Legal Reform

Overview

The legal climate of a state is a significant consideration for a company in its decision to locate or expand its business. The opportunity to obtain a fair and efficient resolution of legal disputes, access to courts, as well as threats of frivolous litigation, all contribute to the overall decision. In a report released by the U.S. Chamber Institute for Legal Reform (ILR) in 2012, 79% of the 1,100 company general counsels surveyed confirmed that a state’s lawsuit environment has a significant impact on their decision regarding where to locate or expand.

Unfortunately, California’s overall legal climate continues to rank poorly. California ranked 47th for the fairness of its litigation environment in 2012 and has consistently placed among the bottom six states over the last decade, according to the ILR. Legal Reform 

See Also ADA Reform

Goal

Seek comprehensive tort reform legislation that will prevent lawsuit abuse, halt runaway liability risk and promote greater fairness, efficiency and economy in the civil justice system.

Major Victories

  • Kept lid on inflated liability costs in 2012 by securing amendments to legislation that would have discouraged settlement agreements (AB 2149); halting anti-arbitration legislation (SB 491); and defeating a bill that would have inflated litigation and insurance costs (SB 1528). Also in 2011 by advocating veto of a bill undermining judicial discretion (AB 559); securing amendments to legislation that could have led to new shakedown lawsuits against businesses (SB 111); and killing a bill that would have undermined enforcement of arbitration agreements in contracts (AB 1062). Also in 2010 by advocating vetoes of proposals invalidating certain arbitration agreements (AB 1680) and limiting judicial discretion to reduce or deny exorbitant legal fees in fair employment and housing cases (AB 2773).

  • Speeding judicial process by supporting an expedited alternative to full-length jury trials, allowing individuals and organizations to resolve disputes efficiently and effectively (AB 2284 of 2010). 

  • Won veto of legislation that could have resulted in new shakedown lawsuits against business establishments by making it a strict liability violation of the Unruh Civil Rights Act, subject to minimum damages of $4,000, if a business limits the use of a customer’s language, even if unintentionally (SB 242 of 2009).

  • Collaborated on shaping bipartisan, comprehensive reform increasing public access for individuals with disabilities while reducing unwarranted litigation (SB 1608). See ADA Reform

  • Spearheaded effort to strengthen California's anti-counterfeiting laws in 2008 (AB 1394).

  • Prevented major expansions of liability in 2008 by working with key legislators from both parties and the Governor. Key victories included the vetoes of a proposal that would have expanded workplace lawsuits (AB 437) and another that would have expanded rewards to plaintiffs for costs of litigation from private attorney general actions (SB 1113). Also stopped was an expansion of liability for manufacturers (AB 2690).

  • Limiting inflation for liability awards. Won veto of 2007 proposal that would have artificially inflated medical damage awards in third party liability cases by not allowing judges to consider the actual cost of medical expenses as evidence, ultimately increasing, not only legal costs, but also rates for auto and general liability insurance (SB 93)

  • Halted attacks on employers' right to arbitrate. In 2006, stopped potential increases in litigation costs for employers by defeating legislation that would have eliminated an employer’s ability to mandate the use of the less expensive and faster process of arbitration, rather than court, to resolve discrimination claims by employees under the California Fair Employment and Housing Act (AB 2371, failed passage in Assembly 5/31/06).

  • Maintained Attorney General accountability. Ensured the Attorney General did not receive unchecked power and unfair settlement leverage against companies in "fishing expeditions" and lawsuits alleging violations of the Unruh Civil Rights Act, corporate securities laws, environmental laws, and numerous other statutes, by winning a veto of legislation that would have required defendant companies to pay all the investigation and lawsuit costs, including attorney’s fees, if the Attorney General "prevailed." "Prevailed" was not defined and could have included a slight change in behavior by the company or miniscule settlements. (SB 1489, vetoed by Governor). In 2005, overcame a similar attempt (AB 153, Vetoed by Governor, 2005).

  • Held the line on punitive damages reform. Achieved a veto by the Governor, halting end-of-session 2006 legislation that would have hampered much-needed reforms to California’s out-of-control punitive damage system by establishing that 50 percent of all punitive damages awards go to an undefined state "public benefit" fund, potentially controlled by the attorney general, while 25 percent would still go to the plaintiffs' lawyer and the remaining 25% to the plaintiff (SB 832, vetoed by Governor).

  • Supported reforms of lawsuit abuse under Unfair Competition laws. Helped advocate and achieve passage of Proposition 64, which curbed predatory lawsuits by requiring attorneys who file section 17200 lawsuits to have an actual plaintiff who has been harmed or suffered by financial injury.

  • Protected confidentiality of proprietary information. In 2005, defeated legislation that aimed to impede a business’ ability to maintain the confidentiality of its proprietary information, thus exacerbating an already-hostile legal environment (AB 1700, Assembly Inactive File, 6/2/05)

  • Kept the lid on excessive litigation. In 2005, won a veto of legislation establishing new “sue your boss” lawsuits, which would have increased employer liability by providing new incentives for plaintiffs and their attorneys to file lawsuits by establishing new types of “sue your boss” lawsuits (SB 174 — vetoed by Governor). Also blocked new reasons to sue certain private sector employers by setting in statue a very detailed notice process that an employer must follow exactly in order to able to utilize any severance agreement (AB 1310, vetoed by Governor).

Issue Summaries

Impact of Attorneys' Fees in Litigation
Position: The California Chamber of Commerce supports access to justice to address valid disputes that are pursued in good faith. The CalChamber does not believe, however, that the threat of attorneys’ fees should manipulate civil litigation and place unwarranted pressure on the parties to settle cases, including those that lack merit. Both parties should have some financial risk in pursuing litigation in order to minimize frivolous lawsuits that overburden the courts’ dockets and preclude valid claims from being resolved on a timely basis. Impact of Attorneys' Fees in Litigation

Medical Injury Compensation Reform Act
Position:  As evidenced by the health care crisis that prompted the passage of MICRA, amending MICRA to increase any damages award in malpractice litigation is problematic as it has a direct impact on the cost of and access to health care. While the California Chamber of Commerce is sympathetic to victims who have suffered as the result of medical malpractice, there does not appear to be any overall indication that the current provisions of MICRA do not adequately compensate those individuals for their injuries. Rather, the current and historical efforts to amend MICRA appear to be driven primarily by trial attorneys who would benefit financially from increasing the damages awards in malpractice cases as higher awards directly increase legal fees. The CalChamber does not believe affordable access to health care for the general public should be jeopardized in order to provide financial gain to trial attorneys. Medical Injury Compensation Reform Act

Positions

The California Chamber of Commerce opposes making sweeping changes to the legal system that unfairly tip the scales of justice in favor of one party versus the other and do not address any systemic problems within the judicial system, but rather only isolated issues. New and expanded private rights of action, increased litigation costs, and efforts to undermine arbitration serve to further enhance California’s reputation as a poor legal environment and continue to overwhelm the already-overburdened court dockets. Frivolous and unnecessary litigation delays the opportunity for those truly harmed and in need of justice to efficiently receive their day in court. Improving California’s legal system is a cost-effective way that the Legislature can improve California’s business climate and make California even more competitive with other states that are striving to lure away its businesses.

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Policy Contact

Jennifer BarreraJennifer Barrera
Policy Advocate
Labor and Employment,
Legal, Taxation


 
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