Nick Krieger (@nckrieger):
On Tuesday, Michigan’s State Administrative Board approved Attorney General Bill Schuette’s request to spend an additional $3.4 million on outside legal assistance in his Flint Water Crisis probe, bringing the total expected cost for private attorneys and investigators to $4.9 million. So far, this money has bought the taxpayers of Michigan little more than a few minor criminal charges against mid-level bureaucrats and a fairly hopeless civil lawsuit.
Why do I say “fairly hopeless”? Let me take you through the Attorney General’s claims:
As you’ve likely read, Schuette has filed a civil lawsuit against defendants Lockwood, Andrews & Newnam (“LAN”), Veolia North America (“Veolia”), and several of their associated companies. These defendants are professional engineering firms retained by the City of Flint to study the feasibility of using the Flint water treatment plant, to develop recommendations concerning the treatment of Flint River water, to assist the city in implementing these recommendations, and to provide other related consulting services. Schuette alleges that these defendants failed to act in accordance with the standards applicable to professional engineers, made fraudulent misrepresentations, created a public nuisance, and worsened the Flint Water Crisis through their negligent and deceitful conduct.
But has anyone actually read the Attorney General’s complaint? (You can read the complaint on The Detroit News's website here.)
Schuette first sets forth a claim of professional negligence against all the defendants. As any first-year law student will tell you, to prevail on a claim of negligence the plaintiff must establish a duty, a breach of that duty, causation, and damages. Let’s just assume for the sake of argument that the defendants owed the City of Flint a duty to act as would a reasonably prudent professional engineer under the circumstances. Let’s further assume that the defendants breached their duty of care and that this breach proximately caused injuries and damages. The problem is that Schuette is not suing on behalf of the City of Flint.
In his complaint, Schuette maintains that he has the power to proceed in the name of the people of the State of Michigan to protect the state’s quasi-sovereign interest in safe drinking water. Specifically, Schuette alleges that he has standing to sue under the common-law doctrine parens patriae. In some jurisdictions, the doctrine of parens patriae gives the attorney general standing to sue in the name of the people to protect a quasi-sovereign interest of the state.
In Michigan “[t]he Attorney General’s duties and powers are not exhaustively defined by statute and constitution, but include those exercised at common law.” Accordingly, it is certainly arguable that Schuette has standing to sue the defendants in this case under the doctrine parens patriae, at least with respect to claims for statutory violations, nuisance, declaratory or injunctive relief, and the like. But negligence? That might be a horse of a different color. Even assuming that the Attorney General has standing to sue for negligence, he still must prove the essential elements of the tort to prevail on his claim. This includes proving that the defendants owed his client a duty of care.
The defendant professional engineering firms were retained to do work for the City of Flint; no one disputes that they owed the city a duty to act as would a reasonably prudent professional engineer. But the defendants did not work for, or have any relationship with, the people of the State of Michigan at large. True, a general duty of care may arise by operation of law, and this is certainly not limited to instances in which there is contractual privity. In determining whether a duty exists, however, “[t]he most important factor to be considered is the relationship of the parties.”
Although Schuette alleges that “[t]he defendant corporations owed the State of Michigan and its citizens a duty of care and competence at a professional standard,” merely reciting something in a complaint does not make it so. Interestingly, Schuette cites zero law for the proposition that the defendant companies owed a duty of care to the people of the State of Michigan. As already explained, the defendants had no relationship with the State of Michigan or its citizens. They were hired exclusively by Flint to provide consulting and professional engineering services for the city. If a city hires a construction company to replace its water pipes and the company performs negligently, can the people of the State of Michigan sue the construction company on the city’s behalf? If a city retains an architecture firm to design a new wastewater treatment plant and the design does not comport with the standard of care applicable to a reasonable architect under the circumstances, is the architecture firm liable in negligence to the citizens of the State of Michigan? No, not in most cases. In each of these hypotheticals, the defendant’s duty of care is owed to the city—not to the citizens of the state at large. As Chief Judge Cardozo famously wrote in Palsgraf v Long Island R Co, 248 NY 339, 342; 162 NE 99 (1928), “[t]he plaintiff sues in [his] own right for a wrong personal to [him], and not as the vicarious beneficiary of a breach of duty to another.” In the end, Schuette still has not explained how the doctrine of parens patriae allows him to establish that the people of the State of Michigan were the beneficiary of a duty of care that was not owed to them.
The Attorney General has stated that the State of Michigan will seek to recover “hundreds of millions.” In my opinion, he’s definitely jumping the gun. Before he can reach the damages stage, he’ll have to prove that the defendants owed his client—the people of the State of Michigan—a duty of care. That won’t be an easy task. And it is axiomatic that there can be no negligence where there is no duty.
Next, Schuette sets forth a claim of fraud against Veolia. In two short paragraphs, Schuette alleges that Veolia made three fraudulent misrepresentations (in addition to other unidentified misrepresentations) in its interim report dated February 18, 2015, and its final report dated March 12, 2015. Schuette claims that these misrepresentations were intended to induce reliance by the citizens of the State of Michigan, and that the citizens of the State of Michigan actually and reasonably relied on the alleged misrepresentations to their detriment. These allegations are highly questionable.
