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3 Anti-Lawyer Measures on Ballot Ignite Costly Ad War

Election: Backers say lawsuits are out of control, but figures suggest otherwise. Ad by attorneys sparks libel suit.

February 29, 1996|DAN MORAIN | TIMES STAFF WRITER

SACRAMENTO — Judging from the opening volleys, the statewide television ad campaigns for and against three anti-lawyer initiatives on the March 26 ballot will be about as costly as they are misleading.

Funded primarily by Silicon Valley corporations and entrepreneurs, backers of Propositions 200, 201 and 202 are using what essentially are running lawyer jokes to get across the point that attorneys are out of control--even though statistics show that civil litigation is declining in key areas.

California trial lawyers are responding with a high-cost campaign of attack ads aimed at discrediting the three measures. Their campaign committee, Consumers and Attorneys Against Propositions 200, 201 and 202, is spending $1 million a week on television commercials and soon will increase that to about $1.5 million.

And this is only the start of what promises to be an all-out war over the civil justice system that will continue through the November general election, when the lawyers most likely will have two counter-initiatives on the ballot.

Homing in on Propositions 201 and 202, the lawyers have taken the unusual tack of focusing on a single supporter--Alan Shugart, president and founder of Seagate Technologies, a major Silicon Valley computer firm, and likening him to Charles Keating of Lincoln Savings & Loan infamy.

The ads so stunned Shugart, 65, that he filed a libel suit against the lawyers' campaign committee Feb. 21, saying the spots essentially accuse him of being a criminal. After it had run for two weeks, CBS affiliates in San Francisco and Los Angeles pulled the ad. KNBC in Los Angeles refused to air it from the start.

The ad opens with a picture of convicted felon Keating as a voice intones, "Keating swindled millions from the life savings of elderly people."

Keating's photo then morphs into a grainy picture of Shugart. "Shugart is one of the largest contributors to the campaign to pass Propositions 201 and 202," the announcer says.

As Keating's picture reappears, the announcer says the initiatives would have prevented Keatings' victims from filing lawsuits in "state" court to get their money back.

Again, the Keating photo transforms into Shugart: "Mr. Shugart himself has been taken to court for insider trading by consumers who recovered millions in settlements. . . . Protect yourself from the next Charles Keating."

Proposition 201 deals with an arcane area of lawsuits filed by shareholders of publicly traded firms when a firm's stock takes a nose dive. Proposition 201 would, as the ad states, limit those suits in state court. Shareholder suits are a bane of high-tech firms, many of which have volatile swings in stock prices.

Proposition 202 would cap contingency fees charged by plaintiffs' attorneys in other civil lawsuits.

Shugart and his defenders believe that the lawyers' attack ad implies that Shugart is another Keating. Unlike Keating, who is serving a 12-year prison sentence for plundering Lincoln Savings & Loan, Shugart has never been accused of criminal wrongdoing.

One of the pioneers of the personal computer industry, Shugart co-founded Seagate in 1979 and built it into a firm that today holds a quarter of the market for disc drives, with sales of more than $5 billion a year. His firm employs 10,000 people in the United States and 55,000 in overseas manufacturing plants, primarily in Asia.

Like many publicly traded firms, Seagate has been sued in federal shareholders' actions. Each suit came after Shugart and Seagate executives sold company stock, shortly before share prices tumbled.

In a federal lawsuit filed in 1984, Seagate and its insurance company paid a $9-million settlement. A second suit was dismissed. A third federal suit is pending.

When he first saw a tape of the ad attacking him, Shugart said he thought that it was a practical joke. "Then, all of a sudden, it hit me: These guys are crucifying me.

"If I did nothing," Shugart said, "I'd lose respect from my family, my friends, my employees, shareholders. I have been wronged so totally. The only action I can take is to sue them. They are ruining my reputation, and it gets worse every day."

Bill Carrick, the trial lawyers' political consultant, vowed to continue airing the commercials. He noted that Shugart has contributed $250,000 to the campaign for the initiatives and signed the argument in the official California Voter Pamphlet endorsing Proposition 201. "Voters are entitled to know who Alan Shugart is and what his motivations are," Carrick said.

"We wanted to make this issue real for voters--what it's about and who's behind it. The point of the ad is not that Al Shugart is Charles Keating. The point is that he is financing a campaign to solve a very narrow problem for himself that would create a bigger problem for other people."

Bill Lerach, a San Diego lawyer who brought all three actions against Seagate and was the investors' lead attorney in the Lincoln litigation, called Shugart's libel action "the height of hypocrisy."

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