Despite arbitration’s endorsement by Congress and the U.S. Supreme Court, it seems like the Securities and Exchange Commission (SEC) has a problem with it.

Hal Scott and Leslie Silverman recently wrote a commentary for the Wall Street Journal in which they point out that the SEC rejected proposals by the Carlyle Group, Pfizer and Gannett to mandate arbitration instead of litigation in disputes between investors and management. The SEC gave no explanation for the decision related to the Carlyle Group and said only that the other proposals from Pfizer and Gannett "might" violate securities laws.

Securities class actions undercut the competitiveness of the U.S. capital markets. From 2000 to 2011, the total value of all U.S. securities class action settlements was approximately $64.4 billion, according to NERA Economic Consulting. As Scott and Silverman point out in their opinion piece, securities class actions, unlike mass tort litigation, involve stockholders who are often both plaintiffs and investors in the defendant corporation.

These suits are invariably settled before trial, generally for pennies on the dollar. Small investors recover so little they often do not bother to file for their money. Between 40 to 60 percent of settlement funds generally go unclaimed, while plaintiffs’ attorneys walk away with 35 percent of the total settlement.

These lawsuits do little to deter wrongdoing. The stockholders funding a settlement generally have no knowledge of management misdeeds while the actual wrongdoers rarely pay a dime. The corporation's directors' and officers' insurance covers the settlement cost.

On an issue as big as this, the SEC has to explain its reasoning for not allowing arbitration. They should be protecting shareholders, not plaintiffs’ lawyers.

Mark your calendars, 2012 Justice Day is May 1! The more common name for it would be Trial Lawyer Lobby Day, when private jets and limos will converge on Sacramento for plaintiffs’ lawyers annual lobby day. It is a nice touch that they schedule this on the day that both the Senate and Assembly Judiciary Committees meet. That way they can make sure any legitimate legal reform is defeated and their pet issues are passed.

I am not exactly sure why they even bother coming. They have covered their bases over the past decade by contributing more than $33.5 million to legislative campaigns. In the 2007-08 election cycle, personal injury and other plaintiffs’ lawyers spent more than $4.1 million in direct contributions and trial-lawyer controlled political action committees. Contributions from trial lawyers have ensured that the key policy committees are totally in their control and little or no legal reform ever is passed.

Beyond blocking legal reform, plaintiffs’ lawyers actively support laws designed to increase litigation costs and, in turn, attorneys’ fees. One of their highest priorities is the bill introduced by State Senator Darrell Steinberg, SB 1528, which they call the “Reasonable Value of Medical Care” act. One tip: anytime trial lawyers use the word “reasonable,” get ready to worry.

Our state continues to struggle with unemployment at nearly 11 percent, and annual deficits in the billions. There’s a reason CALA's theme this year has been “Create Jobs, Not Lawsuits” – legal reform will help create jobs. Unfortunately, our Legislature does not seem to get the connection between legal reform and jobs. Improvements to our legal system will attract investors back to California, and with them will come jobs and tax revenue.

Every time a business closes in California, it means fewer jobs and lower tax revenue. Let’s hope that this year, some elected officials are able to see beyond the contributions of the trial lawyers.

I was initially planning to post about how successful our Day at the Capitol events with the Civil Justice Association of California (CJAC) went on April 24th, but things did not exactly turn out like we thought they would.

Our annual Day at the Capitol was April 24th. Sunny weather and a great group of folks from all over the state showed up to discuss legal reform and the California economy. As many of you know, our main theme this year has been "Create Jobs, Not Lawsuits." At every turn, California has chosen to create more litigation rather than improve its legal climate, which is ranked nearly dead last by numerous sources.

The day began with a meet and greet, then a luncheon featuring a brief screening of a new movie called Wheels of Fortune, which focuses on the abusive ADA lawsuits that have been ravaging small businesses in our state. Our panel of lawsuit abuse victims discussed how lawsuits alleging wage-and-hour violations and ADA violations have hurt California and cost our state jobs.

