CALA Blog

California is Ground Zero for Food Lawsuits

For some time, the plaintiffs’ bar has been looking for the next cash cow and the food industry seems to be it. Last year, a story on ABC laid out how the same guys who got rich by pummeling the tobacco industry have set their sights on a new target: those who make and sell food. That accusation that the U.S. Food and Drug Administration is in the pocket of the food industry combined with the fact that more than a third of Americans are obese make for the perfect storm for trial lawyers. Dr. David Katz, Director of the Yale University prevention Research Center stated, “The three major detriments of all our ills are tobacco, poor diet and lack of physical activity.” He went on to add, “There is no question the problem of poor diet has been aided and abetted by those profiteering from the status quo.”

Fast forward nearly a year and what is happening? Trial lawyers are swooping in to make a profit of their own. Food companies are seeing a dramatic uptick in the number of consumer fraud lawsuits. The number of consumer fraud class actions brought in federal court against food and beverage companies has skyrocketed in the last 5 years. In 2008, there were roughly 19 cases. That number jumped to 102 in 2012. Where are the vast majority of these cases being filed? California!

From 2008 until 2012, 186 class actions were filed in California court, many of them in the U.S. District Court for the Northern District of California. Ironically, this court has been dubbed, the “Food Court.” This is compared to New Jersey, where there have been only 18 cases filed. Aided by political rhetoric and policy proposals from First Lady Michelle Obama and Mayor Michael Bloomberg, the focus of plaintiffs’ attorneys has clearly shifted to health and safety concerns over food. One lawyer in Los Angeles, Matthew Kaplan, even predicted an increase in litigation from local government enforcement efforts. He even called it the “Bloomberg effect.” Perhaps we’ll need to change their moniker from “ambulance chasers” to “food truck chasers” soon.

As one lawyer said, we have seen this movie before. Ronald Levine stated, “Lawsuits come in waves, but eventually they peter out.” The question is whether the industry can weather the wave of litigation. Trial lawyers are for profit. They are always looking for the next big avenue for revenue and it appears that the food industry is it and California is ground zero.

Is President Obama a Legal Reformer?

I will be honest: the title of this blog was a little hard to type. But I was reading an article in Reuters and it made me wonder: does the President believe in legal reform? On one level it would seem that he does. Just last week, he took steps intended to curb lawsuits brought by companies called “patent trolls.” These companies do not make or sell anything; they specialize in suing others for patent infringement. He asked for new federal regulations and action from Congress.

Of course the timing was advantageous. This position was announced ahead of an Obama fundraising trip to the Silicon Valley and it came at a time when lawmakers and courts are  looking at ways to reduce the number of unwarranted patent lawsuits. These lawsuits have dramatically increased in recent years, particularly in the technology sector. Critics say those patent portfolios are assembled as a springboard to litigation; many firms argue that they are providing a service to inventors, or protecting against loss of licensing fees that users of patents should pay.

Big technology companies like Cisco, Apple and Google have been pushing for legislation that would reduce the number of times each year that they are sued for infringement. One of the proposals being pushed by the White House is legislation that would make it easier for a federal judge to award legal fees to the winner of a patent case if the judge deems the lawsuit abusive. Wow. Abusive lawsuits? The President actually recognizes that some lawsuits are abusive? Interesting.

Companies specializing in patent litigation filed 2,921 infringement lawsuits in 2011. According to Colleen Chien, a teacher of patent law at Santa Clara University of Law, the latest figures show that these companies initiated 62% of all patent litigation or 2,921 of 4,701 suits in 2012

There are already a couple of proposals in Congress. One is a bill put forward by Democratic Senator Patrick Leahy of Vermont and Republican Representative Robert Goodlatte of Virginia. Their measure would improve access to information about who owns patents, reduce discovery burdens in lawsuits, and make additional changes to enable judges to identify abusive cases early in the process and, presumably, dismiss them.

Another bill has been introduced by Democratic Representative Peter DeFazio of Oregon and Republican Representative Jason Chaffetz of Utah. Their bill would require certain plaintiffs to pay all legal fees if they sue for patent infringement and lose.

