Bid to Reform Consumer Act Gains Steam
Pressure is mounting to amend one of California’s stiffest consumer-protection laws amid charges that it allows attorneys to effectively extort money from businesses with frivolous lawsuits.
An Anaheim assemblyman plans to hold hearings on the matter and said he would introduce legislation changing portions of the Unfair Competition Act next year. Meanwhile, a top trial lawyers group, long a defender of the act, said it is time to make reforms.
The act was designed to help consumers fight unfair business practices by prohibiting such things as false advertising and price-fixing. It allows plaintiffs to file lawsuits even if they have not been directly harmed by the alleged wrongdoing.
The act has long been criticized by business groups, which claim it allows attorneys to shake down merchants with false claims. Supporters have successfully fought efforts to amend the law over the years, arguing that it gives consumers the ability to “prosecute” unfair business practices that district attorneys don’t have time to pursue.
But now, even the leader of the Consumer Attorneys of California said he would support changes, saying that some attorneys are abusing the act. He said others have cited a Beverly Hills law firm that over the last year has filed thousands of suits against Southern California restaurants, nail salons and auto-repair garages.
That firm, the Trevor Law Group, says those businesses are cheating the public. The suits accuse restaurants of not meeting health codes, garages of selling used parts as new and similar violations. But defendants say the lawyers are cooking up frivolous suits based on government records of routine citations just to pressure businesses to settle for about $2,000.
State Atty. Gen. Bill Lockyer this month called on the State Bar Assn. to examine whether disciplinary action should be taken against the attorneys, likening some of their tactics to extortion.
“At latest count, there are five firms that are just taking advantage of a wonderful consumer-protection statute,” said Bruce Brusavich, president of the Consumer Attorneys of California. “We’re encouraging the attorney general and the State Bar to crank up their investigation into the groups. Meanwhile, we’re seeing if there’s a legislative way to take the extortion incentive out of this law.”
Brusavich has two changes in mind: require judges to approve all litigation settlements and make those settlements public. He said these changes would help prevent the quick out-of-court settlements that many businesses say they are pressured to make to avoid drawn-out and expensive trials.
Brusavich’s statements mark a change for the organization. The previous president, Robert Cartwright, said several months ago: “Nothing’s perfect in this world, but for the most part it’s a good law.... [It] protects consumers against wrongful conduct by institutions. People who don’t like to be held responsible for tobacco, toxins or pollutants or who are perpetrating financial fraud don’t like the law.”
Should the Legislature tinker with the act, it would not be the first time. A few years ago, lawmakers amended it to bar suits over software packaging after the computer industry complained about lawsuits alleging that oversized boxes misrepresent the value of software.
Taking the first step toward new changes in the law, Assemblyman Lou Correa (D-Anaheim) plans to hold a Jan. 10 hearing on complaints from business owners. He said he would propose changes to the act based on testimony at the hearing.
“We want to make sure we’re examining the full extent of the problem,” Correa said. The law “is supposed to prevent unlawful business practices, yet this code is being used to perpetrate unlawful business practices by some very unscrupulous people.”
In many cases, the suits are filed on behalf of consumer groups with close connections to the lawyers handling the suits. Although the consumer groups can seek monetary restitution, the lawyers can recover attorney fees from settlements.
Despite the outcry, the Unfair Competition Act still has its defenders. Eric V. Traut, president of the Orange County Trial Lawyers Assn., said the law is needed because county prosecutors don’t have time to go after wrongdoing by small-business owners.
“The law gives the little guy a lot of power to get a remedy they wouldn’t otherwise have,” Traut said. “I don’t think it’s too broad. In some areas it’s too restrictive.”
