Boo! Prop. 211 Campaigns Are Out to Scare Up Votes

Turn on your television set these days and you’re likely to see a clean-cut man in a sparkling white lab coat strolling past ethnically balanced clusters of busy scientists surrounded by microscopes, beakers and test tubes.

“If Proposition 211 passes, it will put our company and our jobs at risk,” says the grim-faced man. “East Coast lawyers have spent millions of dollars putting 211 on the ballot so they can make a fortune filing frivolous lawsuits in California. You see, 211 will allow frivolous lawsuits that have been banned in federal courts to be filed in California.”

Suddenly he stops, turns to face the camera, puts on an even deeper frown, and then poof, he’s gone, along with his well-scrubbed colleagues, the lab tables and all the gleaming gear. Proposition 211 will force companies like the bustling biotech outfit previously pictured to flee the state, the lingering voice intones, “taking hundreds of thousands of jobs with them.”

Flip to another channel and you’re likely to see a group of sweet-faced and modestly attired seniors talking about how they’ve been stripped of their life savings by unscrupulous stockbrokers and the business executives whose securities they peddle.

“911 could save your life; Proposition 211 will save your life savings” is the slogan that ends the ad.

Scary? Yes. Accurate? Well, no, not really. But be prepared for lots of this kind of thing--on TV, on billboards, in print media and on the Internet--as one of the costliest initiative battles ever waged in California reaches the home stretch.

Proposition 211 is a wrangle between two of California’s wealthiest constituencies: business leaders, especially in high tech, and trial lawyers. At issue is an initiative on the November ballot that would make it easier to file securities-fraud lawsuits against public companies in California courts when stock prices unexpectedly drop.

In Silicon Valley, the anti-211 campaign has become an emotionally charged crusade. Technology companies’ share prices are often volatile, and thus they’ve become a lucrative target for trial lawyers who file fraud suits on any downturn--often, the companies charge, in the hope of getting a settlement. Because it would make it even easier to file such suits and increase directors’ personal liability, Proposition 211 is nothing less than the biggest threat California business has ever faced, opponents claim.

The anti-211 campaign has raised an imposing $25.5 million to defeat the initiative, compared with $8.3 million for the proponents. The anti-211 forces began soliciting money early, determined not to repeat the mistake they made last spring when three tort reform measures--including a securities litigation reform initiative--were rebuffed by voters.

They’re also tapping other kinds of resources. The anti-211 campaign has rallied many Silicon Valley companies to include opposition statements on their home pages on the Internet’s World Wide Web.

And Yahoo, which has a popular advertising-supported directory of Web sites, took the battle to another level this week by refusing to carry an ad from the pro-211 side. Most of the media are generally free to turn down advertisements for any reason, but Yahoo, which contributed $25,000 to the anti-211 campaign, has been a strong proponent of free speech on the Internet. The company did not return calls seeking comment.

Where the 211 proponents may find an advantage, though, is in the kinds of ads they are running: They tug at the heartstrings with nonactors such as 84-year-old Sam Epstein, who lost $65,000 in the Lincoln Savings & Loan collapse. “Proposition 211 would hold the CEOs and the white-collar operators accountable to make sure we get our money back,” a frail-looking Epstein says.

What the ads fail to make clear is that Epstein, like many of the seniors who appear in them, actually recovered much of his money via lawsuits. Even without 211, investors will still be able to sue public companies in either the state or federal courts--though the new federal securities litigation bill passed over President Clinton’s veto earlier this year will make it more difficult to win such cases.

The slick anti-211 ads, produced by Claussen-Goddard/First Tuesday, the Sacramento public relations firm that created the Harry and Louise spots credited with sinking the Clinton health-care reform plan, are similarly misleading.

They claim that Proposition 211 would force companies to leave the state, taking 159,000 jobs with them. But the source of that figure is a report commissioned by the anti-211 forces, and one the impartial state’s legislative analyst’s office declined to include in the Proposition 211 review in the ballot.

In fact, the legislative analyst’s office maintains that Proposition 211 would be unlikely to have a significant effect on the state’s coffers.

The statement repeated in almost all of the anti-211 ads--that the campaign for it is being bankrolled by East Coast lawyers--is also less than candid. William Lerach, the most successful attorney in the area of securities litigation and 211’s biggest sponsor, is a partner in the New York-based law firm of Milberg, Weiss Bershad Hynes & Lerach, but he is based in San Diego. And 211’s foes have collected millions of dollars in out-of-state money, most notably from East Coast stock exchanges and accounting firms.

But perhaps the riskiest tactic taken up by the anti-211 forces is targeting Lerach, hardly a household name to Californians. A spot now running exclusively in Southern California shows the frizzy-haired attorney laughing into the camera. Unfortunately, Lerach looks less like the demon they hope to portray and more like the affable co-worker down the hall.