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Shake Off the Shakedowns

October 16, 2004

As late as August we were still urging Sacramento to pass modest tort-reform legislation to protect businesses from shakedown lawsuits. It didn't happen, hasn't happened for a decade and, in light of the power of the trial lawyers' lobby, may never happen. So we have no choice now but to urge a "yes" vote on Proposition 64. California cannot continue to tolerate such frivolous litigation.

At issue are the state's unfair business competition laws, which allow the state attorney general, local prosecutors and private parties to sue anyone engaging in unlawful or fraudulent behavior.

The trouble is, unlike in almost every other state and at the federal level, private parties in California needn't show any harm to bring a lawsuit. Trial lawyers are essentially deputized to go out and enforce the law, and to engage in bounty hunting by uncovering supposedly unfair business practices without even finding a client injured by the practice. Not so shockingly, the result is too many lawyers forcing small businesses to pay settlements to avoid unjustified but costly lawsuits.

Proposition 64 would curtail such shakedowns by amending the law so as to require a showing of actual harm by a private party. The proposition aligns California law with traditional American constitutional notions that a party requires "standing" to sue, and it would be an affirmation by California voters that due process and fairness are not judicial concepts that can be watered down to make it easier to sue corporations.

Proposition 64 also restores a proper balance between the branches of government, underscoring the right and obligation of the state attorney general -- as opposed to private litigants -- to enforce the law on behalf of the public. There is nothing in this proposition that diminishes the power of public authorities to bring lawsuits alleging improper business practices.

Opponents concede the law has led to abusive lawsuits but argue that to fix it is to throw the baby out with the bathwater. Would these same liberal interest groups applaud the adoption of draconian criminal laws that undermined traditional constitutional values if they happened to make it easier to catch some bad guys? The same principle applies here.

The unfair business competition law in its current form isn't indispensable to bringing many of the cases that opponents say would be endangered by the proposition. You may hear, for instance, that suits that shut down polluters would be more difficult to bring. But again, the state itself should be prodded to defend the public. Moreover, many state and federal environmental laws have separate provisions encouraging private "citizen suits." National environmental groups still engage in vigorous litigation on the public's behalf in states that don't have such an all-purpose anti-corporate vigilante statute.

Voters should support Proposition 64 to restore fairness to the judicial system, and to announce to corporations willing to do business and create jobs here that California is not irrationally hostile to them.

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