Will a City Sue Your Company Next? The Impact of Municipal Legal Action

Legal battles between cities and corporations have ushered in immediate and enduring consequences for the involved businesses, impacting everything from financial stability to public reputation. With cities and municipalities becoming more active litigants, the emerging legal landscape represents a critical shift with potential repercussions for companies, as these lawsuits can carry immediate and long-term repercussions, impacting everything from financial stability and internal operations to public reputation.

Leveraging Curate data, we examine this trend, look at recent cases, and explore ways companies can shield themselves from this growing legal threat.

Emerging Legal Landscape: A Look at Recent Cases

Whether fueled by the ongoing opioid crisis or the proliferation of per- and polyfluoroalkyl substances (PFAS) in water supplies, cities and municipalities have been increasingly taking legal action against corporations.

Pharmaceuticals

Many municipalities have been suing over the ongoing opioid crisis with great success. Drug manufacturers and the pharmacy benefit managers (PBMs) in charge of distributing the medications are at risk here, and many have already faced billions of dollars in damages. These companies, such as manufacturer Janssen Pharmaceuticals and distributor Walgreens, will pay municipalities for the next five, 10, or even 20 years, depending on their arrangements. Curate has been tracking discussions around the country to understand how municipalities, such as Ayer, Mass., are choosing to use these settlement funds.

In a similar vein, municipalities have successfully sued insulin manufacturer Eli Lilly for inflating the price of the necessary drug by as much as 1,000 percent. In mid-2023, they agreed to a $13.5 million settlement, and to cap their insulin prices at $35. There are still further lawsuits pending against the manufacturing company, such as potential litigation coming out of Hillsborough County, Fla., as tracked by Curate.

Curate has also picked up instances of school districts, like the Rim of the World Unified in California, successfully suing the JUUL vaping corporation over their tactics of advertising to teenage audiences.

Forever Chemicals

Another nationwide issue at the forefront currently is the proliferation of per- and polyfluoroalkyl substances — also referred to as PFAS, PFOS, or forever chemicals — in local water supplies. This happens through the use of certain firefighting foams, grease-proof food packaging, and stain-resistant coatings on furniture, upholstery, clothing, and cooking utensils. As estimated in 2007 by the U.S. Center for Disease Control, approximately 98 percent of the population has trace readings of forever chemicals in their bloodstreams. You have almost certainly ingested some PFAS at some point in your life, and ingesting too many can lead to serious health issues.

It’s become known that New Jersey’s water supply currently does not meet the updated National Primary Drinking Water Standards as set by the Environmental Protection Agency in March 2023. This change reduced the allowable PFAS parts per trillion from 13 to just four, per New Jersey’s own Department of Environmental Protection.

In July 2023, Curate data flagged that the municipality of Flemington is electing to seek legal counsel to engage in a class-action lawsuit to secure safe drinking water for the years to come. This effort aims to have the chemical manufacturers responsible for the pollution pay for the costs of upgrading the water systems to meet the updated state standards. This move also allows the municipalities not to pass this cost on to the affected residents, something local leaders are attempting to avoid.

Wisconsin has also put heavy effort into PFAS litigation as the state grapples with some of the worst PFAS proliferation in the country, with every well in the city of Wausau contaminated to some degree. Curate caught an official notice about the lawsuit in Wausau in December 2023. Echoing the sentiment behind Flemington’s rationale, the attorney working on behalf of the municipality argues that the taxpayers and victims should not be the ones paying to fix the water system.

Redefining the Corporate Legal Environment: What This Trend Means for Your Company

The increasing involvement of cities and municipalities often requires private lawyers and individual lawsuits. This can complicate matters for state attorneys general, who traditionally lead these types of cases and have more resources

Some legal experts have labeled this new movement as a “dangerous legal trend,” so corporations need to consider the possible implications. Most notably, these lawsuits can significantly impact your company's internal operations, employee morale, customer perception, and the company's ability to uphold high service standards.

Reducing Risk: Strategies for Legal Protection

The most elementary step toward avoiding legal complications lies in staying updated with changes in local, state, and federal mandates. To this end, local policy monitoring tools such as Curate, part of FiscalNote, can significantly mitigate legal risks. Staying on top of changing local policy is crucial to stay on top of any policy changes or discussions that could affect your business operations or put you at risk of legal action.

Curate can help in this preventive approach with in-depth tracking tools and a dedicated team of information specialists to track local, state, and federal changes to production standards, regulations, and requirements. Curate can track meeting minutes and agendas across the entire country so you’ll know when something happens as it's happening. You can even “listen in” on the initial discussions and conversations before any law is passed or ordinance is approved.

The growing phenomenon of municipalities suing corporations does not have to spell an automatic disaster for companies. By taking steps to stay ahead of the game, you can safeguard against financial losses and protect your reputation.

Curate's advanced tracking system can help your company adapt to these changes smoothly, aiding in compliance with existing and future laws. Staying informed is key to steering your company confidently through this shifting legal landscape.