When reporters asked Gov. Jerry Brown about the radio ads a Texas public-private partnership purchased in an attempt to lure California companies to Texas, he dismissed it reflexively, using words that would earn small children a time-out. Calling the ad campaign “a big nothing,” the governor said it was “barely a fart.”
While Brown’s language frustrated mothers around the state who tell their children that those words are not meant for the dinner table – or the 6 o’clock news – the real people Brown’s words disappointed were California’s small-business owners. Texas Gov. Rick Perry’s ad campaign underscored the struggles small-business owners deal with every day in this state: California’s high taxes, nonsensical regulations and especially its unfair legal climate.
The evidence has been stacking up for years that California’s legal climate is hurting its economy and costing the state jobs. Last December, the American Tort Reform Association released its annual “Judicial Hellholes” report, identifying the areas of the nation where abusive lawsuits thrive and courts produce uneven rulings that often favor plaintiffs. Which state earned the humiliating title of the nation’s worst “judicial hellhole”? You guessed it: California and, in particular, Los Angeles, where our unbalanced legal system is so famous for producing easy verdicts for plaintiffs it is nicknamed “the bank” by personal injury attorneys.
All these abusive lawsuits have an outsized impact on the economy. When a business is facing an abusive lawsuit, it is often far less expensive simply to settle the lawsuit rather than incur steep legal fees fighting it in court. While this saves companies money in the short term, it only encourages unscrupulous attorneys to continue shaking down businesses with abusive lawsuits.
This happens far too often in California, especially in Los Angeles, and it hurts both the L.A. and state economies. Through my involvement in California Citizens Against Lawsuit Abuse, a nonpartisan grassroots organization fighting against lawsuit abuse, I have heard stories from business owners all over the L.A. area about how abusive lawsuits have hurt their businesses.
Their stories are nothing short of staggering. Sil Gonzalez, who owned a car dealership in South Gate, was sued for a car ad because the font on the ad was too small. After settling the lawsuit, Sil closed his dealership and opened a new one – in Oregon, where the lawsuit climate doesn’t encourage abusive lawsuits against businesses.
Tina Freeman, the owner of Tina’s Tavern and T’s Lounge in West Covina, was sued four times for alleged violations under the Americans With Disabilities Act in the past two years. In one case, the lawsuit was so blatantly abusive that Tina threatened to approach the media about the lawsuit, and the attorneys arrived within 30 minutes with dismissal papers.
David Houston, owner of Barney’s Beanery restaurants in Los Angeles, was forced to pay almost $1 million to settle an abusive class-action lawsuit regarding workers falsely claiming that they were unable to take legally mandated breaks. A similar lawsuit cost Joe Ramirez, owner of Pacific National Security in Culver City, $40,000, even though he, too, had done nothing wrong.
How big of an impact does California’s legal climate have? A recent study from NERA Economic Consulting found that Californians could save $5.2 billion in tort costs and the state could create between 115,000 and 320,000 jobs by improving its legal environment. In a state that has faced double-digit unemployment for years on end, creating that many jobs would be a game-changer.
And while the governor and California’s other leaders do not seem to agree, Californians as a whole certainly do. A recent poll found that approximately two-thirds of California voters believe the number of lawsuits filed against businesses or public entities in California has hurt the state’s economy, and 74 percent believe that enacting lawsuit reform is an important part of improving California’s business environment and attracting and keeping jobs.
Californians, especially small-business owners, are crying out for relief from the threat of abusive lawsuits. Yet Brown, when faced with an opportunity to acknowledge how the state’s policies hamstring small businesses and carve a new path forward, instead compared the situation to flatulence.
If California doesn’t pass legal reform soon, the next questions reporters might be asking Brown might not be why businesses might move to Texas, but why they did move.
Maryann Marino is the Southern California regional director for California Citizens Against Lawsuit Abuse.
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