It looks like the issue of Proposition 64’s retroactivity could go all the way.
The past few weeks have seen conflicting state appellate court decisions on whether the initiative passed by voters in November applies to lawsuits that were in the works before.
With other test cases moving through the courts, the differing opinions could send the issue to California’s Supreme Court, local lawyers said.
The matter is a big one for business, which hopes the initiative will be used to throw out lawsuits based on the state’s unfair competition law, known as Business and Professions Code 17200. Auto dealers and others that have been hit by 17200 suits were backers of Proposition 64.
Last week, the 2nd District Court of Appeal in Los Angeles ruled that Proposition 64 does apply to cases filed before the initiative was passed.
The ruling came in a 2002 suit against Newport Beach-based Downey Financial Corp.’s Downey Savings & Loan over allegations the company charged excessively high fees for certain transactions.
Now the plaintiffs in the lawsuit must prove they personally suffered financial harm from Downey’s alleged practices.
Then the 4th District Court of Appeal in Santa Ana backed retroactivity in a lawsuit again Kwikset Corp., a Lake Forest-based unit of Black & Decker Corp. The suit took lockmaker Kwikset to task for “Made in America” labels on products that were said to contain six screws made in Taiwan.
Conflicting Ruling
The rulings conflict with one earlier this month in San Francisco. There the 1st District Court of Appeal ruled that Hayward-based Mervyn’s LLC could not retroactively use Proposition 64 to seek the dismissal of a lawsuit brought by Californians for Disability Rights.
Lawyers for the department store chain had sought retroactive protection from the lawsuit under Proposition 64.
“This is not the last we’re going to hear of it,” said Dale Giali, partner with the Irvine office of Washington, D.C., law firm Howrey, Simon, Arnold & White. “When appellate courts differ on an issue, then it’s likely the California Supreme Court eventually will take up the matter. The Supreme Court likes to let an issue percolate, to see how the various courts of appeal rule on the issue.”
Other cases are in the works. Ed Sybesma, a lawyer with Costa Mesa-based Rutan & Tucker LLP’s 17200 practice, said he is watching a case known as “Consumer Advocates et. al. v. DaimlerChrysler Corp.” at the 4th District Court of Appeal.
In that case, defense lawyers Horvitz & Levy LLP of Encino filed an appeal days after Proposition 64 passed asking the court to rule on retroactivity.
The court already dismissed the motion, according to Sybesma. But that’s not necessarily the end of the issue in the case, he said.
“The court’s decision just means they deferred making a decision on the retroactivity issue until later,” Sybesma said.
Then there are the nuances. According to Sybesma, the 4th District tends to take a dimmer view of litigation than judges in the Bay area.
“The 1sth District in San Francisco tends to be more sympathetic to legislation like 17200,” he said.
Hot Issue
Abuse of 17200, a decades-old law designed to protect consumers from shady business practices, drew intense criticism in the past few years.
Law firms such as the now-defunct Trevor Law Group LLP of Beverly Hills used 17200 to send thousands of letters to companies threatening lawsuits if they didn’t pay up for what often were trivial violations.
One of the biggest beefs among businesses: 17200 didn’t require lawyers to produce a plaintiff who actually suffered harm before a suit could take place. Cases that made it to court often were filed on behalf of dubious consumer groups set up by law firms themselves.
Proposition 64 changed that. The measure 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.
But officials at the Sacramento-based Consumer Attorneys of California argue that Proposition 64 wasn’t meant to be retroactive.
“Retroactivity for bills in the Legislature is a negotiation process,” said Sharon Arkin, 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.”
Rutan & Tucker’s Sybesma and Layne Melzer, partner and chair of the firm’s 17200 practice, wrote an article on Proposition 64 retroactivity last year.
The two argued in the piece that 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.'”
Since “prosecution” refers to ongoing matters, Melzer and Sybesma contend that voters intended for existing litigation to be subject to Proposition 64.
The retroactivity issue aside, Proposition 64 struck a blow to trial lawyers and limited their ability to file consumer lawsuits. And they’re not taking it lying down.
In a recent twist, lawyers are trying to get around Proposition 64 by offering their services to Attorney General Bill Lockyer’s office and local district attorneys, according to a report in law publication The Recorder.
The lawyers want to be deputized to pursue 17200 suits on behalf of the public,giving them a way around Proposition 64.
The initiative bars private lawyers from acting as attorney generals under 17200 unless there is a harmed plaintiff. Lockyer hasn’t responded to the inquiries.
The attorney general has tapped outside lawyers before on more complex litigation matters, such as the antitrust lawsuit against Microsoft Corp.
