(August 27, 2009) A California Chamber of Commerce-opposed bill that could result in unreasonable and significant new liability exposure and unwarranted shakedown lawsuits against companies, particularly small businesses, is awaiting action on the Senate floor.
SB 242 (Yee; D-San Francisco/San Mateo), a “job killer” bill, could result 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.
Although the bill was recently amended on the Assembly floor, SB 242 remains a “job killer.” The CalChamber is requesting that the Senate reject the bill even as amended. CalChamber has strong concerns about the unintended consequences arising from the creation of a new private right of action around such a vague and broad new standard.
New Reasons to Sue
SB 242 establishes a new private right of action with vague terminology that could open the door to new lawsuits. For example, has language use been limited if a business has a policy of posting customer signage in a language the customer does not understand? – Or hires staff who are unable to respond to a customer’s question in a language understood by the customer? Additionally, SB 242 may conflict with existing laws that regulate language use between businesses and customers.
While the bill provides businesses with some affirmative defenses, such as “business necessity, which is defined as an “overriding legitimate business purpose,” as a practical matter, businesses will be forced to litigate in order to prove these defenses. For small businesses in particular, defending a single such lawsuit could pose an extreme hardship and result in closed doors, especially at a time when many businesses are suffering in the economic downturn.
Unwarranted Settlement Demands and Lawsuits
Even worse, the uncertain new obligations could be a magnet for unwarranted settlement demands and shakedown-type lawsuits by a small group of atypical lawyers and plaintiffs from inside and outside the state already using the Unruh Act to gain monetary profit by securing large numbers of settlements from multiple businesses.
The Unruh Act’s treble damages, minimum damages of $4,000, and attorneys’ fees provisions make new opportunities to sue especially attractive. And even meritless lawsuits can be profitable because most small businesses cannot afford to defend even a single lawsuit and will feel forced to settle.
Liability Even Without Intent
Businesses found to have limited use of a language without business necessity could be on the hook for treble damages, and in no case less than $4,000 in damages, plus attorney’s fees on a strict liability basis. In other words, the business is liable even if the limitation of the language use was inadvertent or unintentional, and even if the plaintiff did not suffer any personal harm or damage as a result of the limitation.
Staff Contact: Kyla Christoffersen