Texas A&M University School of Law Texas A&M Law Scholarship Faculty Scholarship 1-2008 Bootleggers, Baptists &(and) Televangelists: Regulating Tobacco by Litigation Bruce Yandle Joseph A. Rotondi Andrew P. Morriss Texas A&M University School of Law, [email protected] Andrew Dorchak Follow this and additional works at: https://scholarship.law.tamu.edu/facscholar Part of the Law Commons Recommended Citation Bruce Yandle, Joseph A. Rotondi, Andrew P. Morriss & Andrew Dorchak, Bootleggers, Baptists &(and) Televangelists: Regulating Tobacco by Litigation, 2008 U. Ill. L. Rev. 1225 (2008). Available at: https://scholarship.law.tamu.edu/facscholar/315 This Article is brought to you for free and open access by Texas A&M Law Scholarship. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Texas A&M Law Scholarship. For more information, please contact [email protected]. BOOTLEGGERS, BAPTISTS & TELEVANGELISTS: REGULATING TOBACCO BY LITIGATION Bruce Yandle* Joseph A. Rotondi** Andrew P. Morriss*** Andrew Dorchak**** The "bootleggers and Baptists" public choice theory of regula- tion explains how durable regulatorybargains can arisefrom the tacit collaboration of a public-interest-minded interest group (the "Bap- tists") with an economic interest group (the "bootleggers"). Using the history of tobacco regulation, this article extends the bootleggers and Baptists theory of regulation to incorporate the role of policy entre- preneurs like the state attorneys general and private trial lawyers who joined forces to regulate tobacco by litigation. We denominate these actors "televangelists" and demonstrate that they play a pernicious role in regulation. The article begins by showing how tobacco regulation through the 1980s fit the traditional bootleggers and Baptists public choice model. It then explores the circumstancesthat made it possible for the emergence of the televangelists as a regulatory partner that the boot- * Alumni Distinguished Professor of Economics Emeritus, Clemson University. A.B. 1955, Mercer University; M.B.A. 1968, Ph.D. (Economics) 1970, Georgia State University. This article grew out of our study of tobacco litigation for our book, ANDREW P. MORRISS, BRUCE YANDLE & ANDREW DORCHAK, REGULATION BY LITIGATION, forthcoming from Yale University Press. Ro- tondi coauthored that portion of the book with Morriss, Yandle, and Dorchak, and our collaboration continues with this article. In addition, three of us have examined regulation-by-litigation in a variety of articles focused on the Environmental Protection Agency's regulation of heavy duty diesel engines. See Andrew P. Morriss, Bruce Yandle & Andrew Dorchak, Choosing How to Regulate, 29 HARV. ENVTL. L. REV. 179 (2005); Andrew P. Morriss, Bruce Yandle & Andrew Dorchak, Regulation by Litigation: EPA's Regulation of Heavy-Duty Diesel Engines, 56 ADMIN. L. REV. 403 (2004). We are grateful to Roger E. Meiners and Jerry Ellig for comments. ** Legal Fellow, Regulatory Studies Program, Mercatus Center at George Mason University. B.A. 2001, St. John's University; J.D. 2003, University of Minnesota Law School. *** H. Ross and Helen Workman Professor of Law, Professor of Business Administration & Professor, Institute of Government and Public Affairs, University of Illinois; Senior Scholar, Mercatus Center at George Mason University. A.B. 1981, Princeton; J.D., M. Pub. Aff. 1984, University of Texas at Austin; Ph.D. (Economics) 1994, Massachusetts Institute of Technology. **** Head of Reference and Foreign/international Law Specialist, Case Western Reserve Univer- sity School of Law. M.L.S. 1994, Kent State University; Honors B.A., 1988, Xavier University. 1225 1226 UNIVERSITY OF ILLINOIS LAW REVIEW [Vol. 2008 leggers would prefer. The article then criticizes televangelist- bootlegger bargains as likely to result in substantial wealth transfers from large, unorganized groups to the coalition partners. It also shows how televangelist-bootlegger coalitions are more pernicious than bootlegger-Baptist coalitions. Finally, it concludes with sugges- tions for how to make televangelist-bootleggercoalitions less durable. TABLE OF CONTENTS Introduction ................................................................................................ 1226 I. Regulatory Bootleggers, Baptists, and Televangelists .................. 1228 A . Regulatory Bootleggers ............................................................ 1230 B . R egulatory B aptists ................................................................... 1233 C. Regulatory Televangelists ......................................................... 1236 D. Interest Groups and Regulation-by-Litigation ...................... 1240 II. Before the Televangelists ................................................................. 