by Nancy McCarthy
Proposition 211, the shareholder lawsuit measure on the November ballot, has caught the attention of both presidential candidates, who announced their opposition to the initiative last month.
It is one of four justice-related measures on the November ballot in California. A fifth, Sen. Bill Lockyer's court unification proposal, will not be on the November ballot even though legislation has been passed and signed by the governor. Because of technical requirements, the proposal will be on a future ballot.
Prop. 211, the "Retirement Savings and Consumer Protection Act," is expected to generate costly opposition by a coalition of national business interests. Estimates of the campaign have so far ranged between $15 million and $30 million. Television advertisements began airing more than three months before the election, and at the same time, Silicon Valley business executives and political leaders began to lobby the White House on the issue.
The initiative's chief sponsor is San Diego attorney William S. Lerach, who reportedly has forced corporations and investment firms to cough up $3 billion in the past 25 years by filing class action lawsuits on behalf of stockholders when companies' stock prices fall.
Now faced with federal restrictions on securities fraud class actions, Lerach is expected to put up a hefty portion of the funds required to back the initiative.
The measure would expand shareholder rights in California by making it easier to file and win -- or to force a settlement in -- multimillion dollar lawsuits for securities fraud.
It would allow plaintiffs to go after the personal assets of company directors and officers in cases charging corporate wrongdoing and stock manipulation. In addition, it would prohibit any limitations on the fees attorneys could charge in such cases.
Proponents say the measure would protect pension funds and shareholders who are victims of insider trading and investment fraud.
Opponents claim it favors plaintiffs so drastically that companies would be forced to pay protection money to ward off frivolous lawsuits. They also say 159,000 jobs would be lost because of legal costs.
In a visit to San Jose last month, President Clinton announced his opposition to Prop. 211, saying it "would be highly disruptive to investment in new companies throughout the country."
The president said he believes changes Congress made to securities law last year -- passed over his veto -- make it too hard for plaintiffs to bring and win shareholder suits. But he said Prop. 211 would make it too easy and even "invite the filing of lawsuits" in California that could not be brought under federal law.
"It just goes too far and it has national implications," Clinton said. "I think it is a mistake. I don't think it's good for the economy."
Republican Presidential nominee Bob Dole also opposes Prop. 211, saying it would "cast a shadow over (California's) economic recovery and burden your state with an unfair and costly law that has no apparent beneficiaries but a handful of trial lawyers."
Silicon Valley business leaders, who met with Clinton just before his announcement, were pleased with his stance, but the measure's backers reacted critically.
Louis Wellington, president of the Congress of California Seniors, said the president "turns his back on his core constituency -- more than 100 California consumer, labor and seniors groups."
Prop. 211 also is backed by the powerful Consumer Attorneys of California.
In addition, the Consumer Attorneys favor Prop. 207, an initiative which prohibits caps on lawyer fees. It codifies existing State Bar Rules of Professional Conduct and strengthens the bar's power to discipline attorneys who are sanctioned repeatedly.
Although the court consolidation measure (Senate Constitutional Amendment 4) did not pass early enough to win a spot on the 1996 ballot, lawmakers are working to place the measure on a future ballot, most likely in 1998.
Lockyer has been trying for four years to win approval of SCA 4, which would give superior and municipal court judges in each county the choice of whether to unite.
Gov. Wilson had opposed the measure because it would elevate municipal court judges appointed by former Gov. Jerry Brown to superior court status.
But he and Lockyer struck a deal, with the Senate leader agreeing to support bills authorizing 21 new judgeships and easing the re-election of appellate judges by eliminating certain information on the ballot.
Other measures on this Novem-ber's ballot are Prop 213, limiting recovery by felons, and a bond measure to build more jails.
Prop 213, sponsored by state Insurance Commissioner Charles Quackenbush, would, in part, bar drunken drivers and uninsured motorists from suing for non-economic damages in auto accidents.