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Initiative Seeks Curbs on Consumer Lawsuits

The State

July 06, 2004|Evan Halper and Marc Lifsher | Times Staff Writers

SACRAMENTO — It was a comforting message from California's largest HMO: "When you see a Kaiser Permanente physician, no one but you and your doctor decides what's right for you."

Comforting perhaps, consumers groups said, but flat-out untrue. After a four-year legal battle, they won a court settlement last year requiring Kaiser to disclose how it pays doctors for controlling costs.

For The Record
Los Angeles Times Wednesday July 07, 2004 Home Edition Main News Part A Page 2 National Desk 2 inches; 81 words Type of Material: Correction
Consumer lawsuits -- A photo caption in Tuesday's Section A accompanying an article on California's Unfair Competition Law said Kathy Olsen won a malpractice lawsuit against Kaiser Permanente. She was the lead plaintiff in a false advertising lawsuit against Kaiser that resulted in a settlement requiring the HMO to disclose a system of bonuses given to medical groups for controlling costs. Also, an accompanying chart said the Foundation for Taxpayer and Consumer Rights was in Sacramento; it is in Santa Monica.

Now the health maintenance organization is joining an effort to weaken the 70-year-old consumer protection law under which it was sued. Dozens of companies have already collected $7 million to promote a measure making it more difficult to sue businesses, and political consultants say Proposition 64 could become the hottest ballot initiative of 2004.

At issue is California's tough Unfair Competition Law, which lets consumers sue businesses to stop unfair and deceptive business practices even when those consumers have not been harmed personally. The initiative would sharply limit who can sue and under which circumstances.

Businesses say they do not want to gut the law; they just want to prevent frivolous and costly litigation.

They rattle off hundreds of cases of abuse. One complaint alleges that the Super Soaker squirt gun doesn't shoot as far as promised. Another charges that the Universal Studios movie "In the Name of the Father" is not based on a "true story," as advertised. And a law firm sent letters to 140 ethnic grocery stores, accusing them of offering pirated videotapes for rent and threatening to file a complaint against every store that did not immediately pay a $2,000 settlement.

Consumer groups, on the other hand, insist that the initiative's backers really want to go beyond stopping such cases to strip valuable protections from Californians.

The state's senior consumer attorney -- who acknowledges that the law has been abused -- is alarmed by the proposal to fix it. The initiative "goes unbelievably far," said Senior Assistant Atty. Gen. Herschel Elkins. "Throwing the baby out with the bathwater is not the best thing. There are substantial problems with the proposal."

Elkins says the law has been used successfully to protect the public from polluters, unscrupulous financing schemes and religious discrimination. Other public officials note that the law helped jump-start civil litigation against tobacco companies, which ultimately resulted in a multibillion-dollar settlement for taxpayers.

With hefty contributions pouring in, the measure is shaping up to be among the most costly ballot fights in recent memory.

After two years of failed efforts to overhaul the law in the Legislature -- including 14 unsuccessful bills -- business groups are urgently collecting cash to win. They say they are prepared to spend tens of million of dollars if necessary.

"Companies are budgeting to fix the problem, regardless of the cost," said John Sullivan, a co-chairman of the campaign to pass the measure, Californians to Stop Shakedown Lawsuits.

Businesses say they get shaken down all the time under the current law.

"It's extortion. It's like Chicago in the 1920s," said Peter K. Welch, president of the California Motor Car Dealers Assn. "The window breakers out there find any unlawful act, and they get you in a hammerlock.... It winds up being cheaper to settle than to defend."

Car dealers, who often complain of being hounded by lawsuits saying that the fine print is too small in their newspaper ads or that those ads use too many abbreviations, have so far raised the most money: $4.5 million.

Large corporations such as Microsoft, Blue Cross of California, the State Farm Group, Bank of America Corp. and Southern California Edison Co. have contributed much of the rest.

Kaiser says the advertising case wasn't what it had in mind when it wrote a campaign check. What really annoys the HMO is a case claiming that it broke the law by splitting pills and giving them to patients. Kaiser says patients still got the prescribed dosages, consumer groups endorsed the practice and plaintiffs acknowledged that nobody got hurt.

"We have spent over $1 million in enrollee premiums defending this," said Michael Hawkins, a company attorney. "We do not think it is appropriate."

Although 16 other states have similar consumer protection laws, only California's allows people to sue companies that have not directly caused them damage. A California consumer group, for example, did not have to prove that anyone had been harmed when it successfully sued to stop a supermarket chain from pushing back expiration dates on meat.

Without the existing law, only government prosecutors would have been able to take legal action in that situation.

As proposed, the initiative would limit lawsuits to people who can show they have lost money or property. It also would make it more difficult for individuals to file lawsuits aimed at getting sweeping court orders to halt particular business practices statewide.

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