the Microsoft cases of the world, the federal government would be in the lead. State Attorneys General in the bigger cases would shadow along, see what happens and determine whether they were satisfied with the action of the Justice Department and then make a determination as to whether or not they wanted to enter the fray.”

“And the state AG offices had different levels of interest and resources when it came to antitrust cases. New York, California, Illinois, Texas, Maryland, Connecticut have relatively vibrant antitrust divisions, some of the smaller state offices don’t have much at all and haven’t done that much work in the antitrust arena.”

“In the bigger cases, the bigger state AG offices would look at the antitrust concerns and follow along with the Department of Justice. In the smaller cases, then you might find one state that is taking the lead.”

“In California, the AG’s office is moving against Sutter Health. That was a case that I had been involved with at my former firm. The focus of concern in the case came out of northern California. It made sense for the state of California to bring that action instead of other states and instead of the federal government.”

Now you are getting big cases, like the T-Mobile/Sprint merger, where the Department of Justice is green lighting the merger, but the state AG offices are moving in to challenge it.

“That’s one of those national, very big cases of concern. We live in a much more polarized political world than we used to. The state AGs are much more political. Most if not all state Attorneys General at one time or another consider running for the U.S. Senate or for Governor.”

“As a result, you see the real strengthening of the Republican Attorneys General Association and the Democratic Attorneys General Association. They convene and meet and talk about cases – like the T-Mobile/Sprint merger. In that case, we have a Republican federal government. We have the perception of the Democratic State Attorneys General that the federal government is doing less and less enforcement work, in the antitrust space in particular.”

“You have the New York Attorney General and the California Attorney General challenging the merger, not necessarily because they think it’s a bad thing for consumers, but they don’t know that it has been studied and looked at from the perspective of consumers. In that particular case, those state AGs and the other Democratic state Attorneys General are concerned the merger would create less competition and higher prices for lower and moderate income consumers and rural consumers. Those are concerns that may or may not have been addressed by the federal government. And they are bringing a case to make sure those concerns are addressed.”

“It is a little unusual, because in the telecommunications space it is rare that there are concurring prosecutions or cases with the Department of Justice. That is highly unusual in a big telecommunications merger.”

You headed the National Association of Attorneys General for a year. Who controls that organization?

“The Republican Attorneys General Association (RAGA) started in 2000. The Democratic Attorneys General Association started in 2002. RAGA was pushed by the Chamber of Commerce to go after what they considered to be aggressive state Attorneys General. And in particular they had in mind Eliot Spitzer of New York and Attorneys General of that ilk.”

“But the National Association of Attorneys General (NAAG) has been alive and well for well over a century. And that is the non partisan group. I was head of Democratic Attorneys General Association for three years before I became head of NAAG. And NAAG is the national association. It is bipartisan. It does not take corporate money. The others do. They have substantive meetings three times a year. But they are also divided into four different regions – the East, the South, the Midwest and the West.”

“NAAG rotates leadership in alternative years. You are a NAAG President for a year. And it moves from Democrat to Republican to Democrat to Republican. And there’s a four person executive board. Right now the head of NAAG is Jeff Landry. He’s the AG in Louisiana.”

“There is also a staff side. NAAG has its own offices in DC. They do an enormous amount of training for the AG offices. They do international trips with state AGs. They support the AG offices around the country.”

Who funds the NAAG?

“The different AG offices fund it. They have to pay dues. Also, there is a huge tobacco arm of NAAG. And that is funded by the tobacco settlement agreement. That grew out of the AG litigation brought against the tobacco companies in the late 1990s. That is a big part of it. They bring in a lot of money. And some of the money that came in from the tobacco settlement goes directly to NAAG.”

[For the complete q/a format Interview with Douglas Gansler, see 33 Corporate Crime Reporter 32 (11), August 12, 2019, print edition only.]

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