It is certainly refreshing to see bipartisan efforts in Congress to tackle these abusive lawsuits. Additionally, the President appears to see a  clear abuse and wants it stopped. This coming from a guy who took over $27 million dollars from trial lawyers during the 2011/12 election cycle and when you Google his name and “legal reform”, almost nothing comes up. Whether it comes about via regulation or legislation, the abuse must stop. The absurd amount of money being spent on frivolous lawsuits is only hurting the economy and job creation in California and across the country.

The Tide Comes In, The Tide Goes Out

There are certain things that you can predict with relative certainty, such as the tide and the annual Proposition 65 Private Settlement report. I have been waiting since early April for the Attorney General to post the annual Summary of Proposition 65 Private Settlements. I was giddy with anticipation when it finally was posted the other day. Just as a warning (no pun intended), there will be no surprises for those of you who follow this annual posting. The abuse of Proposition 65 is alive and well for now.

I will applaud the Attorney General’s office for making this report a little easier to read and understand. Sometimes, for non-lawyers, this stuff can get a little confusing. So let’s highlight some of my favorite parts:

• Total Settlements for 2012 = $22,560,022

• Total Non-Contingent Civil Penalties = $4,095,095.54

• Attorney Fees and Costs = $15,588,763.93 (69.10%)

Here are a few examples of the 17 plaintiffs (give or take; excluding the Attorney General’s office and other government-related plaintiff actions):

• The Consumer Advocacy Group had 59 settlements. The total for the settlements was $2,615,000. Of that amount, a civil penalty in the amount of $117,250. Their Attorney Fees and Costs totaled $2,227,500 – 85% in fees and costs!

• Anthony Held had 58 total settlements totaling $2,581,060. $490,310 was paid in civil penalties and Mr. Held walked with 81% of the total in fees totaling $2,090,750. He also had a number of other settlements with some of his cohorts, in which they split the fees, which were between 79% and 83%.

• Russell Brimer had a total of 46 settlements, with $344,400 paid in civil penalties and $1,676,500 (82.79%) paid in attorney fees and costs.

Proposition 65 was written by trial lawyers. By creating private rights of action, they have allowed some in their ranks to abuse the intent of the original initiative. The public should seriously question attorney’s being awarded 80% fees and more. CALA has long documented and talked about this abuse. And by the looks of it, the Consumer Advocacy Group has already filed 112 60-Day Notices this year.

We are hopeful that this abuse practice will come to an end. While Proposition 65 is complicated and there are a lot of different interests at the table working to fix these abuses, I believe there is a middle ground. These rogue attorneys are not doing anyone a service.

The Proposition 65 Game Changer

For years I have said that anyone who looks at the private settlements related to Proposition 65 (The Safe Drinking Water and Toxic Enforcement Act of 1986) or the 60-Day Notice Section on the Attorney General’s website would definitely come to the conclusion that there is a clear abuse of this initiative.

The problem is that a large group of Californians were not around when voters approved Prop. 65, or were too young when it passed to understand it. This has created a large learning curve in explaining to people how it is being abused. One great article on the abuse was written by Anthony Caso back in March 2012 for the Federalist Society. Mind you, this focuses primarily on the private settlements and the bounty hunter issues, but it is still a good read.

Earlier this year, Assemblyman Mike Gatto (D-Los Angeles) introduced AB 227 to combat Prop. 65 abuse. CALA was one of the first to applaud Assemblyman Gatto for introducing this bill to address a concern of his constituents. He saw an abuse and he wanted to try and correct it. I think it would be fair to say that the trial lawyers and environmentalists were not thrilled when they first saw the text of the bill. Gatto was willing to sit down with them and others to narrow the focus of his bill and see if we could get some kind of language that was workable.

