Indiana Supports Business With Enlightened Law Enforcement

Tuesday, May 31, 2011 - 01:00
Hon. Gregory F. Zoeller

Hon. Gregory F. Zoeller

The Editor interviews Hon. Gregory F. Zoeller, Attorney General of the State of Indiana.

Editor: You worked in the federal government for ten years. How has this experience shaped your approach as Indiana's Attorney General (AG)?

Zoeller: The ten years I spent in the office of Senator and then Vice President Dan Quayle gave me an appreciation for the difficulty in crafting federal solutions to address issues that are very local in nature. During my years with the AG's office, the relationship between the state and federal government has become more like a partnership; however, I still see a fundamental problem in Washington, where solutions are crafted too narrowly and don't allow room for the states to make them work locally.

Editor:I understand you have a resident economist at the AG's office. Is that unusual?

Zoeller: As far as I know, Indiana may be the only state with a chief economist as part of the AG's office. I give credit for this idea to my predecessor, Steve Carter, with whom I attended law school. Having pursued a joint degree - MBA and JD - AG Carter had a very keen sense of the need to develop a business approach to the legal practice of the AG's office.

We use the chief economist primarily to help us develop a clear set of standards for settlements.Too often, state agencies, which are our clients, don't have a clear sense of what they want out of a settlement - unlike corporations, which instruct their own legal counsel. Our chief economist helps the state agencies develop a better endgame for litigation.

The other value the chief economist brings to the AG's office is in helping us with our own internal budgets. For example, we have an IT budget, and the chief economist helps us assess requests for proposals, so we can determine the best outside vendor for certain projects. This position has become a very valuable tool for the AG's office.

Editor: Why is Indiana an attractive state in which to do business?

Zoeller: One of the key reasons is that our state statutes and regulations are easily understood. Indiana has a clear mandate in areas that greatly affect business, such as consumer protection and the state tax code.

Clarity of statutes and regulations creates certainty and is conducive to business interests. Indiana has an effective government and boasts a highly skilled workforce with a strong work ethic, and we are leading the nation in private-sector job growth. The most recent full-year statistic places our 2010 private-sector job growth at 2.1 percent, which evidences that business is welcome to come to Indiana.

Editor: Is there a dichotomy between schools of thought regarding the role of state attorney general - law enforcer versus policy maker? What are your thoughts?

Zoeller: There are differences across the U.S. in defining the role of AGs, with some states defining the role by statutory authority. To get a complete picture of how AGs best represent what states ask of them, you have to look at each state - and the authority granted to the AG - and then look at the distinct views of individual officeholders.

In Indiana, the AG's role is one of only 16 in the nation that is defined by statute rather than by the constitution. This arrangement lends itself to a more conservative role for the AG, and I respect that Indiana's legislature gives direct authority to this office, rather than general authority to do what any individual deems best.

I recognize the enforcement role primarily and do not venture into the area of policy maker, which is reserved for the governor's office and the legislature.

Editor: In your remarks at the Lawyers for Civil Justice (LCJ) Membership Meeting, you discussed the use of private law firms. Do you think there may be abuses in other states with respect to the use of outside counsel?

Zoeller: We have not hired outside counsel on a contingency basis, except for the areas of collection work, in which the interests of private counsel and of the sovereign state are the same. In almost all other areas, hiring outside counsel on a contingency fee may not preserve the best interest of the state as the only motive for the litigation and subsequent settlement of a lawsuit. The use of outside counsel on contingency fee enables a private interest to play a disproportionately large role in the litigation.

Indiana recently passed a statute that codifies a very clear limitation on the use of outside contingency fee counsel, and I supported this effort to ensure that the role of outside counsel was limited to those areas in which the state's interests were aligned with private interests.

Editor: You also mentioned the Tort Claims Act cooling-off period and a "do not sue" statute that limits the use of state resources to sue the state.

Zoeller: We've long had a Tort Claims Act, requiring a 180-day notice that allows the state to review a claim - prior to litigation - and determine whether there are damages and if payment is owed by the state. The follow-up legislation, just recently passed, is a statute that my office nicknamed the "do not sue" statute.

First, the statute limits Indiana school corporations, which are funded with state resources, from using state funds to sue the sovereign. There have been a number of cases recently where school corporations have sued the state, challenging certain parts of the funding formula. While I recognize there are legitimate arguments, they should be brought to the legislature and discussed as a part of a policy orientation. Using state funds to sue the state, which involves my office and the courts, creates an expensive dispute resolution system, and we're looking to do away with it.

Editor: You mentioned thatIndiana is attractive to business, in part because its laws and regulations are transparent, and there are not, for example, undisclosed standards among the agencies that may mislead business regarding compliance with the law.

Zoeller: That is right. We have tried to develop a transparent set of laws and regulations. We don't play a game of "gotcha," where people may unknowingly violate the requirements; instead, we create an open and transparent system so that compliance is simple. We limit enforcement against those who fail to complete the basic self-education required to comply with our statutes and rules. We want to avoid surprises where companies fail to comply and then complain that they didn't understand what was required of them.

