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Business Owners Rally Around Initiative to Limit Lawsuits

Proposition 64, aimed at 'shakedowns,' would weaken the Unfair Competition Law.

September 16, 2004|David Reyes | Times Staff Writer

When the family business was targeted by a frivolous lawsuit, Santa Ana businessman Ben Mendoza Jr. decided to fight back.

The family won the case but it cost the auto body shop $10,000 -- roughly $8,000 more than the law firm had wanted for a settlement.

"It was extortion," Mendoza said Wednesday as he joined other businesspeople and elected officials at a news conference for Proposition 64, which aims to end "shakedown" lawsuits.

The business-backed initiative on the November ballot is aimed at limiting California's 70-year-old Unfair Competition Law. The law allows individuals or groups to sue businesses for alleged unscrupulous behavior even when they have not been personally injured. The proposition would allow only the state attorney general or local officials to sue on behalf of the public to enforce laws governing business competition.

Gov. Arnold Schwarzenegger has endorsed the initiative. But environmentalists, the American Lung Assn. of California and consumer groups oppose it, saying it would drastically cut the number of environmental and public-health lawsuits. "Right now, the Unfair Competition Law is being used as the No. 1 method to sue polluters," said Sierra Club lobbyist Bill Magavern.

For years, business groups have complained that the Unfair Competition Law has led to frivolous lawsuits ginned up by unethical plaintiffs' attorneys seeking easy settlements.

Proponents point to the Beverly Hills-based Trevor Law Group as evidence. Three lawyers were facing disbarment last year for allegedly extorting cash from thousands of Southern California auto repair shops. They resigned voluntarily from the State Bar of California.

Mendoza and other business owners charged that the Trevor lawyers hit them with frivolous lawsuits to extract quick cash settlements. Defendants were told that by paying the settlement of a few thousand dollars, they could avoid the greater expense of a long trial.

In Mendoza's case, a check sent to the Bureau of Automotive Repair to pay for the business' license was misplaced, he said. It was later found, but not before the Trevor law firm filed a lawsuit on behalf of the attorney general's office accusing the garage of operating without a license. The alleged shakedown wasn't included in the lawsuit, but Mendoza said, "They, in essence, told us that it would cost $2,000 to have them go away."

Barry E. Zanck, a Newport Beach businessman, said he was the victim of the same law firm when he forgot to list his broker's license in a magazine advertisement for his firm. Zanck was sued for allegedly violating business and professions statutes.

His first lawyer told him to settle to avoid expensive court costs, but Zanck decided to fight. "The judge eventually ruled in my favor, and I won. But really, I lost. It cost me about $15,000."

The proposition doesn't prevent people from filing legitimate lawsuits, said Assemblyman Bob Pacheco (R-Walnut), who was at the news conference. "What we don't want to see is frivolous lawsuits being filed."

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