At the April 30th Assembly Judiciary Committee hearing, the amended language to AB 227 was introduced and both the environmental community and trial lawyers added their support. The amendments to AB 227 narrowed the focus of the bill’s application to alleged violations relating to exposure to alcohol and food-related chemicals, tobacco smoke and vehicle exhaust. In only these cases, an alleged violator can avoid a lawsuit by paying a $500 penalty for each facility where the violation occurred and posting the required warning signs within 14 days of being notified of the violation. This legislation has passed out of two policy committees on unanimous votes.

Then came the game changer. On May 7th (Trial Lawyer Lobby Day), around 11:30 a.m. a large group of people received an email from the Governor’s Office entitled, “Prop. 65 Stakeholder Briefing Invitation.” It announced a meeting to take place that same day at 3:30 p.m. to lay out the Governor’s proposals of reform for Prop. 65. His reforms are outlined here.

Not only does the Governor jump into the debate on Prop. 65 reform, he does it on the Trial Lawyer Lobby Day of all days. This is huge. If anyone is frustrated with how Prop. 65 is being abused, it is Governor Brown. He has a long history on this issue and the fact that he has injected himself, his staff and key members of his administration is big.

One of the key reform elements is abusive lawsuits. To quote Governor Brown, “Proposition 65 is a good law that has helped many people, but it’s being abused by unscrupulous lawyers.” The Governor wants to improve the law so it can do what it was intended to do. There will be a series of stakeholder meetings over the coming weeks to see if there is agreement on his reform package. If so, I would think that language might be amended into Assemblyman Gatto’s AB 227 in the next couple of months.

One of the most interesting aspects of the Governor’s recent announcement is that he views the Prop. 65 debate not only as an environmental issue, but also as an economic development issue. CALA is very supportive of the Governor’s efforts and will be at the table to help push for common sense reform to stop abusive Prop. 65 lawsuits. Just as in the discussion regarding reform to California’s Americans with Disability Act laws, there is common ground and I am hopeful that we will see major legal reform in this area by the end of summer.

Juror Appreciation Week: May 13-17

In 1998, the California Legislature designated the second full week in May each year to honor the important contributions of citizens who serve on juries, making citizens’ right to trial by jury possible. This year marks the 16th Anniversary of Juror Appreciation Week. For those of you who have served on a jury, CALA would like to applaud you.

Jury service contributes to our American system of justice and is an important form of service to local communities. Today, we express our appreciation for you: thank you to the millions of citizens in California and the United States for making our country a symbol of justice.

However, it is unacceptable that many Americans avoid jury service. Our system of justice is unique in this world, and we must all participate to ensure it works.

To quote California Supreme Court Justice Tani G. Cantil-Sakauye, “Trial by jury is one of the fundamental ideals of American democracy; serving as jurors reminds us that these ideals exist only as long as individual citizens are willing to uphold them.”

So, during Juror Appreciation Week, we ask everyone to answer the call and when that jury summons arrives in the mail, not to discard it, but to do your civic duty and play your part in our judicial system.

Has the Table Been Set for CEQA Reform?

The appetizers have been cleared and it looks like the table is being set for possible reform of the California Environmental Quality Act (CEQA). While there are a large number of issues that one can discuss when it comes to CEQA reform, I will limit my comments to how to stop abusive CEQA lawsuits.

The CEQA debate came to a head recently in the Senate Environmental Quality Committee. The debate featured a lot of legislators, a lot of bills and a lot of passion, but in the end it became clear that Senate Pro Tem Darrell Steinberg was going to control this debate with his bill, SB 731. CALA had been supporting legislation by State Senator Tom Berryhill as one possible vehicle for reform, but it was pretty clear that SB 787 was going to be grounded due to the makeup of the committee.

What was interesting to me is that every single State Senator that spoke about CEQA reform discussed lawsuits, litigation and the fact we need reduce abusive CEQA lawsuits. If I had a dollar for every time lawsuits were mentioned I could buy a season ticket to the Sacramento Kings.

