Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘s. 17200’

And for something completely different

I’ve written a literary review of a historical novel (Emma Donoghue’s Life Mask) for Sunday’s New York Times Book Review; it has nothing at all to do with problems of the legal system. I’m at work on a second review for the same outlet and hope the relationship will be a long and happy one. (Walter Olson, “Women in Love”, Sept. 26).

Back on topic: yesterday’s publicity roundup omitted a few recent clips. To wit: I’m quoted in an article in Legal Affairs on the controversial new “litigation-finance” industry, which advances money to plaintiffs (often at very high interest rates) in exchange for a share of the booty (Daniel Brook, Legal Affairs, Sept./Oct.)(see Aug. 4, 2003). My Manhattan Institute colleague Robert Goldberg quotes me in a piece on the attacks on FDA general counsel Dan Troy over his initiative to have the agency intervene in state-court liability suits which threaten to contravene FDA policies (“The sacking of Troy”, Washington Times, Jul. 25)(see Jul. 14). And very kind things are said at PokerPulse Forums about me, about this site, and about my book The Rule of Lawyers in the course of a discussion of the lawsuits under California’s s. 17200 against Google, Yahoo, etc. for supposedly promoting online gambling (see Aug. 9).

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Exporting s. 17200

Have you been skipping past items about California’s abuse-ridden s. 17200 business practices act (see Jun. 30, Apr. 22, Mar. 12, Feb. 16 and links from there) just because you don’t happen to live or do business in California? Then read on. Under a case currently on appeal to the state’s supreme court, a business located anywhere else in the country, perhaps even the world, can be sued under s. 17200 if it advertises for customers in California — and such advertising may take the form of maintaining a website accessible to California customers. In the case at issue, a Los Angeles appeals court ruled this March that several Nevada casino hotels “could be sued by a man seeking class action status on behalf of all California residents hit with a $3-per-night energy surcharge while staying in Las Vegas, Reno or other gambling towns.” The court held “that hotel advertisements, toll-free numbers and interactive Web sites provided sufficient contact to give Los Angeles-area resident Frank Snowney jurisdiction to sue in California” under the ultra-liberal state law. According to a Fulbright & Jaworski lawyer who is representing the casinos on appeal, the ruling “may affect any hotel, cruise ship, club, theater, museum, sporting venue, rental car company, restaurant, etc., operating exclusively outside of California, but accepting online reservations.” (Mike McKee, “Businesses Quake Over California Case”, The Recorder, Jul. 2). More: There turns out to be a whole blog dedicated to s. 17200, and it takes exception to the Recorder article’s slant, interpreting the pending case as primarily about the scope of state jurisdiction generally and only incidentally about s. 17200 (via Legal Reader).

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“Failure to Plead 17200 Claim = Malpractice”

Legal Reader (Jun. 22) on a new development in the saga of California’s please-abuse-me law, s. 17200: “according to California’s First District Court of Appeal, failing to include a cause of action under 17200 in many civil actions may actually constitute malpractice, even if the plaintiffs’ attorney thought it unwarranted or unjustified. The opinion was filed today in Janik v. Rudy, Exelrod & Zieff. …

“My problem is that the Court’s reasoning here applies to almost any civil lawsuit against a ‘business’ in California. As a rule, if you can state a cause of action for anything, you can also state a cause of action under section 17200, as whatever wrongs constitute the first will also constitute the second. By including section 17200 you automatically get a bunch of ‘freebies,’ such as: four year statute of limitations, the ability to recover on behalf of other non-parties, and most likely a case that is at least partially impenetrable to a petition for arbitration.

“In fact, most California civil lawsuits already include section 17200 claims, but now lawyers may be subject to malpractice claims (even from non-clients) if they file compaints that don’t.” For an analogous problem, see “Omit a peripheral defendant, get sued for legal malpractice”, Feb. 15-17, 2002. More: Declarations and Exclusions analyzed the case Jun. 24, pointing out that the ruling, while exposing the defendant attorneys to a claim of breach of duty, does not establish on the merits whether or not they did breach a duty.

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Puttin’ on the s. 17200 ritz

A California court of appeal has rejected a lawsuit under the state’s s. 17200 (“unfair competition”) law (see Mar. 12, Dec. 8 and links from there) demanding class-action damages against the Ritz-Carlton hotel chain over its practice of adding an automatic gratuity to room service. Although the claimant conceded that the hotel’s room service menu did warn guests of the charge, he argued that the warning was not in big enough print. And Sacramento sole practitioner Brian Kindsvater, accused of abusing the law, has reached an agreement with the state attorney general’s office to return about $35,000 in settlements from various businesses he sued under s. 17200, including travel agency websites and video stores. “According to the AG’s complaint, Kindsvater helped form a shell corporation called Consumer Action League, which served as plaintiff in the suits. … [The agreement also] also forbids him from making false statements that settling 17200 cases protects defendants from similar actions.” (Jeff Chorney, “Attorney Agrees to Return Unfairly Won Settlements”, The Recorder/New York Lawyer, Mar. 25) (via Tim Sandefur, Apr. 21 and Mar. 25 respectively). Fresh from his resounding political victory in achieving workers’ compensation reform, Gov. Arnold Schwarzenegger is likely to turn his attention to other economic agenda items, among them whether to throw his weight behind an expected business-backed initiative on the November ballot to rein in s. 17200 lawsuits (Marc Lifsher, “Schwarzenegger Has Long To-Do List to Boost Business”. L.A. Times, Apr. 20). One case for s. 17200 reform: Lance T. Izumi (Pacific Research Institute), “Laws, courts unfair to businesses in state”, L.A. Daily News, Apr. 15.

