Instead Of Good Jobs

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1 JOBS LAWSUITS At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs

2 It s no secret: California s economy is hurting. We have the second highest unemployment rate in the nation at more than 12 percent. But that doesn t tell the whole story: unemployment in parts of our state such as the Central Valley has soared as high as 20 percent! Even more alarming, economic forecasts predict that double-digit unemployment will last through at least On top of that, our state and local governments are facing ever-growing budget shortfalls as tax revenues decline. The net result is fewer people working, more people relying on the government for support and less public funds available for critical services such as police, firefighters, prisons and schools. Meanwhile, at every turn, our state chooses to create lawsuits that hurt job creation and business growth. California is one of the most litigious states in the country. More than one million lawsuits are filed in our state every year. Everywhere you look from our courts to our state legislature to the office of our attorney general California chooses to create obstacles for employers and small business owners by encouraging more lawsuits. Businesses of all sizes are leaving the state or closing their doors and when they leave, jobs go with them. Other states are adopting policies to make their business climates more attractive, and in doing so, are actively recruiting businesses from California. Abusive and predatory lawsuits have severely impacted, and in some cases, even closed down many small businesses such as pizza shops, convenience stores and well-known local eateries that have been serving residents for decades. So we have to ask: facing the worst economic outlook in recent memory 1. Why is California more interested in helping personal injury lawyers make money than we are in providing jobs for our citizens? 2. Why does our state continually create legal hurdles for employers who want to create jobs? 3. What will it take for this madness to stop and for common sense and fairness to return to our civil justice system? No matter where you look, you will find only in California examples of a sue-happy culture that fuels abusive lawsuits instead of job growth. Consider the following laundry list of litigation obstacles that constrain California employers who want to create jobs. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 1

3 Blatant Abuse of the Americans with Disabilities Act Threatens to Shutter Small Businesses The Americans with Disabilities Act (ADA) was meant to increase access for disabled people, but a few unscrupulous personal injury lawyers and professional plaintiffs have made fortunes by targeting businesses for shakedown lawsuits. Oftentimes these lawsuits are filed when access has not been deterred in any way. These lawsuits don t ask for any accessibility improvements to be made, they ask for money to make the lawsuit go away. Small businesses are often the targets of these shakedown suits, and many quickly settle because of the exorbitant costs of fighting a lawsuit. Recently you may have heard about some of the following egregious examples of personal injury lawyers attempting to fleece hard-working, honest small business owners: The Squeeze Inn Nearly Squeezed Out. Travis Hausauer, owner of the iconic Squeeze Inn burger joint in Sacramento, found out that he had been sued for ADA violations after receiving a call from the press before he had even been served. The lawsuit was dropped after public outcry, but not before Hausauer was forced to move his business. Both the plaintiff and her attorney are notorious in town for filing multiple ADA lawsuits. Our state is in financial ruin and we have one of the highest unemployment rates in the nation, yet our courts and legislature push an aggressive pro-lawsuit agenda that makes it that much harder to attract business and for businesses that are here to succeed and provide the jobs our community needs. Travis Hausauer, Squeeze Inn All we re asking for is fairness. Give us 30 days to fix our violations before forcing us to pay legal costs. Access should be the priority, not financial gain. Lee Ky, Doughnuts to Go Doughnuts To Go Almost Gone. Doughnuts To Go, a small doughnut shop in Reedley, was recently sued for noncompliance with ADA even though Lee Ky, the owner s daughter who helps run the shop, has been in a wheelchair her entire life! Doughnuts To Go was not the only business targeted in its community. The same personal injury firm also filed suit against dozens of small businesses in Fresno, Clovis and Sanger. A neighboring Reedley restaurant closed its doors shortly after the lawsuits were filed. Goodbye Basketball Town! A disabled man sued a Rancho Cordova sports center after he was unable to access the second floor where his nephew s birthday party was being held. Although Basketball Town quickly moved the party to an accessible location, the suit persisted. Facing $100,000 in legal fees, the popular basketball center for kids was forced to close. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 2

