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A flawed law that needs fixing



The chickens have come home to roost. Or as law Professor Robert Fellmeth put it when testifying to legislators on the explosion of Business and Profession Code §17200 private lawyer lawsuits, "it's tempting to say I told you so."

Fellmeth was referring to his 1997 state Law Revision Commission study which found that 17200's "dilemma is no longer theoretical, it is currently functioning in a number of cases to frustrate the just and expeditious resolution of disputes."

That was the year plaintiffs' lawyers snuffed out three Unfair Competition Law reform bills, including the one sponsored by the Law Revision Commission.

Plaintiffs' lawyers have blocked every §17200 reform bill since then, meanwhile holding seminars like the one held in Maui titled, "How Business and Professions Code §17200 Can Be an 'Added Value' Component of Your Litigation."

So today we have bipartisan abhorrence of mass lawsuits against mom and pop auto repair shops, many owned by Hispanic families. We have editorials decrying settle-quick 17200 demands against nail salons largely run by Vietnamese-Americans. Many of these lawsuit victims are people who came to this country to escape arbitrary, oppressive governments. Now they are discovering new oppression carried out by "officers of the court" with so-far tacit approval of the state's legislature and judiciary.

But wait. A State Bar of California's task force of "some 40 people" has "devoted more than 8,000 hours" investigating for a petition to disbar three of the lawyers who have been filing what observers feel safe in calling 17200 "shakedown" lawsuits. Relief is on the way. Or is it?

Legal malpractice defense lawyer Diane Karpman of Los Angeles told the Daily Journal that the State Bar should be working to change the law, not going after those who find loopholes. "If the law's flawed, it's not the lawyers' fault; it's the fault of the legislators, and that should be on the agenda of the State Bar of California to get that law fixed."

It's hard to blame the State Bar, whose investigation was requested by the attorney general.

But bar members should ask how much did the 8,000 hours of investigation cost? How much more will it cost to investigate the nearly two dozen other "consumer" organizations allegedly serving as fronts for shakedown lawyers?

State Bar members should not be thrilled that their dues are going into investigations which would be unnecessary had the powerful Consumer Attorneys of California ($9.9 million in campaign contributions in 2001-02) not blocked past attempts to reform 17200.

It's not certain that the State Bar's actions will succeed. The accused lawyers' sound defense of their practices could be the best documentation yet of how badly we need changes to the unfair competition law. These lawyers' basic use of 17200 is in line with the statute. What got them into trouble was their efficient, over-enthusiastic use of the law - and their choice of defendants.

Chapman University Law Professor Nhan T. Vu wrote in the Los Angeles Times that "Investigations of, and sanctions against, individual attorneys will not work because they do nothing to change the incentives of pursuing settlements by threatening expensive legal action."

As a statute unlike any other in the country, 17200 has attracted national attention. Its reputation has reached past economic harassment to trampling free speech. Major news organizations have aligned with the Civil Justice Association of California in amicus briefs filed with the U.S. Supreme Court in Nike v. Kasky, an appeal of last year's California Supreme Court ruling that 17200 permits a company to be sued over its press releases, regardless of whether the information ever appears in a news story and without the information being even negligently misleading.

Tom Newton, General Counsel of the California Newspaper Publishers Association (which participated in one of the Nike briefs), says, "Newspapers support strong consumer laws. We believe, however, the case has been made for a serious adjustment of the unfair business practices law."

What should that adjustment be? There are many approaches to choose from - so far a dozen bills have been introduced in the legislature.

We contend the focus has to be on private attorney use of 17200. Whatever changes are made in standing, attorney fees awards, etc., it must be remembered that private lawyers who choose to wear the mantel of "private attorney generals" and file suits "representing the public" should receive much more judicial and public scrutiny than lawyers solely representing named clients. District attorneys and the attorney general are elected officials and accountable to the voters. Private lawyers are not.

  • John H. Sullivan is president of the Civil Justice Association of California.
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