Merchants Plead for Relief From Law That Led to Extortion Claims

Scores of business owners called on legislators Friday to retool one of California’s most powerful consumer-protection laws, charging that lawyers are filing frivolous lawsuits under the statute and extorting businesses for quick cash settlements.

“We’re begging for help,” said Denise Pina, whose family owns Brea Auto Body, one of more than 2,000 auto garages that have been named in a series of lawsuits filed by a Beverly Hills law firm. “They say they’re suing in the name of the general public, but that’s a fraud. They’re just shaking us down for money.”

Pina, who joined more than 200 garage owners, nail salon operators and restaurateurs at a hearing in Santa Ana, appealed to Assemblyman Lou Correa (D-Santa Ana) for help in altering the law. Correa, who chaired the hearing and sat behind a 2-foot stack of lawsuits, told the crowd that he wanted to alter the statute but not dilute or dismantle it.

“Clearly something’s wrong,” he said. “While reform is needed, I believe this law has shown itself to be an important and valuable tool in protecting consumers.... We don’t want to throw the baby out with the bathwater.”

The Unfair Competition Law was designed to help consumers fight unfair business practices such as price fixing and false advertising. It allows plaintiffs to sue even if they have not been directly harmed.

Consumer groups say the law has achieved much good. It has been used by such groups as Consumers Union, which publishes Consumer Reports, to stop a dairy from making false claims about the health effects of raw milk.

Others have used the law to prevent grocery stores from altering the packaging date on meat that should have been removed from shelves, to stop deceptive billing practices at nursing homes and to end cigarette advertising aimed at minors.

Gail Hillebrand, senior attorney for Consumers Union, said changes should be accomplished without weakening the law. Among her suggestions was to require that all settlements be approved by a judge and be made public, and that plaintiffs report their suits to the attorney general.

“We want to preserve the statute for consumer protection, not lawyer protection,” she said.

Some attorney groups said the time has come for change.

“The business owners aren’t the only losers in this scam,” said Maryann Maloney of the Civic Justice Assn. of California. “Consumers could be paying more for their favorite dish on the menu or more for a tuneup as businesses raise prices to cover the cost of settlement payouts.”