Orange County Residents Fight for the Right to Sue : Laws: Investors say a GOP plan to block frivolous suits by requiring losers to pay the winner’s costs will inhibit all but the wealthy from suing for fraud.

A police commander whose brain-damaged daughter’s money is frozen in the Orange County investment pool and two high school students complained Wednesday that their rights to sue for damages in the financial debacle could be curtailed by proposed Republican changes in securities fraud law.

In a news conference, the Orange County residents attacked the securities section of the GOP “contract with America” written by Rep. Christopher Cox (R-Newport Beach).

“I would be happy just to get my money back now--I don’t give a darn about any interest,” said Melissa Arbour, a sophomore at Valencia High School in Placentia, who put $38,000 in the county investment pool from a settlement after an automobile accident in which she suffered serious knee and ankle injuries.

The Orange County residents, whose air fare to Washington was paid by a trial lawyers group fighting changes in the law, plan to attend a House hearing today on the securities law reform. They met with Sen. Barbara Boxer (D-Calif.) Wednesday, and attended the news conference with Rep. Edward J. Markey (D-Mass.), who denounced the GOP plan and offered his own proposal.

Because of the nationwide attention drawn to the Orange County bankruptcy, it is becoming a key battleground in a tough political struggle.

Advocates of changing the law, notably major accounting firms and the high-tech industry, say there is a tidal wave of frivolous lawsuits that threatens fast-growing firms and burdens consumers by adding big legal bills to the cost of doing business.

They want a law requiring more knowledge of the alleged fraud by those who sue to “prevent fishing expeditions” with vague charges and a requirement that the loser in federal cases pays the winners’ costs, including legal fees.

The other side, which includes trial lawyers and some consumer groups, accuses the GOP of trying to strip ordinary investors of the effective right to sue when they have been defrauded. Making losers pay for all legal costs would inhibit all but the wealthy from filing a suit, opponents say.

Both sides are deploying costly and sophisticated public relations and lobbying campaigns, and the verbal barrages are intensifying.

“Legalized extortion by self-interested unethical strike suit lawyers is a national outrage that has become intolerable,” Cox said Wednesday in a letter delivered as a counter-attack to the news conference where Markey offered Orange County residents to denounce Cox.

“I am up against possibly the toughest, slickest, most clever and devious opponents of all, the sub-stratum of lawyers who behave unethically to stretch the present laws,” Cox said in an interview.

On the other side, the language was equally bellicose.

“The issue is whether people defrauded by the likes of Charles Keating or Wall Street pirates should have their rights curtailed,” said William Lerach, a San Diego lawyer who is one of the leading litigators of class-action suits. Lerach will be a witness at today’s hearing before the finance subcommittee of the House Commerce Committee.

Bondholders and others with money at risk in the Orange County bankruptcy have filed numerous lawsuits in state court alleging securities fraud and other misconduct by county officials or their investment advisers.

But they note that they will be reluctant to pursue securities fraud charges in federal court if the Cox-sponsored legislation passes. Historically, most of the successful securities fraud cases brought by investors have been filed in federal court.

At the news conference, a number of people caught up in the fiscal mess offered poignant accounts of their travails.

When Cmdr. John H. Bretza of the Long Beach Police Department bought a new home several years ago, the bathroom ceiling collapsed on his daughter Kristi, causing permanent brain damage.

Kristi and 400 others under the age of 18 have a total of $7 million in accident settlements now frozen in the county investment pool. Orange County judges recommended the investment pool as a safe and desirable place to put the money of accident victims.

Kristi is due to get access to her $204,000 in settlement funds when she turns 18 in March. But the money is apparently tied up indefinitely by the bankruptcy. “They won’t tell us anything at the county,” Bretza said after the news conference.

Joshua Server, a 15-year-old sophomore at Irvine High School, has $120,000 in a settlement fund from an auto accident and doesn’t know if he will ever get a cent of it. “The judge said it would be safe,” he told the news conference.