Another “middle way” strategy by Republican Gov. Jeff Landry, implemented before he was governor, may end up backfiring – or perhaps could pay off depending upon the inclinations of his ally GOP Pres. Donald Trump; just follow the money.
At present, Landry is battling to put an insurance reform package into law, one that he proclaims casts a pox on both houses of insurers and trial lawyers for practices he claims needlessly drive up the cost of insurance. The move is somewhat of a gamble, as in comparison to other states’ laws where insurance rates are much lower Louisiana’s encourages litigation and Landry’s agenda doesn’t appear to move the needle enough to substantially reduce rates through measures discouraging litigation while not discouraging industry participation.
But this isn’t the first time Landry tried to find a path between opposing sides of an issue. As attorney general, he tried to discourage the state from intervening legally against energy companies which was alleging, along with coastal parishes, that explorers had caused coastal damage through activities illegal or without permission under state law. Use of state resources this way was part of his predecessor Democrat Gov. John Bel Edwards’ sue-and-settle strategy: treat these firms as piñatas to be busted open for cash by allying with plaintiffs, use the state’s notoriously plaintiff-generous/jackpot justice courts to come up with a judgment against the target, and then work out a semi-extortionist agreement using the judgment as the hammer waiting to come down, with appellate prospects uncertain, that shovels settlement money to plaintiffs – in this case, government.
Instead, Landry backed parish governments in their quests, signing over to their lawyers in effect state cooperation to be exercised at their disposal. Under state law, this would channel any awards to specific parishes towards the state’s coastal restoration efforts, whereas if the state had intervened the money could have been used for other purposes (which couldn’t happen as the state legislature refused to enact enabling legislation conveying this power).
And cash is a major motivation in all of this. While the state does, indeed must, kick in some monies from time to time for coastal restoration needs – projected at $50 billion worth – as well as by federal law apportioning offshore activity royalty generation, efforts mainly have been financed from the Macondo oil well blowout settlement that will bring the state $8.7 billion through 2031. The clock obviously is ticking on this revenue steam, and a slew of judgments or settlements could exceed this figure.
That’s become apparent from the recent state court case that awarded Plaquemines Parish – in reality, for the state to use in and around the parish for restoration work – what could end up with penalties and fees over $1 billion. With over 40 other such cases out there, the irony is that the state’s chief executive who decried the use of jackpot justice as attorney general now oversees a state seeking that path to scratch up funding. (A settlement months ago involving Cameron Parish remains sealed, but likely involves a similar amount.)
There will be business consequences. A stern letter written by former U.S. Atty. Gen. William Barr warned Louisiana Republican Atty. Gen. Liz Murrill that the industry will fight these attempts and argues against the legal merits of the case, about which Murrill disagrees, but most particularly calls for her to halt the state’s endorsement of the plaintiff parishes and specifically the carte blanche backing it has given to the trial lawyers representing them. A study prior to resolution of any cases estimates that the state would have 53 to 74 fewer oil wells and would lose between $44 million and $113 million dollars in economic activity, as well as annually royalty revenues between $8.9 million and $22.6 million, because of the litigation risk associated with the coastal lawsuits.
Which is why, according to sources mentioned in The Hayride, Trump may get involved (introducing more irony: he and Barr didn’t part on very good terms). He recently issued an executive order that seems to counter the very course the state is taking, which condemns states using the legal system to discourage energy production with a vague threat to take action against these. But also it could be that a potential response would entail shoveling more federal money to states’ coastal restoration efforts in exchange for cancelling these legal efforts. It should not go unnoticed that the cooperation of Congress needed involves an institution whose top two officials are from Louisiana.
Of course, the stick could apply as well as the carrot. Washington Democrats put Louisiana liquified natural gas projects into a deep freeze, which the Trump Administration only recently resuscitated. If Trump wanted to, federal regulatory decisions could tie projects up into knots in states he deems allow too much interference in energy concerns.
Yet if Trump and Republican congressional leaders choose carrots, Landry becomes the ultimate winner, having aided in setting up a regime to snare restoration bucks but rescued from that without denting the state’s economic development hopes. This application of the “middle way” might prove more fruitful that the uncertain economic and political prospects he invites on himself over vehicle insurance.
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