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Chocolates, roses, and s. 17200

Tim Sandefur has collected more examples of unsuccessful, but inevitably expensive, lawsuits invoking California’s abuse-fraught s. 17200 private-attorney-general “unfair competition” law (see Dec. 8 and links from there). All three were rejected by the Court of Appeal. In one case, Consumer Cause, Inc., associated with veteran s. 17200 impresario Morse Mehrban, had demanded damages from an auto show producer that had provided female visitors to its shows with complimentary chocolates and roses, but had made similar gifts available to men only after an affirmative request. In a second case, an attorney had sought to employ s. 17200 as a surrogate obscenity statute by suing AT&T cable services demanding a refund of all fees collected for showings of pay-per-view adult film fare. The attorney’s suit had also sought forfeiture of AT&T’s profits from the films, revocation of its cable franchise (useful as a negotiating point, that one), and of course attorneys’ fees. (Feb. 20). Yet a third s. 17200 suit was filed against abortion clinics arguing, to quote Sandefur, “that providing abortion without disclosing alleged health threats to the mother, was unfair competition under Business and Professions Code 17200”. It was dismissed under the state’s anti-SLAPP (use of litigation for harassment) statute (Feb. 24).

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Update: another alcohol suit

Piling on in search of a Next Tobacco: “A lawsuit filed in Los Angeles [earlier this month] against the world’s two biggest brewers accuses the beer makers of advertising to minors and seeks $4 billion in disgorgement of profit.” The suit, filed by Seattle’s Hagens Berman, whose doings are oft chronicled in this space (see Sept. 9-10, 2002 and links from there, Nov. 24) targets Anheuser-Busch and SABMiller. It invokes California’s distinctively abuse-prone s. 17200 law (see Dec. 8), as well as a California law which bans alcohol advertising intended to encourage underage drinking. (Ira Teinowitz, “$4 Billion Lawsuit Filed Against Beer Giants”, Advertising Age, Feb. 4) (lawsuit website/complaint in PDF format). Two months ago, lawyers led by David Boies filed a would-be class action against a number of alcohol companies over alleged youth marketing (see Dec. 1)

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S. 17200 horror stories

Tim Sandefur collects them, too: “[I]n another currently pending case, a trial court hearing a class action lawsuit with class members from across the nation — but suing in California — held that it could simply ignore the choice of law clauses of the contracts from 48 other states, because ?17200 is more broadly written than any other ‘consumer protection’ law, and therefore it violated public policy to require litigants from other states to litigate there even though the contracts they signed required them to do so.” (Dec. 3). See also Oct. 26; Nov. 24; Steven Greenhut, “How California’s Consumer Laws Legalize Extortion”, Foundation for Economic Education, May.

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Latest 17200 targets: drugmakers

Trial lawyers are hoping to turn California’s endlessly abused and abusive s. 17200 “unfair competition” law (Oct. 26, etc.) to rich new account by using it to sue pharmaceutical companies over a variety of marketing practices that the U.S. Congress and Food and Drug Administration have not seen fit to ban. The Ralph Nader operation is helping out, while the litigation effort is being handled by Seattle trial lawyer and tobacco-caper veteran Steve Berman of Hagens & Berman (see Sept. 9-10, 2002 and links from there). (Bernadette Tansey, “Citizens use law to pursue drug firms”, San Francisco Chronicle, Nov. 23; plaintiff’s site (“Prescription Access Litigation”). Update: see Point of Law, Nov. 8, 2004.

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Update: Calif. business groups launch s. 17200 initiative

As predicted in this space (Sept. 29), a California business coalition which includes the state Chamber of Commerce, auto dealers and the Civil Justice Association of California has launched an initiative drive aimed at curbing lawsuits under s. 17200, the state’s bizarrely broad consumer-protection statute. (see Oct. 2, Aug. 27 and links from there). The coalition “expects to spend $1 million to $2 million to collect signatures to put the initiative on the November 2004 ballot. … Under the initiative, private attorneys or individuals would no longer be able to file a lawsuit without a specific victim or evidence of harm or financial loss. … The right to sue on half of the public would rest with the attorney general, county district attorneys and other local prosecutors.” (Gilbert Chan, “Ballot drive targets lawsuits”, Sacramento Bee, Oct. 23). More: Law.com coverage (Jeff Chorney, “Tort Reformers Want Voters to Remake Calif. Unfair Competition Law”, The Recorder, Oct. 27)

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Overlawyered gets results

On Aug. 27 we said we hoped Arnold Schwarzenegger would tell us where he stood on s. 17200, the state’s abuse-ridden business practices act. Now his campaign has published its official agenda, and not only is “End the Litigation Lottery” Plank #3 in “Arnold’s Five Point Plan for Economic Recovery”, but reform of s. 17200 is the first specific to be listed, along with reform of employment litigation and specifically age discrimination law (California accords more liberal treatment to such claims than does federal law). “California’s runaway litigation system has become a trial lawyer’s paradise — encouraging frivolous lawsuits and outrageous settlements that are bleeding money from businesses while driving the cost of virtually everything higher for average consumers.” (Californians for Schwarzenegger, “Agenda”, undated).

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