Legal Reform

Overview

The legal climate of a state is a significant consideration for a company in its decision to locate or expand its business. The opportunity to obtain a fair and efficient resolution of legal disputes, access to courts, as well as threats of frivolous litigation all contribute to the overall decision. In a report released by the U.S. Chamber Institute for Legal Reform (ILR) in 2012, 79% of the 1,100 company general counsels surveyed confirmed that a state’s lawsuit environment has a significant impact on their decision regarding where to locate or expand.

Unfortunately, California continues to rank poorly in its overall legal climate. According to the ILR, California ranked 47th for the fairness of its litigation environment in 2012 and has consistently placed among the bottom six states over the last decade. California also is the second state listed on the American Tort Reform Foundation’s “Judicial Hellholes” list for 2014–2015 because of the rise of public nuisance lawsuits pursued through contingency fee arrangements, predatory lawsuits against small businesses regarding technical violations of the Americans with Disabilities Act, growing asbestos litigation, and lawsuits regarding failure to post notices under California’s Proposition 65. Legal Reform 

Related Business Issues:
ADA Reform
Regulatory Reform

Goal

Seek comprehensive tort reform legislation that will prevent lawsuit abuse, halt runaway liability risk and promote greater fairness, efficiency and economy in the civil justice system.

Major Victories

  • Stopped economic development barrier, such as significant liability for car dealers on safety recalls (SB 686 of 2014).

  • Stopped unwarranted expansion in 2014 of product defect litigation and associated claims by allowing consumers to pursue claims after the warranty has expired (SB 1188).

  • Advocated veto of legislation in 2014 that would have hurt small businesses, made it more difficult for a franchisor to terminate an underperforming franchisee and reduced investment opportunities for franchisees due to expanded risk of potential litigation (SB 610).

  • Kept lid on inflated liability costs in 2012 by securing amendments to legislation that would have discouraged settlement agreements (AB 2149); halting anti-arbitration legislation (SB 491); and defeating a bill that would have inflated litigation and insurance costs (SB 1528). Also in 2011 by advocating veto of a bill undermining judicial discretion (AB 559); securing amendments to legislation that could have led to new shakedown lawsuits against businesses (SB 111); and killing a bill that would have undermined enforcement of arbitration agreements in contracts (AB 1062). Also in 2010 by advocating vetoes of proposals invalidating certain arbitration agreements (AB 1680) and limiting judicial discretion to reduce or deny exorbitant legal fees in fair employment and housing cases (AB 2773).

  • Speeding judicial process by supporting an expedited alternative to full-length jury trials, allowing individuals and organizations to resolve disputes efficiently and effectively (AB 2284 of 2010). 

  • Won veto of legislation that could have resulted 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 (SB 242 of 2009).

  • Collaborated on shaping bipartisan, comprehensive reform increasing public access for individuals with disabilities while reducing unwarranted litigation (SB 1608). See ADA Reform

  • Spearheaded effort to strengthen California's anti-counterfeiting laws in 2008 (AB 1394).

  • Prevented major expansions of liability in 2008 by working with key legislators from both parties and the Governor. Key victories included the vetoes of a proposal that would have expanded workplace lawsuits (AB 437) and another that would have expanded rewards to plaintiffs for costs of litigation from private attorney general actions (SB 1113). Also stopped was an expansion of liability for manufacturers (AB 2690).

  • Limiting inflation for liability awards. Won veto of 2007 proposal that would have artificially inflated medical damage awards in third party liability cases by not allowing judges to consider the actual cost of medical expenses as evidence, ultimately increasing, not only legal costs, but also rates for auto and general liability insurance (SB 93)

  • Halted attacks on employers' right to arbitrate. In 2006, stopped potential increases in litigation costs for employers by defeating legislation that would have eliminated an employer’s ability to mandate the use of the less expensive and faster process of arbitration, rather than court, to resolve discrimination claims by employees under the California Fair Employment and Housing Act (AB 2371, failed passage in Assembly 5/31/06).