It seems like everyone now acknowledges that CEQA lawsuits, whether or not they have merit, have become a path to slow down or stop development projects. In the bill analysis for SB 731, the consultant to the Senate Environmental Quality Committee specifically examined the issue of CEQA litigation, noting that just the simple threat of a lawsuit is an impetus for extra costs and delays of a project subject to environmental review. Indeed, when communities pursue major development projects, it seems they inevitably will encounter a problem with CEQA litigation and abuse.

If one abusive CEQA lawsuit holds up or stops a project that would bring jobs and economic development to our state, then we have a problem. There needs to be reform when it comes to the issue of CEQA and litigation. We hope that SB 731 by State Senator Steinberg will be that vehicle for reform. CEQA, just like the Americans with Disabilities Act (ADA) or Proposition 65, is complicated, and there is a delicate balancing act that must occur. Just as he did with California’s ADA laws last year, we are confident that Senator Steinberg can strike this balance with CEQA.

According to CEOs, California is Dead Last

If I were trying to grow a state’s economy, I would probably listen someone who knows how to create jobs and is making decisions on behalf of shareholders, investors and employees. I think the time has come to take seriously all these various surveys that come out and rank California at the bottom or close to the bottom of nearly every category when it comes our business climate.

In its ninth annual survey, Chief Executive magazine polled 736 CEOs – the highest number ever – about the best and worst states in which to do business. The survey asked business leaders to grade states based on the following metrics: taxation and regulation, quality of workforce and living environment. California placed dead last – the same rank it received in 2012 – right behind Illinois and New York. Texas ranked No. 1, followed by Florida, North Carolina and Tennessee.

While legal reform might not be specifically listed as one of the issues in the survey, it was likely on the minds of these 736 CEOs when they responded. The legal climate is as critical to whether a business stays in a state or relocates as anything else, and a single abusive lawsuit can cost a company tremendously.

While California is moving slowly in the right direction on legal reform, a lot more needs to be done. For decades we have heaped more and more laws and regulations on the books that have resulted in more and more lawsuits. Last year nearly 1.1 million civil lawsuits were filed in California.

If California is to ever climb its way back up this CEO list, it is going to have to make big progress on reforming its legal climate.

CEQA Reform Can Happen – Support SB 787

The Governor said in his State of the State speech: “We … need to rethink and streamline our regulatory procedures, particularly the California Environmental Quality Act (CEQA).”

CEQA, for those of you who do not know, was passed in California in 1970 – the year of the first Earth Day. It does not directly regulate land use, but what it does do is make environmental impact analysis a mandatory part of every California state and local agency’s decision-making process. It has also become the basis for numerous lawsuits concerning public and private projects.

CEQA’s broad scope and lack of clear thresholds often leads to litigation. Individuals and organizations opposing developments often file lawsuits to delay projects and grind development to a halt. CEQA plaintiffs often challenge projects that receive negative declarations, i.e., that are found to have no significant effect on the environment, on the grounds that environmental impact reports (EIRs) should have occurred. Litigation also occurs on the grounds that EIRs are too brief or overlooked possible impacts. Truly, lawsuits have become rampant in the CEQA process, delaying projects that would bring jobs and economic growth to a state that badly needs both.

Change is needed. Like so many other well intended laws, the law of unintended consequences applies. In this case, the consequence has been an enormous number of lawsuits. That is why CALA supports State Senator Tom Berryhill’s SB 787, which will integrate newer — sometimes stricter — environmental and planning laws with CEQA review. Additionally, SB 787 focuses on CEQA litigation. The bill would limit litigation when projects are in compliance with the applicable environmental laws.

The bill would still permit opponents to sue under CEQA. Opponents can challenge whether lead agencies complied with procedural requirements of CEQA (e.g. adequate project descriptions, adequate notice and public hearings, etc.). CEQA lawsuits may still be filed, with limited exceptions, for failure to comply with CEQA’s procedural and substantive requirements. The Sacramento Bee’s Dan Morain said it best. “In any overhaul, legislators must walk a line,” he wrote, between “how to limit lawsuits intended to shakedown developers, while protecting legitimate concerns of organizations and citizens who don’t want thoroughfares or factories in their front yards.”

