PROP 64:
An End to Frivolous Lawsuits or a Shelter For
More Unfair Business Practices?

By Vincent S. Gannuscio

A newly-enacted law will change the way in which Californians may pursue lawsuits against insurers and other large companies. Proposition 64, adopted by voters in last year’s election, was intended to curb abuses of California’s “unfair competition” statute, which allows consumers to sue businesses engaged in illegal or unfair business practices.

Roxborough, Pomerance, & Nye has previously sued under the “unfair competition” statute to obtain injunctions and other relief against insurance companies whose illegal practices cost employers and consumers millions of dollars in excess premiums.

Before Proposition 64, any person could be a plaintiff in an unfair competition lawsuit, whether they were actually injured by a defendant’s conduct or not. This allowed public interest groups and others to sue on behalf of the “general public” for known illegal conduct, which was particularly beneficial when it would otherwise be difficult to identify persons actually injured by the conduct. As an example, Roxborough, Pomerance, & Nye has pursued several auto insurers for illegal underwriting practices with plaintiffs not injured by the practices but rather suing on behalf of the general public.

“Proposition 64’s effect on new and old lawsuits will ultimately
be decided by the state Supreme Court.”

Unfortunately, some unscrupulous lawyers were misusing the statute to “shake down” area businesses. One Los Angeles law firm, the Trevor Law Group, was accused by the State Bar of filing frivolous law suits against small businesses for minor or non-existent violations and forcing those businesses to pay thousands of dollars to the firm to get rid of the lawsuit. Those attorneys have since been disciplined by the State Bar, and have lost their license to practice law.

Proposition 64, following in the wake of the anger of the Trevor Law Group’s activities, provides that no person may pursue an unfair competition lawsuit unless that person has lost money or property as a result of the defendant’s illegal conduct. The law also eliminates lawsuits on behalf of the general public. “Representative” lawsuits may be brought, but only as a class action.

Proponents believe the law will cut down on the number of frivolous lawsuits like those brought by the Trevor Law Group and its ilk. The law, however, has had unintended effects as well. Many insurers and other companies opposing lawsuits filed before the election have jumped on the new law to claim that the law bars actions for their illegal conduct. Several courts have agreed with these big businesses, throwing out numerous unfair competition lawsuits, frivolous and legitimate alike.

Proposition 64’s effect on new and old lawsuits will ultimately be decided by the state Supreme Court. Roxborough, Pomerance, & Nye will be in the middle of that fight, on behalf of both legitimate plaintiffs in important public-interest lawsuits, and on behalf of small-to-medium size employers who have been victimized by the old law’s abuses.


 

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