4 Environmental Lawsuits with Ulterior Motives Yet another example of California impeding job creation and business growth is abuse of a law passed by our state legislature: the California Environmental Quality Act (CEQA). CEQA is a classic example of personal injury lawyers taking advantage of Californians good intentions. CEQA was intended to be a valuable tool for determining the impacts of a given project on the environment, but its notoriously vague framework often leads to litigation that has nothing to do with the environment. CEQA relies on unclear and subjective standards, such as significant effect, substantial evidence, and cumulative effect. These unclear, shifting and subjective standards create a lawsuit dragnet for employers who find themselves ensnared in costly legal battles with special interest groups who exploit CEQA s loopholes to advance their own agendas through litigation. As a result, projects that would jump-start our state s sagging economy and create jobs are delayed. In December 2010, labor unions teamed up with environmentalists to sue to block a recently approved large-scale solar energy project in Riverside County. The project, which qualifies for federal stimulus dollars, would create more than 600 new jobs during construction and generate enough green energy to power 75,000 homes. Instead, it remains on hold due to litigation that alleges environmental violations under federal law and CEQA. The group that sued to stall the project California Unions for Reliable Energy has long been criticized for using environmental lawsuits to pressure developers to hire union workers. In September 2009, the Merced City Council approved a plan for Wal-Mart to build a $60 million distribution center that would bring approximately 1,200 jobs to a county that at that time had an unemployment rate exceeding 20 percent. Despite great economic hardship and widespread community support for the project, an out-of-town lawyer professing concern for Merced delayed the project by filing a CEQA lawsuit. His attempt to derail one of the biggest job creators in the Central Valley demonstrates the harmful effects lawsuit abuse can have on an entire community. To date, construction has yet to begin as the lawsuit remains tied-up in court. Wage and Workplace Suits That Only Help Lawyers California has the most stringent and, arguably, onerous labor requirements of any state in the country. For example, employers in our state are required to provide a 30-minute unpaid lunch break and two 10-minute rest breaks. But if they fail to provide any of the breaks in a timely manner, then they can be fined one hour of pay for each delayed break. Accordingly, violations of these regulations are a gold mine for personal injury lawyers who troll for small claims that add up to millions of dollars in fees for them, with very little awarded to the supposed victims they represent. Even after resolving cases, employers are often targeted by copy-cat litigants who bring suits by different groups of workers alleging similar violations. A recent study found that California is one of a handful of states with an explosion of these types of lawsuits, which discourage employers from creating new jobs. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 3

5 Many employers could do more to ensure they don t get hit with such cases, but the fact is the matters are often beyond their control. For example, suppose you work in a home improvement store. You take off your vest, walk to the back of the store and a customer asks you a question. That s a violation because you were on your break. Our courts are intended to be used to ensure fairness, but when they are used for greed it is anything but fair. Small businesses, our employees and our customers should not bear the financial burden of filling trial-lawyers already full pockets with even more money. David Houston, Barney s Beanery David Houston, owner of five Barney s Beanery restaurants in southern California, was sued by former employees for wage and hour violations. He settled for nearly $1 million. The plaintiffs lawyers walked away with more than one-third of that money while some plaintiffs received as little as 35 cents. As a result of the lawsuit, Houston has tabled plans to grow his business in the near future. The Proposition 65 Shakedown Passed in 1986, Proposition 65, which is more formally known as The Safe Drinking Water and Toxic Enforcement Act, requires warning language to be posted on products and premises that contain chemicals deemed to cause cancer and birth defects by the state. The law has become a state-sanctioned mechanism for gotcha lawsuits. The law is actually used by personal injury lawyers who team up with the Office of the Attorney General to levy penalties on noncompliant businesses forcing businesses to post notices even when they have no idea if there is an actual risk of chemicals being present. When businesses are sued for not posting the warnings, it is usually by a private attorney who is on the hunt for lucrative fees. Several firms exist exclusively with the purpose of filing Prop 65 lawsuits. Just one example of how the law is misused to cash in: If you visit any California small business with Prop 65 chemicals on its premises and signs are not posted to warn that you are in the presence of potentially harmful chemicals, you can sue the business owner in court for $2,500 for each day he didn t post the warnings. If you win, you will get 25 percent of the settlement and the state will get 75 percent. At this rate, a small business owner who failed to post a warning sign for just one month would be fined $75,000 which equates to the annual salary of least four new minimumwage workers. Annual statistics on Prop 65 settlements released by the attorney general demonstrate how severely the law is abused as a cash cow for private attorneys. For example, Prop 65 settlements totaled $14.6 million in 2009 $14.6 million dollars that could have gone to hiring more employees, increasing wages or growing businesses. Instead, the money went to the state and to personal injury lawyers. But rather than use the settlement funds in the public interest, the attorney general paid $9 million more than 60 percent of the total to private attorneys. The Prop 65 shakedown is another example of how California puts a lawsuit target on the back of employers and encourages outrageous lawsuit abuse at the expense of California employers who are trying to make a living and create jobs. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 4

