(May 5, 2003) - Legislation to protect businesses from costly, frivolous litigation is expected to be considered by the Assembly Judiciary Committee in the near future.

California Chamber-supported AB 69 (Correa; D-Anaheim) begins to limit abuse of the state’s Unfair Competition Law, Section 17200 of the Business and Professions Code. The section permits anyone to sue on behalf of the general public for even the most insignificant regulatory infractions.

Also expected to be heard that day are Chamber-sponsored AB 102 (Pacheco; R-Walnut), Chamber-supported AB 754 (Bogh; R-Beaumont) and other bills intended to curb abuse of the unfair competition law.

Thousands Sued

Frivolous and abusive lawsuits have been filed against thousands of small business owners throughout the state, including auto repair shops, nail salons, restaurants and numerous other industries. Attorneys have filed these lawsuits using Section 17200 to extort cash settlements, mostly from small and minority-owned businesses that decide it is less expensive to settle than fight to prove their innocence in court.

The Chamber believes no good law would permit this kind of open-ended abuse.

Protection for Businesses

AB 69 will provide procedural protections for small business owners and the consumers they serve. It is narrowly drawn so that it applies only to private attorneys who wish to represent the general public because most of the known abuses are of this type.

The changes in AB 69 include: preventing a dispute from being re-litigated by a private attorney once a court has approved a lawsuit and/or settlement; requiring the plaintiff and his/her attorney to certify they do not have a conflict of interest in bringing the lawsuit; requiring plaintiffs to provide defendants with an easy-to-read summary of their legal rights, designed and written by the State Bar and made available in multiple languages; making public documents the lawsuits and settlements on behalf of the general public; preventing private attorneys to seek a settlement by just threatening to sue; requiring the court to review any settlement before it can take effect; requiring plaintiffs to notify the state attorney general, district attorney and appropriate regulatory body when filing the lawsuit and when it is settled.

AB 102 establishes steps to guard against abuse of the unfair competition law by private attorneys.

AB 754 revises the definition of unfair competition so that a violation must consist of a “pattern” of conduct, rather than a single act.

Action Needed

Contact members of Assembly Judiciary and urge them to support reform of section 17200.

Staff Contact: Valerie Nera,