Many of California’s most powerful interests have taken sides on a plan to dramatically curtail class-action lawsuits–a replay, thus far at least, of a successful 2004 ballot-initiative strategy that culminated in a crackdown on what business interests contended–and voters agreed–were frivolous court actions.
Could another initiative war be on the horizon?
The battleground, a familiar one in the Capitol, pits business and corporate interests on one side against lawyers, organized labor and consumer activists on the other. Like Proposition 64 of 2004, the proposal would limit access to the courts by plaintiffs’ attorneys and their allies. But unlike the earlier plan, the latest proposal would reduce the ability of attorneys to file class actions, the lawsuits that represent large numbers of people alleging corporate wrongdoing.
The bill, AB 1505 by Assemblywoman Nicole Parra, was summarily defeated this month in the Assembly Judiciary Committee. The death of the bill, which would have made it more difficult to file class actions, came as little surprise in the Democrat-controlled Legislature.
But Capitol insiders believe it may serve as a leverage point for proponents who seek to raise money for a ballot initiative next year. Sources say discussions are under way, although none cared to publicly discuss their progress, if any. The list of backers and opponents of the Parra bill reads like a Who’s Who of California’s most powerful political players. Opponents include the California Nurses Association, AARP, the trial lawyers, the SEIU State Council, and consumer and labor groups. Supporters include the California Chamber of Commerce, the Farm Bureau, the grocers, hospitals, retailers, Hewlett Packard, Intel and insurers, among many others.
“We haven’t foreclosed any options,” said Vince Sollitto, Chamber of Commerce spokesman. “We always try to work with the Legislature, and we will continue to do so now. Nothing is ever really dead in the Legislature. While this particular bill didn’t clear policy deadlines, the issue isn’t going away.”
Gov. Schwarzenegger, who typically declines to disclose his positions on pending bills, supported Parra’s legislation. In a letter to Parra, the governor’s deputy legislative director, Brent Jamison, said the governor’s staff was “committed to working with you on this bill so as to provide even greater guidance to litigants and judges.” The letter was dated May 4–four days before the Judiciary Committee rejected it.
Class-action suits, while relatively small in number, have the capacity to wring huge settlements from deep-pocket defendants. They have long been characterized by corporate interests–such as insurers in the 1994 Northridge earthquake, for example–as a way of enriching lawyers’ pocketbooks rather than meaningfully compensating wronged consumers. Consumer activists don’t see it that way, nor do the attorneys who represent them. They note that people who have been damaged by businesses often cannot afford top-drawer legal talent to challenge the companies’ alleged wrongdoing. The unfettered ability to file class actions is one tool that consumers use, among others.
“For the big companies that were backing the bill, this is pretty much par for the course. They are trying to deny justice to citizens by eliminating class-action lawsuits,” said Jordan Traverso, a spokeswoman for the Consumer Attorneys of California. “It is another attempt by big business to achieve immunity.”
“If nothing else, it simply raises the bar of consumers to band together,” said Carmen Balber of the Foundation for Taxpayer and Consumer Rights. “It’s an outrageous attempt to change the law. It’s exactly like Proposition 64. When the Legislature wouldn’t change the law, they said, ‘Business is being abused and now we have to go to the voters.'”
But the problem is that businesses feel the law, written by lawyers and buttressed by attorney-friendly Democrats, unfairly targets companies.
“Certainly, Proposition 64 showed that voters understand what’s going on. In otherwise complicated legal areas, these issues can be expressed in a way that people understand it and agree to a change. What Proposition 64 did was eliminate the misuse but preserve the law that protects consumers,” said John Sullivan of the Civil Justice Association of California, which sponsored Parra’s bill. “The same situation exists with class actions, from the standpoint that they can be used to extort money [from companies].”
“The major problem now is with certification. If the judge says ‘no, you’re not certified,’ the plaintiff can appeal. But if the judge says, ‘yes, you are certified,’ the company being sued can’t immediately appeal,” Sullivan said. “That is an imbalance that doesn’t exist under federal law, or other states. Once certified, other things kick in, such as notification requirements and all those other expenditures, and companies prudently settle rather than risk the long-term, higher cost of battling it.”
Parra, who carried the bill, agreed, calling the current law a “jackpot justice system” in which “abusive and frivolous class actions clog our courts.”
Consumers–some of whom were surprised at Parra’s authorship of the bill–and their Democratic allies see the attempt to place the measure before voters next year as difficult and costly. But they also note that business interests spent $15 million or more to win approval for Proposition 64, and likely could be persuaded to pony up again this time for an even more wide-ranging measure.
“The parallels are crystal clear,” Balber said. “We found 125 lawsuits that had been filed prior to the initiative, but that after the passage of Proposition 64, the courts turned around and said no, you can’t file that. They dealt with unfair cell phones, dangerous drugs, privacy issues, false advertising. That’s where you see the deception.”