With this objective, we offer substantial outreach, within both state government and the AG's office. For instance, we can work with corporations in situations where they are addressing a large number of consumer complaints. The goal is to reduce the number of complaints and to push the companies to meet certain best practices within their own industry and within our office. In turn, companies can educate consumers about what's required of businesses that deal with consumers, creating a clear understanding among all parties.

Editor: You mentioned at the LCJ meeting that Dodd-Frank and the Patient Protection and Affordable Care Act (PPACA) have had particular ramifications in terms of state enforcement. Would you please expand on that?

Zoeller: Most AGs saw the Dodd-Frank statute as a means of coordinating state and federal regulation of the credit markets. I agree in some respects, because the shrinking footprint of state resources requires coordination among states and collaboration with the federal government.

I may be the only AG who asked my state's legislators to vote against the Dodd-Frank bill, which I did for two primary reasons. First, with problems in the credit market over the last few years, it was a very poor time to create an environment of uncertainty, which is reflected in rules yet to be promulgated and their enforcement yet to be defined.

Second, on a philosophical basis, the idea of having state AGs - who represent a sovereign state - being the enforcement arm of federal regulators constitutes an inappropriate role within our federalist system.

Editor: What is the impact of Dodd-Frank legislation - and the creation of the Bureau of Consumer Financial Protection (the Bureau) - on your state operating budget?

Zoeller: This is an issue with which I am actively engaged. Roy Cooper - the AG from North Carolina - is this year's president of the National Association of Attorneys General, and he has appointed five AGs, including myself, to work with the new Bureau in its development.

One area in which I have focused is to ensure that federal government support for state AGs not be laden with restrictions on how we choose to operate within our own state offices. For example, the Medicaid Fraud Control Unit (MFCU) is another example of a federal regulatory program - under the U.S. Department of Health and Human Services (HHS) - that is enforced by state AGs.

Indiana's MFCU program receives 75 percent of its funding from the federal government and the remaining 25 percent comes from the state. This funding comes with far too many restrictions and, thus, states are forced to conform to the federal department procedures regardless of whether they make sense for the individual state. I hope we can avoid this outcome in the final development of this new enforcement role of AGs with the Bureau.

Editor: Do you have any formal or informal liaison arrangements with corporations in the state to help them avoid breaches of state law?

Zoeller: We have an open door policy. We encourage Indiana corporations to build a relationship with our office, particularly on consumer protection compliance matters, so they have a clear understanding of what is required. If issues arise, we can address them very early on, rather than wait for problems to develop to the point where enforcement action would be necessary.

Again, we're not aiming to enforce statutes and regulations, though we want businesses to understand that action will be taken if they fail to comply. We want to have a relationship with business and create an environment wherein compliance is easy. Everyone has to comply, so there's no competitive advantage gained as a result of non-compliance.

Editor: Do you see public nuisance claims increasing in light of the U.S. Supreme Court case American Electric Power Co., Inc. v. Connecticut ?

Zoeller: My office filed the amicus brief in AEP, and I also wrote a recent op-ed about it. While it is too early to predict the outcome of this case, our brief argues that where there is a full regulatory scheme - which is true of the energy sector - it's not appropriate for federal courts to re-regulate on top of that full regulatory scheme. Thus, I hope AEP will stand for the proposition that leaving these matters to regulators - not to federal courts under a nuisance statute - is the best way to enforce the requirements of statutes and regulations promulgated on both the state and federal levels.

Editor: The LCJ meeting focused on rising costs of litigation and, particularly, of e-discovery. In fact, your office might also be experiencing that problem to some degree. What are your thoughts on the LCJ goals?

Zoeller: The meeting was very informative about the interests of LCJ, including its goal to reduce the cost of litigation and the resulting uncertainty within the business environment. E-discovery costs present a problem for many of our state clients.

LCJ discussions highlighted the larger problem of litigation costs. The recent U.S. Supreme Court decision in AT&T Mobility v. Concepcion is a good sign because it supports arbitration and, more broadly, expresses the need to develop alternatives to dispute resolution that limit the most expensive civil litigation option.

Indiana supports the development of dispute resolution alternatives that don't require years of costly litigation, which creates uncertainty, disrupts business development and operations and drains resources. Editor: It seems the insights you've gained from the perspective of your office and its goals must have been very valuable to the LCJ. Do you have any final thoughts for our readers?

Zoeller: As I mentioned at the LCJ meeting, I would be more than happy to participate in continuing efforts concerning these issues. My background, both as the elected AG and in my prior capacity as chief deputy and manager of the office, lends itself to working with the LCJ in its mission to represent the interests of its membership. Serving both as a defense attorney for the sovereign and as a prosecutor who brings actions of enforcement on behalf of the state, I view broad issues from a unique perspective.

Finally, it is notable that Indiana is leading the country in terms of a business-friendly environment and yet still maintaining strong environmental and consumer protections and a viable, comprehensible tax code. It's an exciting time to be an attorney general and to field questions about the Constitution of the United States. I am privileged to be in this role at this fascinating time.