6 Costly Class Actions that Delay Justice Class action lawsuits are too often abused in our state. Intended to be an efficient way to speed up justice and keep our courts from being clogged with hundreds of lawsuits, class action lawsuits have instead become a lawsuit lottery for personal injury lawyers. A recent Harris Interactive survey found that plaintiffs lawyers choose to file suit in California because they know that the courts are often willing to certify class actions that are not certifiable elsewhere, and juries are willing to give plaintiffs high awards in civil cases. Personal injury lawyers frequently abuse a state law that allows private citizens to sue businesses for so-called unfair practices, and then demand a quick and confidential settlement often resulting in millions in fees for lawyers and only coupons for the allegedly harmed consumers they represent. Consider the following only in California examples of wacky consumer class actions alleging unfair practices that we ve seen recently: Plaintiffs filed a class-action lawsuit in Northern California challenging Apple s claim that reading on the ipad is just like reading a book. The suit alleges that ipad does not live up to consumer s expectations created by the company because it shuts down when left in sunlight for prolonged periods. A class-action filed in Orange County claims that certain olive oil labeled as extra virgin is not extra virgin enough. The suit seeks punitive damages and asks that the plaintiffs be reimbursed the profits made from the suspect oils going back four years. Personal injury lawyers filed a class-action suit against PepsiCo under the unfair practices law alleging that the company s Cap n Crunch with Crunch Berries cereal brand was misleading because it did not actually contain fruit. Personal Injury Lawyers Dominate the Legislature While voters across the country sent public officials a clear message in the 2010 elections In the 2010 election cycle, personal injury and that jobs should be the number one priority, other plaintiff s lawyers spent more than $5.2 Californians decided to stick with the status million in direct contributions and trial-lawyer quo. In recent years, California has only passed controlled political action committees. two bills that could decrease litigation one to protect Good Samaritans and one to establish the Commission on Disability Access, which has yet to yield positive results. Countless other bills have failed to make it out of the Judiciary Committees. Meanwhile, the only thing stopping bills creating more lawsuits from being signed into law was Governor Schwarzenegger s veto pen. Even the inclusion of legal reform as part of the governor s 2010 jobs creation package wasn t enough to persuade legislators to vote against the wishes of some of their heaviest campaign contributors. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 5

7 Common-sense reforms that have failed Leveling the playing field in class action lawsuits: Bills that would have returned fairness to the courtroom by ensuring that plaintiffs and defendants have the same rights to appeal class action certification have been repeatedly killed in committee, making it easier for lawsuits without merit to proceed and costing companies billions, even when no wrongdoing is found. These billions could be better spent on things like job creation and containing the costs for goods and services. Bills backed by the personal injury bar that have passed through the legislature Resurrection of dead lawsuits: This bill sought to drastically increase employer liability by revising the statute of limitations for any workplace claim or lawsuit relating to compensation. It would have invited additional lawsuits from decades-old claims and virtually unlimited damages amounts. It was passed easily by both houses of the Legislature but later was vetoed by the governor. Product liability reform: A bill that would have protected businesses from liability over defects in goods they had no knowledge or control over died in committee. More opportunities for litigation, less opportunities for job growth. Common-sense limits to punitive damages: A bill that would have put reasonable limits on punitive damages and placed California in line with the majority of states that limit punitive damages failed in committee, reinforcing California s reputation as a judicial hellhole where job creation is smothered by lawsuit abuse. Practical ADA reform: This bill would have helped businesses and the disabled alike by ensuring compliance with ADA while discouraging abuse of the law by any party by giving defendants a small window of time to fix any violations before having to pay a plaintiff. Unfortunately, the bill died in committee, emphasizing the Legislature s unwillingness to enact common-sense reforms to reduce litigation. Heads I win, tails you lose: A bill that sought to increase incentives for lawsuits by adding attorney s fees and costs to the overall compensation of victorious plaintiffs in lawsuits, but would not add these fees to the compensation of victorious defendants. It was passed with little difficulty by both houses of the Legislature but was later vetoed by the governor, who rightly criticized the Legislature for focusing on increasing litigation, rather than job creation. More litigation, less arbitration: A bill that would have prohibited voluntary arbitration agreements between seniors and their long-term care facilities. It would have vastly increased litigation costs to both care providers and consumers, with trial attorneys reaping the benefits. It was passed by large margins in both houses of the Legislature but later was vetoed by the governor. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 6

8 How Can We Stop this Nonsense? California consistently chooses lawsuits over jobs. Rather than pursuing no-cost, common-sense solutions that will reform our civil justice system, our state encourages costly litigation that is derailing economic growth and chasing jobs away from our state. Immediate action is required to change California s lawsuit-friendly culture at every level of our society from the Capitol building in Sacramento, to courthouses across the state, to local governments to your own backyard. It s time we start embracing personal responsibility and stop abusing our civil justice system as a means to get rich quickly. More than any other state, California continually chooses to create lawsuits that hurt employers and small business owners. If we are serious about growing our economy and attracting new jobs, then it s time we stand up to the personal injury bar and reign in its abuse. A good first step would be closing loopholes in California s laws that invite abuse. At Every Turn California Chooses Bad Lawsuits Instead Of Good Jobs 7

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