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17200: Motions Seek Prop 64 Retroactivity

It didn’t take long for Proposition 64 to spur a flurry of action on 17200 lawsuits.

Proposition 64, which easily passed in the November election, reforms section 17200 of California’s Business and Professions Code.

Defense lawyers already have begun launching motions to get 17200 lawsuits thrown out based on the presumption that Prop-

osition 64 is retroactive.

“Most of the (defense) lawyers in current 17200 cases are teeing up motions to get their cases dismissed,” said Layne Melzer, a partner and chair of the competitive business and advertising practices group of Costa Mesa law firm Rutan & Tucker LLP. “We’re filing motions now, and there at least a few appellate courts where defense lawyers have raised the issue. This will result in some rulings very shortly.”

17200 drew intense criticism from businesses during the past few years as law firms, such as the now-defunct Trevor Law Group LLP of Beverly Hills, sent thousands of letters to companies threatening lawsuits.

Letters demanded payment to avoid the suits, which would’ve proven costly for small businesses to fight. Many companies paid, even though most infractions cited under the code were frivolous.

Perhaps the biggest beef with businesses: 17200 didn’t require a plaintiff to suffer harm before a suit could take place.

Proposition 64 changes all that.

The measure, which took effect upon being passed, requires nearly all plaintiffs to prove they’ve personally suffered harm. The law still allows a public official, such as the attorney general or a district attorney, to sue a company without having a plaintiff show harm.

Defense attorneys now are claiming that while Proposition 64 won’t get anyone’s money back, it can be used to get cases awaiting trial thrown out.

One of the cases being appealed is “Consumer Advocates et. al. vs. DaimlerChrysler Corp.” Defense attorneys Horvitz & Levy LLP of Encino filed an appeal Nov. 9, just a week after Proposition 64 passed. The appeal asks the state Court of Appeal in Santa Ana to determine whether Prop- osition 64 is retroactive.

Another such case: “Diaz vs. Fresno Dodge.” Car dealers were hit especially hard in recent years by 17200 suits.

A third case involves Kwikset Corp., a Lake Forest-based unit of Black & Decker Corp.

“The plaintiffs’ attorneys certainly won’t raise the (retroactivity) issue themselves,” Melzer said. “But they’d be naive to think that defense attorneys won’t raise the issue. Plaintiffs’ lawyers are going to be in defensive mode.”

Officials at the Sacramento-based Consumer Attorneys of California argue that Proposition 64 doesn’t address retroactivity.

“Retroactivity for bills in the Legislature is a negotiation process,” said Sharon Arkin, incoming president of Sacramento-based Consumer Attorneys of California. “But in an initiative process the authors can put in whatever they want. If they wanted retroactivity, they would’ve put it in and they didn’t.”

Brian Maas, director of government and legal affairs for the Sacramento-based California Motor Car Dealers Association, said his group is telling members who face a 17200 suit to talk to their lawyers.

“It’s true that retroactivity was not specified in the original language of the bill, but my understanding is that you look to whether the change in law is procedural,” Maas said. “Since the change on the harmed plaintiff issue is procedural, it would become a retroactive right.”

“It’s obviously up to the courts to decide this issue,” he said. “But I think you’ll find most defense counsels will look at it and make the argument that there is no private attorney general right anymore, even for existing cases. We’re not telling members that it is or isn’t retroactive. We’re telling people to talk to their attorneys and analyze the situation and make whatever motions or pleadings they think are appropriate.”

Ed Sybesma, a lawyer with Costa Mesa-based Rutan & Tucker’s 17200 practice, together with the firm’s Melzer, recently wrote an article on Proposition 64 retroactivity.

While “Proposition 64 does not expressly address the issue of retroactive application, it does say, ‘It is the intent of the voters that only the California attorney general and local public officials be authorized to file and prosecute actions on behalf of the general public,'” the lawyers wrote.

Since “prosecution” refers to ongoing matters, Melzer and Sybesma said voters wanted existing litigation to be subject to Proposition 64. y

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