Then it was off to the State Capitol for meetings with legislators, which are always important and interesting. We weren’t the only ones busy at the Capitol that day. The Assembly Judiciary Committee met in the morning (they defeated Assemblyman Don Wagner's badly-needed class action reform legislation) and then the Senate Judiciary Committee met in the afternoon. After our legislative meetings, we were scheduled to have a public forum discussing the link between legal reform and California’s economy hosted by State Senator Tom Harman. CJAC had coordinated with Sen. Harman to reserve a room and we have invited panelists to discuss how lawsuits are hurting our state’s economy.

Well, I guess the folks in the Capitol who control such things decided that this was not the most productive use of a room in the Capitol and cancelled our reservation. We were told all rooms in the State Capitol where you can hold this public forum were booked, and if we wanted to hold the hearing, we would have to do it outside of the building.

I have seen a lot of games played in the Capitol, but this is certainly one that will top my list. I have my own thoughts as to who and why, but I will not go into them here. Nonetheless, to simply shut out a State Senator and his guests because you disagree about something is pathetic. CJAC and CALA and all of our supporters had a room scheduled to discuss legal reform, but the message from leadership was that our message was not welcome.

Despite the minor setback, we did have a great public forum at the South Steps of the State Capitol with lively panel discussions and heartbreaking stories from lawsuit abuse victims. At the reception in the evening, many legislators showed up, but most importantly Governor Jerry Brown showed up and worked the crowd. He even had a staffer come over and listen to CALA supporters discuss the issues they are dealing with. Impressive!

The Governor’s ability to listen to folks whose opinions may differ from his own is admirable. Maybe some others should take note on how the Governor handles himself and stop being so petty. The State Capitol is a public arena and it should not be tainted by partisan bickering.

On Thursday, April 12, you could hear a huge sigh of relief from the business community in the state of California regarding a state Supreme Court decision on whether businesses have to ensure that workers take legally-mandated breaks in Brinker Restaurant Corp. et al v. The Superior Court for the State of California for the County of San Diego.

In a unamious decision, the Supreme Court authorized a class of workers in the state to proceed with claims that they were denied proper rest breaks by Brinker International Inc., the parent company of Chili's restaurant chain. With respect to the meal break claims, the court ruled that employers only have to provide meal periods to workers, not make sure employees actually take them. The decision can be found here.

Associate Justice Kathryn Werdegar wrote in the unanimous decision, "an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does not work."

This decision is a huge victory for California businesses and employees alike. California employers and labor lawyers have been waiting three years for the high court to clarify the ambiguities in the state's wage laws. Since their passage, class action lawsuits alleging violations of the state’s wage and hour laws have become one of the most commonly filed lawsuits in our state, targeting businesses both large and small. All it took to start the legal process was three current or former employees of a company.

CALA applauds the decision. This will be a huge step in the right direction for making California a little more business friendly. These wage and hour class actions were costing businesses around the state millions of dollars while the employees who brought the lawsuits often received very little. In one lawsuit I know of, the three employees who brought it got $7,500 apiece, the class of current and former employees got between 35 cents and $100, and the lawyers got $350,000. Does that sound fair to you?

Kudos to the California Supreme Court for stopping the abuse and making doing business in California a little better.

Recently, U.S. Senator Dianne Feinstein sent a letter to State Senate President Pro Tem Darrell Steinberg on the issue of predatory ADA lawsuits that have been hurting businesses in California. Sen. Feinstein’s letter states that while she supports the ADA, as we all do, she feels that predatory ADA lawsuits are wrong and have a dire effect on small businesses. She wants the State of California to show some leadership and stop these lawsuits. If the state does not, she said she will introduce legislation at the federal level to try and resolve it.

Her letter was sent on March 8. I guess it took a few days, but Sen. Steinberg responded on March 28, and his response was so predictable, you could have bet on it at Thunder Valley Casino and made some good money. His response was essentially, “Look Senator Feinstein, we appreciate your concern, but we have it handled. We passed a law in 2008 that is going to resolve the whole problem we just need time for it to work.”