The expansion of abusive lawsuits that threaten the creation of jobs and economic development has demonstrated that CEQA needs substantial reform. CALA supports balanced, bipartisan reform, and Sen. Berryhill should be applauded for introducing SB 787. It will be up in Senate Environmental Quality on May 1st. Just like with ADA, we were able to find a balance and enact reform. This can be done with CEQA!

Cha Ching, Cha Ching Went the Cable Car

San Francisco, the beautiful city by the bay, is one of the most popular destinations in the world. To me it is like Las Vegas. Two or three nights in San Fran is the perfect mini vacation. My wife and I like to hop on the famed cable cars and take a spin over to Ghiradelli Square and to Buena Vista for Irish Coffee. It is always fun, a little surreal, overcrowded and a bit of a rough commute.

I never really thought much more about it, until I saw a recent AP story about how the cable cars of San Francisco are lawsuit magnets. It stated that the cable cars average about one accident a month and routinely rank among the most accident-prone mass transportation modes in the nation per vehicle mile traveled annually. According to the U.S Department of Transportation, city officials have reported 126 accidents injuring 151 people over the last 10 years.

The Associated Press obtained a list of cable car-related legal settlements over the last three years. Those figures show that San Francisco paid nearly $8 million to settle about four dozen legal claims. In comparison, the city has paid on average $12 million annually to settle all claims connected to its mass transportation system, which includes cable cars, electric street cars and buses, which travel many more miles and carry many more passengers.

Legal claims are expected on mass transit, and the cable car system has been operating since 1893. While there have been some very serious accidents, the AP found one rather entertaining lawsuit from 1970. A woman won a jury verdict of $50,000 after she claimed that a minor accident on a cable car she was riding turned her into a nymphomaniac. Yes, you read that correctly.

So the next time you are in City by the Bay, humming “I Left My Heart in San Francisco,” and you are thinking about hoping on a cable car, pay attention when they say to keep arms and legs in the vehicle at all times. It might just save you from injury and preserve San Francisco’s tax dollars for public services.

What Are Public Sector Lawsuits Costing You?

CALA  recently released a report finding that just 17 of California’s 482 cities and 58 counties spent more than $1.09 billion on lawsuits over a four-year period from 2008-2012. And that’s just on verdicts, settlements and outside counsel. It does not even take into account the cost of in-house counsel and other administrative costs associated with the enormous number of lawsuits facing cities and counties.

These exorbitant costs came during the worst economic crisis of most of our lifetimes, as cities’ and counties’ revenues fell sharply and public services were slashed. Since January 2010, three cities in California have filed for bankruptcy and several other cities and counties remain on the edge of solvency.

That huge number – more than $1 billion spent by local governments over four years – demonstrates just how damaging abusive lawsuits can be to local government finances. Unscrupulous attorneys and plaintiffs too often treat public sector budgets as a coffer to be raided and file abusive lawsuits against local governments seeking a quick payday.

It is unacceptable for cities and counties to continue to pay out-of-control legal costs while vital social service and public safety programs face budget cuts. For example, in Los Angeles County, the $93.8 million spent in 2010-2011 on litigation was greater than the cost of capital improvement projects at more than 18 fire stations or other fire department facilities.

The additional tax burden the cost of litigation places on taxpayers is substantial. According to a study released by Towers Watson, the overall cost of the U.S. tort system in 2011 was $264.6 billion, which translates to $857 per person, or more than $3,400 for a family of four. These costs are paid through higher local, state and federal taxes, increased premiums for insurance and higher prices for products and services on a daily basis.

The legal system is intended to provide justice for those who have been injured, not to enrich a handful of plaintiffs and their attorneys. Until California’s legislature passes meaningful legal reforms that create balance in our courts and remove the incentives that encourage lawsuit abuse in the first place, high litigation costs will likely continue to plague California’s city and county budgets.

Public sector litigation should be on the minds of all taxpayers. They need to demand more transparency and they need elected officials who will fight for legal reform.