The difficult times for California continue. We’ve all heard the stats – 12 percent unemployment, 4.7 businesses leaving California per week (up from 3.9 per week last year), and a $25 billion budget deficit. We’ve been hearing these types of stats like a broken record for three years now.
The time has come for our leaders in Sacramento to step up and seize the opportunity at hand to tackle the underlying problems hurting our economy. We must make meaningful change now.
One area ripe for reform in California is our tort system. Lt. Gov. Gavin Newsom and a group of California legislators recently returned from a trip to Texas to learn how that state has added 165,000 jobs over the last three years while California has lost 1.2 million. Texas business leaders made it clear that the sweeping tort reforms their state enacted years ago and the ensuing reduction in lawsuit abuse was a primary cause of their job growth.
We need Gov. Jerry Brown and the Legislature to implement fair tort reform in order to improve California’s 46th place ranking in state legal climates and have a lasting impact on the state’s economy.
There are lots of areas where California’s civil justice law needs change. Let’s start with three for now.
The first is class action law. Class action lawsuits were originally intended for use in righteous discrimination cases. Many landmark civil rights cases used, appropriately, the class action lawsuit. However, the class action lawsuit is now routinely overused in many consumer cases, where lawyer-driven lawsuits result in large fees for plaintiffs’ lawyers and pocket change for class members. CJAC has repeatedly proposed (most recently this year’s AB 271-Nestande), and Texas has already enacted, legislation that allows both the plaintiff and the defendant to appeal the decision to certify the class. In California only the plaintiff may appeal the class certification decision before a trial. The defendant may only appeal the class certification if the defendant goes to trial and then loses. This imbalance makes California a magnet for consumer class action lawsuits. More than four class actions are filed every day that California superior courts are in session.
The second area is punitive damages. California has no limits on punitive damages, which are designed to punish a defendant company in the same way that similar conduct would send a person to jail. In Texas, punitive damages are limited to the greater of $200,000 or two times the economic damages plus up to $750,000 for non-economic damages.
Additionally, in order to assign punitive damages the jury must find by a unanimous 12-0 vote that they are deserved. In California, we have no limitation on punitive damages, and only 9 of twelve jurors have to believe punitive damages are deserved. One runaway verdict could bankrupt a company doing business in California.
Third, California courts are clogged with junk asbestos suits filed by people with no medical problems. Some plaintiffs are even double dipping, receiving more than one recovery. Texas curbed these types of lawsuits by requiring would-be plaintiffs to meet specific medical criteria before suing. At the same time, Texas extended the statue of limitations so that people who later found out they were harmed can still sue. Texas asbestos lawyers are now setting up shop in California. One leading plaintiffs’ attorney, whose Houston-based firm opened offices in Palo Alto and Los Angeles, said California had “home run” jurisdictions for asbestos cases.
If state leaders were to get started with a few reforms to our tort system it would send a major signal to businesses that California is making changes in the right direction that will ultimately stop the tremendous loss of jobs in our state.
We must remember that the stakes are not small when lawsuits occur. The costs of attorneys and settling to avoid a lengthy trial can be exorbitant. Even if a frivolous suit is dismissed, there is still the cost of hiring an attorney. Let’s also not forget that it is small business owners who have the most to lose; a lawsuit can wipe out their savings and shut them down in one fell swoop.
Now, with the budget still in flux, is a crucial time for Gov. Brown and the Legislature to come together around these three important policy changes. California is due for some good news about its economy and budget. It’s time to hear about rapid job growth, businesses opening up and thriving, and this perpetual structural deficit closing. These reforms will make our civil justice system fairer and they will bring us the good economic news we are all waiting to hear. The time to act is now.