I am sure that Sen. Steinberg had some staffer run down the hall to State Senator Ellen Corbett's office (who authored SB 1608) to ask her what she has gotten them into and how to draft a response to get Sen. Feinstein off their backs. Sen. Corbett gave the same response as she did last year: SB 1608 is working and it just needs more time to solve the problem. This is not surprising, given that she wrote SB 1608 but has never attended a California Commission on Disability Access meeting even though she is an ex officio member. Maybe if she had, she would see that SB 1608 is simply not addressing the issue of abusive ADA lawsuits.

Quite frankly, I wish people would stop referring to SB 1608 as if it was ever designed to solve the problem of abusive ADA lawsuits. It created a commission  to study the problem and the CASp (Certified Access Specialist) program, which aimed to certify people to inspect businesses for accessibility violations and help businesses come into compliance. However, all that commission was tasked with doing was creating a master checklist for ADA compliance. It is not supposed to stop the litigation problem. Even worse, it has not created the master check list and it has not even begun to "study" the litigation problem in California.

Sen. Steinberg's response is weak. It's as if someone handed him a memo and he took it on face value. If he had been with me in Pollock Pines on March 15 listening to 140 people complain about how their community is being destroyed by accessibility lawsuits filed by a single predatory trial lawyer, maybe he would have a different perspective.

The abusive ADA lawsuits are continuing in this state and Sen. Feinstein is right: they are having a negative impact on our state and the small business community. Lawyers Against Lawsuit Abuse estimates that there have been approximately 25,000 to 35,000 ADA lawsuits filed in California over the past few years.

This is a very complicated matter, but when a small business folds because it is facing a predatory ADA lawsuit, what does this mean to California? It means less revenue for the state from sales taxes, property taxes and employment taxes. So maybe Sen. Steinberg should think of this more as an issue costing the state revenue and jobs. SB 1608 is not working and it will not stop the ADA lawsuits. Sen. Steinberg, show some leadership like your friend Sen. Feinstein. Let’s create jobs, not lawsuits.

Note - this blog post was originally published in the Flash Report.

Over the past few years CALA has tried to shed light on what seems to be one of the biggest legal shakedowns in California history and yet no one seems to be paying attention. Well, some new information has been published that should turn some heads.

The California Attorney General's office just posted the 2011 Proposition 65 Executive Settlement Summary. Those of you who have read previous blog posts by CALA know there is a small group of lawyers and law firms in California filing shakedown lawsuits against businesses for violations of Proposition 65. These individuals file lawsuits looking for quick settlements, taking huge legal fees as they go. These legal fees can range from 22.9% to almost 100% of the settlement.

The 2011 list of private settlements has been published and it tells us one thing: the abuse continues and NO ONE is doing a single thing about it. Let me give you a few highlights:

Russell Brimer settled 61 lawsuits related to Prop. 65 in 2011. The settlements totaled $2,282,485, and the civil penalties of those cases represented $368,900. The attorney fees and costs represented $1,936,085, making up 84 percent of the total.

Anthony Held settled 41 lawsuits related to Prop. 65 in 2011. The settlements totaled $2,239,250, and the civil penalties of those cases represented $207,500. The attorney fees and costs represented $2,031,750, making up 90 percent of the total.

Are you stunned? Here is one more. John Moore settled 47 lawsuits related to Prop. 65 in 2011. The settlements totaled $2,371,900, and the civil penalties of those cases represented $534,400. The attorney fees and costs represented $1,837,500, making up 77 percent of the total.

Does anyone see a pattern here? One individual settled six cases and took 96 percent of the total in fees. Another took 94 percent of the total in fees for four cases, which added up to six-figure amounts. To be fair, the Settlement Summary also states that at least those two gave contributions to the Susan G. Koman Foundation totaling $1,200. I wonder if they are regretting that now...

Seriously California, wake up. If you think predatory ADA lawsuits are bad, Prop. 65 lawsuits make them look like a child’s game. These are the mother of all shakedowns and no one is doing anything about it. These lawsuits are continuing to make California uncompetitive and they are destroying California’s small business environment.

In a future post I will peel back some of the layers to these individual cases and ask the question California’s small business owners are dying to have answered: why isn’t the Attorney General's office stopping these cases? Can they really be justified as being about safe drinking water or is it about allowing trial lawyers to line their pockets at the expense of California jobs and small business?