  • Maintained Attorney General accountability. Ensured the Attorney General did not receive unchecked power and unfair settlement leverage against companies in "fishing expeditions" and lawsuits alleging violations of the Unruh Civil Rights Act, corporate securities laws, environmental laws, and numerous other statutes, by winning a veto of legislation that would have required defendant companies to pay all the investigation and lawsuit costs, including attorney’s fees, if the Attorney General "prevailed." "Prevailed" was not defined and could have included a slight change in behavior by the company or miniscule settlements. (SB 1489, vetoed by Governor). In 2005, overcame a similar attempt (AB 153, Vetoed by Governor, 2005).

  • Held the line on punitive damages reform. Achieved a veto by the Governor, halting end-of-session 2006 legislation that would have hampered much-needed reforms to California’s out-of-control punitive damage system by establishing that 50% of all punitive damages awards go to an undefined state "public benefit" fund, potentially controlled by the attorney general, while 25 percent would still go to the plaintiffs' lawyer and the remaining 25% to the plaintiff (SB 832, vetoed by Governor).

  • Supported reforms of lawsuit abuse under Unfair Competition laws. Helped advocate and achieve passage of Proposition 64, which curbed predatory lawsuits by requiring attorneys who file section 17200 lawsuits to have an actual plaintiff who has been harmed or suffered by financial injury.

  • Protected confidentiality of proprietary information. In 2005, defeated legislation that aimed to impede a business’ ability to maintain the confidentiality of its proprietary information, thus exacerbating an already-hostile legal environment (AB 1700, Assembly Inactive File, 6/2/05).

  • Kept the lid on excessive litigation. In 2005, won a veto of legislation establishing new “sue your boss” lawsuits, which would have increased employer liability by providing new incentives for plaintiffs and their attorneys to file lawsuits by establishing new types of “sue your boss” lawsuits (SB 174 — vetoed by Governor). Also blocked new reasons to sue certain private sector employers by setting in statue a very detailed notice process that an employer must follow exactly in order to able to utilize any severance agreement (AB 1310, vetoed by Governor).

Issue Summaries

Agency Good Faith Protection
Position: It is common sense that a business or person should be able to rely upon advice received from the state regarding how to comply with the law. If a state agency, charged with interpreting and enforcing the law, can determine when a law has been violated for purposes of assessing penalties, then that same agency should be able to advise a company or individual beforehand on how to comply with the law. This same basic concept has worked effectively at the federal level for more than 60 years without the abuse and misuse that opponents claim will occur if expanded to the state level. Allowing individuals or businesses to rely in good faith on the advice they receive from the state would actually encourage compliance as well as trust in the government.

The California Chamber of Commerce agrees with the findings of Congress in 1947, that labor and employment laws meant to protect employees should not be manipulated to spur litigation and create windfall payments to an employee for acts or omissions that actually have been approved by a state agency. This is harmful to California’s economy and employers who are acting in good faith and trying to comply with law. Agency Good Faith Protection

Contingency Fee Arrangements for Public Entities
Position:  Litigation with a government entity is daunting enough for any defendant without the fear of the litigation being influenced by the financial interest of a private attorney. If California continues to condone the use of private attorneys to represent government entities through contingency fee arrangements, there must be enhanced contractual requirements, ethical standards and required disclosures to ensure the neutrality of the government is not jeopardized by such arrangements, thereby placing the defendant at a completely unfair disadvantage.
Contingency Fee Arrangements for Public Entities

Piece-Rate Compensation Plans
Position: While the California Chamber of Commerce appreciates the concern for potential abuse with the use of the piece-rate model, continuing to restrict or burden an employer’s use of this payment method by making it even more costly or difficult to administer, may actually cause more harm to an employee than increased protection. Piece-Rate Compensation Plans 

Position

The CalChamber opposes making sweeping changes to the legal system that unfairly tip the scales of justice in favor of one party versus the other and fail to address any systemic problems within the judicial system, while dealing only with isolated issues. New and expanded private rights of action, increased litigation costs, and efforts to undermine arbitration serve to further enhance California’s reputation as a poor legal environment and continue to overwhelm the already-overburdened court dockets. Frivolous and unnecessary litigation delays the opportunity for those truly harmed and in need of justice to efficiently receive their day in court.

Improving California’s legal system is a cost-effective way for the Legislature to strengthen California’s business climate and make California even more competitive with other states that are striving to lure away its businesses.

Related Top Stories

Policy Contact

Jennifer BarreraJennifer Barrera
Policy Advocate
Labor and Employment,
Legal, Taxation


 
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