(July 11, 2003) A pair of controversial California Chamber-opposed bills that will give trial lawyers more leverage over California businesses in frivolous lawsuits advanced to just one step away from the Governor’s desk this week.
AB 95 (Corbett; D-San Leandro) and SB 122 (Escutia; D-Whittier) are both 'job killers' that will increase the financial incentive for lawsuit abuse in California. They passed their final committee hearings on party-line votes, and are headed for floor votes as their last stop before reaching the Governor’s desk. (See Action Needed below)
AB 95 and SB 122 both contain dangerous provisions disguised as reforms that will lead to increased abuse of the state’s unfair competition law, Section 17200 of the Business and Professions Code. The bills are tied to each other, and both must pass in order for the other to become law.
'These bills give trial lawyers more leeway to abuse the system and drain employers of scarce financial resources,' said Valerie Nera, Chamber legislative advocate. 'They do absolutely nothing to stem the tide of frivolous lawsuits plaguing California’s business climate.'
AB 95 mandates that trial lawyers suing businesses for alleged 17200 violations include a form letter suggesting the defendant to seek legal counsel. The wording of this notice is intimidating and leads the reader to the conclusion that seeking legal counsel must be the next step. Adding legal fees to settlement costs further drains financial resources from businesses.
SB 122 allows for disgorgement as a remedy in 17200 lawsuits. Under this bill, disgorgement provides that all profits derived from an alleged violation of the unfair competition law must be disgorged and given to 'victims,' if there are any. This substantially increases the potential for extremely lucrative awards, and could scare businesses into extremely costly settlements over frivolous lawsuits.
Often in these cases there is no victim, and current law directs that funds awarded go into a 'fluid recovery account' for distribution to a broad range of interest groups that engage in litigation or programs on behalf of the general public.
These bills are being strongly pushed by trial lawyers and labor unions, who are among those with the most to gain from expansions of 17200 lawsuits. Unlike class-action lawsuits, where disgorgement is currently a remedy, in these 17200 cases there is still no limit on the amount of times a business can be sued for the same offense.
'These purported reforms to 17200 laws do nothing to help the small and largely minority owned businesses that have been the target of some of the most egregious abuses under current law,' said Nera. 'Instead, they give new incentives to enterprising attorneys to hold California’s job creators hostage through extremely costly and largely frivolous lawsuits.'
Please contact your local Assembly member or Senator to urge their opposition to the job killing expansions of lawsuit abuse contained in AB 95 and SB 122.
Key Votes
SB 122 in Assembly Judiciary Committee: Passed 9 – 4
Ayes: Corbett (D-San Leandro), Hancock (D-Berkeley), Jackson (D-Santa Barbara), Laird (D-Santa Cruz), Lieber (D-Mountain View), Levine (D-Van Nuys), Longville (D-San Bernardino), Montanez (D-San Fernando), Steinberg (D-Sacramento).
Noes: Harman (R-Huntington Beach), Bates (R-Oceanside), Pacheco (R-Walnut), Spitzer (R-Orange).
Absent/abstaining/not voting: Dutra (D-Fremont).
AB 95 in Senate Judiciary: Passed 5 – 1
Ayes: Escutia (D-Norwalk), Cedillo (D-Los Angeles), Ducheny (D-San Diego), Kuehl (D-Santa Monica) Sher (D-Stanford).
Noes: Ackerman (R-Tustin).
Absent/abstaining/not voting: Morrow (R-Oceanside).
Action Needed
Businesses need to contact their legislators in the Assembly and Senate to urge them to oppose the job killing expansions of lawsuit abuse contained in AB 95 and SB 122.
Staff Contact: Valerie Nera