Michigan Attorney General Dana Nessel announced that her office is seeking proposals from private law firms to prosecute the fossil fuel industry for weather events she claims result from the Earth’s changing climate. According to Nessel:

Warmer temperatures are shrinking ski seasons in the UP and disrupting the wonderful blooms of Holland’s Tulip Time Festival. Severe weather events are on the rise. These impacts threaten not only our way of life but also our economy and pose long-term risks to Michigan’s thriving agribusiness. The fossil fuel industry, despite knowing about these consequences, prioritized profits over people and the environment. Pursuing this litigation will allow us to recoup our costs and hold those responsible for jeopardizing Michigan’s economic future and way of life accountable.

What can Michigan ski resort operators, the Holland Tulip Time Festival and Michigan agribusinesses expect to receive as compensation for the alleged climate change harms described by the attorney general? Based on past experience with litigation of this type, probably very little. But the private attorneys hired by Nessel may end up with massive payouts. Wall Street investment bankers and politically favored companies that receive state subsidies may also benefit, if past events are any guide.

The proposed litigation using outside law firms

Nessel is requesting that private attorneys and law firms submit proposals to her office to explain how they would pursue “constitutional, statutory, tort and other applicable common law claims against the fossil fuel industry.” The private attorneys selected by her office will be compensated on a contingency fee basis.

Several other states, including Connecticut, Minnesota, New Jersey, Rhode Island, and Vermont, have filed similar lawsuits against oil companies, including BP, ConocoPhillips, ExxonMobil and Shell. The states allege that these companies harmed them through their contributions to climate change. Nessel said Michigan might add utilities and other related industries to the lawsuit.

Notably, the Michigan attorney general does not appear interested in including automakers Ford and General Motors in the lawsuit, despite longstanding claims that car emissions contribute to climate change. Other states may be preparing such lawsuits, however. California previously filed a climate change lawsuit in 2006 against Michigan-based automakers, but it agreed to dismiss the lawsuit a few years later, following policy changes imposed by the Obama administration.

Why might a private law firm take on such a risky lawsuit on a contingency basis? The firms selected by Nessel will have to work on the case for years before they are rewarded, and that’s only if the lawsuit is successful. And yet her announcement appears to anticipate that many law firms will compete to be selected to take that risk.

These private law firms probably won’t be taking the risk themselves. Instead, they may be funded by climate advocacy groups. That has been the pattern with lawsuits filed by state and local governments elsewhere. Emails found from other states show that “climate advocacy groups advanced funds to private law firms to be used to research and prepare the climate lawsuits for the state’s attorneys to file,” according to a summary from Forbes. These previous climate change lawsuits appear to have originated with advocacy groups that pitched the cases to state and local prosecutors willing to weaponize law enforcement against companies the advocacy groups consider to be their opponents.

What if the lawsuit is successful?

Suppose that private attorneys chosen by the Michigan attorney general manage to win a claim in court or obtain a settlement. What would be the ramifications? The most useful comparison is what happened when Michigan settled its case against tobacco companies in 1998.

In the 1990s, Michigan and 45 other states sued major tobacco companies to recover tobacco-related health care costs, relying on outside private attorneys to do the work. As part of a settlement, the tobacco companies agreed to a series of marketing restrictions and to make ongoing and indefinite payments to the states. In 2023, Michigan received $292 million from the tobacco companies under the settlement.

Michael LaFaive and Todd Nesbit point out that Michigan has used very little of the tobacco settlement funds on programs with any kind of relationship to harms to Michigan residents from smoking. The American Lung Association reached the same conclusion in its 2023 State of Tobacco Control report, which shows that Michigan receives over $1 billion in tobacco-related revenue per year. Michigan directs only about $2.2 million, or less than a quarter of 1% of those funds, to reducing tobacco use and exposure to second-hand smoke.

Where does the rest of this tobacco money go? The biggest chuck has been directed to corporate handouts. As LaFaive and Nesbit explain:

Each year since 2008, Lansing politicians have showered state agencies, like the Michigan Strategic Fund and Michigan Economic Development Corp., with $75 million in [tobacco settlement] funds in the name of economic development. This is purportedly done to create jobs, but many reviews of this spending suggest it is ineffective. Lawmakers should stop wasting tobacco settlement revenue and instead redirect it to tobacco cessation and prevention programs.

They also point out that other states have used their tobacco settlement funds for purposes such as “college scholarships, road and bridge infrastructure, flood controls and paying legal fees associated with police abuse lawsuits in Los Angeles.”

This kind of litigation is very lucrative for private attorneys. After the tobacco litigation was settled, the attorneys who brought the case for Michigan received a staggering $450 million. Investment bankers made out even better. When Michigan ran into financial shortfalls in the years following the tobacco settlement, state officials went to Wall Street for advances on the funds so they could spend their tobacco settlement money faster. To get those advances, the state agreed to pay 24% of the settlement receipts, so that Michigan only received 76 cents on the dollar, giving up a substantial part of the future revenues from tobacco companies.

Even after paying the attorneys and the investment bankers, states can expect any payouts they receive from the fossil fuel industry to be reduced even further because of lower future tax revenues. Any big payouts by these companies will mean lower profits, which will mean lower corporate income tax payments to the states. There will also be lower dividends for shareholders and lower income tax revenue for states.

There is every reason to expect more lawsuits against politically unpopular businesses if Attorney General Nessel succeeds in launching this litigation. The Michigan climate change lawsuit is an attempt to weaponize the court system to decide energy policy and punish companies the climate activists see as their opponents. Based on past experience with similar litigation, this lawsuit is unlikely to lead to meaningful compensation for those who are supposedly harmed. Instead, it is more likely to lead to a redistribution of wealth from taxpayers and productive companies to lawyers, investment bankers, climate activists and companies looking for more corporate welfare from the state.

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