(June 17, 2009) A recent split decision of the California Supreme Court weakens limits on frivolous lawsuits put in place by a California Chamber of Commerce-supported and voter-approved ballot initiative in 2004.

Proposition 64, overwhelmingly approved by California voters, required that plaintiffs in lawsuits filed under the state’s Unfair Competition Law 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.

Court Ruling

The state high court’s 4-3 decision, however, said that only the named class representative(s) must satisfy the Proposition 64 requirement for being a party to the class action lawsuit. (In re Tobacco II Cases, No. S147345, May 18, 2009).

The high court’s decision will make it easier for plaintiffs to move forward with the type of meritless lawsuits that were stifling small businesses and led to Proposition 64’s passage. Now there is a greater possibility that businesses will be forced to incur high court costs defending meritless claims.

Minority Criticism

The majority’s holding was met by strong criticism from the three dissenting justices. Raising the concern that this decision will invite the very kinds of mischief Proposition 64 was intended to curtail, the dissent characterized the majority’s determination as “erroneous,” and stated that it “turns class action law upside down and contravenes the initiative measure’s plain intent.”

Although the court’s ruling applies only to class actions, not individual claims, as the dissent points out, it is “contrary to the electorate’s clear directive.”

Passed in order to bring an end to the loophole that allowed lawyers to file frivolous shakedown lawsuits, the majority’s holding will significantly undermine the voters’ explicit intention behind approving Proposition 64.

Staff Contact: David Meyerson