As noted above, Veolia was not hired by the State of Michigan, nor did it have a relationship with the citizens of the state at large. It was retained solely by Flint to make recommendations and provide services to the city. It is entirely unclear how Schuette plans to prove that Veolia made its allegedly fraudulent statements with the intention of inducing reliance by the people of the State of Michigan.
In addition, it is difficult to comprehend how the citizens of the State of Michigan could have actually relied on the three statements identified in Schuette’s complaint to their detriment. Schuette has pointed to the following three alleged misrepresentations by Veolia: (1) “Flint’s water was ‘safe’ and ‘in compliance with drinking water standards,’ ” (2) “the observed discoloration was merely aesthetic and not indicative of a water quality of [sic] health problem,” and (3) “medical problems are because ‘[s]ome people may be sensitive to any water.’ ” All three statements were made in Veolia’s interim report dated February 18, 2015. Veolia’s “interim report” is actually a 22-page PowerPoint presentation. The presentation specifically cautions the reader that Veolia has “just started” the process and that the company “[m]ight not have an answer yet to your question.” In fact, the document reveals that it is not intended to serve as a report at all, but rather a preliminary presentation to the Flint Public Works Committee. It provides that the next steps in the process are to “[c]arry out [a] more detailed study,” “[m]ake recommendations for improving water quality,” and “[p]rovide a plan . . . .” It also states that “[a]n update will be provided next week and a report the following week.”
Could any reasonable person conclude that the representations contained in Veolia’s presentation of February 18, 2015, were made with the intention of inducing reliance by the citizens of the State of Michigan? I doubt it. They were interim, preliminary statements concerning the nature of the problem and the progress of Veolia’s work. And they were expressly conditioned on the completion of an additional study and a future report.
It is true that certain of Veolia’s allegedly fraudulent statements were repeated in the final report dated March 12, 2015. But Schuette freely admits that his office had the means to discover the truth about any misstatements contained in the final report by the time that report was issued. Indeed, Schuette specifically alleges that “EPA officials . . . had correctly identified the problem, the root cause, and the solution to the Flint lead crisis” by the time Veolia released its final report on March 12th. He also confirms that the EPA officials independently discovered the truth about the causes of the Flint Water Crisis “[w]ith far more limited information than was available to the defendant corporations . . . .” It is elementary that “there can be no fraud where the means of knowledge regarding the truthfulness of the representation are available to the plaintiff and the degree of their utilization has not been prohibited by the defendant.”
And what about the legal requirements for pleading fraud? Schuette’s complaint states that Veolia’s fraudulent misrepresentations “include but are not limited to” the aforementioned three statements. So, let me get this straight: Schuette alleges that Veolia made other fraudulent statements as well, but he can’t be bothered with describing these other statements or how they were fraudulent??? What an absolute joke. Under Michigan law, fraud must be pleaded with particularity, and the pleading must specifically address each element of the tort. Schuette’s complaint fails to set forth any actionable fraud committed against the people of the State of Michigan.
Lastly, Schuette puts forward a two-paragraph public nuisance claim. The allegations contain very few facts, and are probably too conclusory to state a claim on which relief can be granted. Admittedly, acts in violation of law constitute a public nuisance at common law, and the Attorney General, acting on behalf of the people, is the proper party to sue to enjoin a public nuisance. Schuette alleges that “[t]he acts and omissions of the defendant corporations constitute a public nuisance,” at least in part because they “violate state safe drinking water laws.” This might have been true while the defendants’ activities were still ongoing. However, whereas ongoing activities may constitute a public nuisance when carried out in violation of law, I have found no Michigan case in which the completed acts and omissions of a professional services firm were retrospectively found to constitute a public nuisance. What’s more, even assuming arguendo that the defendants committed unlawful or tortious acts that did qualify as an enjoinable public nuisance, it is unclear what nuisance, if any, remains to be abated at this point. Apparently as an afterthought, Schuette alleges that “[o]ne potential measure to prevent future public harms and abate the nuisance is the replacement of lead service lines and pipes.” Yet I am at pains to understand how any of the named defendants—professional engineering firms hired to do consulting work—could be held legally responsible for replacing the lead pipes.
It’s more than a little troubling that we, the taxpayers, paid someone to prepare this conclusory, internally contradictory complaint. I’m not exaggerating when I say that this pleading looks like it was drafted by a summer intern. Schuette has said he believes this lawsuit might be worth “ ‘hundreds of millions’ in damages from the companies.” He has to be kidding. I have serious doubts as to whether his claims are even legally cognizable.
I don’t know if LAN, Veolia, and their associated companies actually did anything wrong or not; that isn’t the focus of this blog post. But I do know this: If Schuette really believes that the defendants were engaged in tortious and deceptive conduct that created a public nuisance, worsened the Flint Water Crisis, and caused injuries, he should draft a better complaint and think up some better theories of liability that might actually stick. If, on the other hand, this lawsuit is merely a smokescreen designed to deflect attention from the wrongful conduct of the State of Michigan—as I believe it may be—Schuette has accomplished exactly what he wanted.