1244 A . The O pen Speakeasy ................................................................. 1245 B. The G reat Awakening ............................................................... 1248 C. The Street Corner Revival ........................................................ 1252 D . A Failed Reform ation ............................................................... 1256 E. Tobacco Regulation, Bootleggers & Baptists ........................ 1259 III. The Rise of the Televangelists ......................................................... 1260 A . The N ew Clergy ......................................................................... 1261 B . Selling Indulgences .................................................................... 1265 C . The R eform ation ....................................................................... 1268 D . A N ew Jerusalem ....................................................................... 1270 E. The Impact of Televangelists ................................................... 1277 IV. Stopping Televangelist-Bootlegger Alliances ................................ 1280 INTRODUCTION In recent years, regulators-federal, state, and local-have gone be- yond rulemaking to regulate using litigation.' More than merely enforc- ing existing rules and statutes, regulation-by-litigation imposes forward- looking substantive constraints on private parties through settlement agreements achieved by threatening the private parties with catastrophic losses.2 This phenomenon is an important development in regulatory law because it frees regulators from many of the procedural and substantive constraints imposed on them by legislatures and changes the political 1. See ANDREW P. MoRRIss, BRUCE YANDLE & ANDREW DORCHAK, REGULATION BY LITIGATION (forthcoming 2008). 2. See Robert L. Rabin, The Tobacco Litigation: A Tentative Assessment, 51 DEPAUL L. REV. 331, 339 (2001); MORRIss ET AL., supra note 1. No. 4] BOOTLEGGERS, BAPTISTS & TELEVANGELISTS constraints they face, giving them considerably enhanced freedom of ac- tion. For activists frustrated by the slowness of the traditional regulatory process or enraged at the political power of their opponents, regulation- by-litigation may seem a welcome development since it offers a chance to break free of what they see as illegitimate barriers to important public policy goals. The cost of this release of regulatory energy is high, how- ever. The procedures that slow agency progress are there to protect citi- zens' liberty and property from arbitrary action. The political compro- mises that block action are a necessary part of the democratic process that legitimates government action. A key development in the expanding use of regulation-by-litigation was the alliance of private attorneys with state attorneys general in suing the major U.S. cigarette manufacturers in the mid-1990s. The plaintiffs' bar had a long history of unsuccessful suits against the cigarette compa- nies dating back to the 1950s, and even the revelations in the late 1980s and early 1990s of decades of tobacco company misconduct had not en- abled it to overcome the combination of tobacco's considerable re- sources and juries' reluctance to penalize the sellers of a legal product for individuals' choice to engage in what was widely known to be risky be- havior. Federal and state regulators too had a history of, at best, par- tially successful regulatory efforts aimed at reducing tobacco use, with what at first appeared to be victories turning out to enhance the cigarette industry's profits and success. Working together, however, the private litigators and state attorneys general hoped to force the industry to ac- cept broad regulatory measures and pay enormous sums to both the pri- vate attorneys and state treasuries. The alliance did indeed bring the cigarette companies to the bar- gaining table and yielded a proposed national settlement, which subse- quently fell apart during congressional negotiations over the implement- ing legislation. The lawyers, attorneys general, and cigarette manufacturers then regrouped and created a series of state-by-state set- tlements, built around the 1998 Master Settlement Agreement (MSA), that salvaged some, but not all, of the original deal.3 The MSA became "the largest privately negotiated transfer of wealth arising out of litiga- tion in world history."4 It also introduced significant new regulations on tobacco, including an implicit tax that pushed cigarette prices higher, generated large revenue flows to state governments, and, in the process, cartelized the industry and made it more profitable. In the years after the MSA, public health interests, new cigarette manufacturers, and others have attacked various