(May 29, 2003) - Lawsuit abuse under the state’s unfair competition law could actually increase as result of a California Chamber-opposed bill scheduled to be heard on the Assembly Floor this week.

AB 95 (Corbett; D-San Leandro) purports to be a reform to Section 17200 of the Business and Professions Code, though it does nothing to curb abuses, or provide any other kind of reform to the law.

The bill mandates that trial lawyers suing businesses for alleged 17200 violations include a form letter encouraging the defendant to seek legal counsel. The wording of this notice is intimidating and leads the reader to the conclusion that seeking legal counsel should be the next step.

“This bill does nothing to stem the tide of frivolous lawsuits that are draining small businesses of scarce financial resources,” said Valerie Nera, Chamber legislative advocate.

On the contrary, AB 95 could actually give trial attorneys more leverage in extorting settlements from small and minority owned businesses that have been the target of many frivolous 17200 lawsuits in the past.

Enterprising trial attorneys have abused the system by filing costly lawsuits against small businesses that cannot afford the time and expense of a court fight, and agree to settle for a few thousand dollars. The alternative to settling is to hire an attorney, as AB 95 suggests, which could potentially cost far more than the amount for which the trial attorney offers to settle.

Just last week, three of the most notorious alleged abusers of Section 17200 had their licenses suspended by the state bar of California. These attorneys targeted thousands of small businesses, mostly owned by immigrants, with threats of expensive lawsuits for minor violations of the unfair competition law. The bar’s suspension indicates that their actions were unethical, but what they did was arguably not illegal.

Under current law there is little if anything to deter other attorneys from continuing many of these same Section 17200 abuses. AB 95 does not reform the current law, and actually would make the problem worse.

AB 95 is in the Assembly’s third reading file, and is expected to be heard this week on the Assembly Floor. The Chamber asks that readers contact their local assembly member to urge a no vote.

Staff Contact: Valerie Nera