(June 25, 2009) The California Chamber of Commerce recently petitioned the California Supreme Court to review a case seeking to overturn a lower court’s decision that directly conflicts with a voter-approved measure to prevent frivolous lawsuits.
Proposition 64, overwhelmingly approved by California voters, required that plaintiffs in lawsuits filed under the state’s Unfair Competition Law (UCL) must actually have suffered harm. This reform was intended to provide companies doing business in California with significant relief from the numerous frivolous lawsuits clogging the court system.
In its letter asking the state high court to review the case of Safeco Insurance Company v. The Superior Court of Los Angeles, S173602, the CalChamber explained that the appellate court’s ruling direly conflicts with the objectives of Proposition 64, requiring that a plaintiff have been injured in fact and lost money or property as a result of the alleged unfair business practice. By allowing the plaintiff, who had neither an injury in fact, nor lost money or property to initiate and maintain an UCL claim, the Court of Appeal permitted what the voters had expressly rejected — a plaintiff-less UCL claim, the CalChamber pointed out in its letter.
Case Background
The original lawsuit was filed against Safeco and First National in January 2002. Following the passage of Proposition 64, the Los Angeles County Superior Court permitted the original plaintiff (who had suffered no actual injury and therefore had no standing to file the lawsuit, according to Proposition 64) to name a new plaintiff in the class action lawsuit.
Even though the court found that the new plaintiff also had suffered no harm, the court granted the new plaintiff’s request to begin the process of seeking information from Safeco for the purpose of identifying another potential plaintiff (making that person the third plaintiff) who had been harmed so that the lawsuit may proceed.
CalChamber Argument
The CalChamber argued that if the decision is allowed to stand, it will have a devastating impact on the business community. Specifically, CalChamber said that by easing the requirement of standing to bring suit, the Court of Appeal had opened up the floodgates for any party, whether or not they were injured by an alleged wrongdoing, to bring suit, and cause businesses to spend millions of dollars defending frivolous actions.
Permitting these meritless lawsuits to proceed, in addition to being contrary to the voters’ intentions, will result in businesses being coerced into settlements from baseless discovery proceedings, CalChamber explained. The results will be disastrous for California businesses, leaving them vulnerable to shakedown litigation at a time when their economic stability is imperative to getting California back on track financially.
Staff Contact: Erika Frank