Gov. Backing Could Raise Interest in 17200 Initiative
By CHRIS CZIBORR
The battle over 17200 reform is heating up.
Gov. Arnold Schwarzenegger earlier this month endorsed a 17200 reform initiative set for the November ballot.
That could attract more attention to the initiative,Proposition 64,which has flown under most voters’ radars so far. A September Field Poll found 38% of respondents undecided about Proposition 64, with just 21% in favor and 41% against.
The notorious 17200 section of California’s Business and Professions Code drew intense criticism from businesses in the past few years. Law firms, such as now-defunct Beverly Hills-based Trevor Law Group LLP, used the code to send thousands of letters threatening 17200-based lawsuits to small businesses. The letters demanded payment to avoid a suit, which would’ve proven more costly to fight.
Many companies paid money, even as most infractions cited under the code were minor. A big beef with businesses: As written, 17200 doesn’t require a plaintiff to be harmed for a suit to be filed.
Proposition 64 would reform the code so that plaintiffs must prove actual harm in most cases. It would continue allowing a public official, such as an attorney general or a district attorney, to sue a company without having a plaintiff show harm.
The measure also eliminates lawsuits filed on the basis of preventing an injury before it happens.
Mission Viejo Transmission owner Kevin Hurley: paperwork error led to 17200 complaint (photo).
Schwarzenegger had failed in his attempt to reform the code during the waning days of the legislative session this summer.
“So he made it clear that his intention was to support this measure,” said Marty Wilson, executive director of the governor’s “California Recovery Team” and partner with Sacramento-based Wilson Miller Comm-
unications. “The governor’s perspective on this issue has been consistent throughout his gubernatorial campaign as well as his tenure for governor.”
State Assemblyman John Campbell, a Republican representing Irvine and other areas and one of the most vocal 17200 opponents, said he wasn’t surprised by Schwarzenegger’s endorsement.
“It’s in keeping with the governor’s philosophy and position since he ran for office that we need to reduce the impediments to doing business in California,” Campbell said. “And certainly frivolous lawsuits are one of the biggest impediments to doing business here.”
Campbell said he believes the Field Poll is inconclusive.
“People haven’t focused on the initiative yet,the general public doesn’t know about it,” he said. “In the next six weeks, there’s a lot of voter education that will need to get done if the initiative is to pass.”
Officials at the Sierra Club of California, an environmental group and key Proposition 64 opponent, agree with Campbell on the polling.
“According to the poll, only 8% had heard of the initiative,” said Bill Magavern, Sierra Club of California senior legislative representative.
Environmental groups are worried that Proposition 64 would result in abuses by corporations, since plaintiffs would have to wait until damage is done before they pursue a claim.
With more than a third of Field Poll respondents in the “undecided” column on Proposition 64, advertising campaigns on both sides are picking up for the final stretch.
One worry for Proposition 64 opponents: money.
“We’re concerned about the disparity in resources and the ability of the ‘yes’ side to launch ad campaigns,” Magavern said.
So far the “yes” side has raised about $9 million, according to Rick Claussen, partner with Sacramento-based consultant Goddard Claussen Strategic Advocacy, which has been hired to campaign for the reform initiative.
“We’re going to be promoting the governor’s endorsement pretty heavily with a new TV ad that starts this week,” Claussen said.
Along with stressing the governor’s support, the ad campaign will include stories involving 17200 lawsuit defendants. The ad is the second for TV that Goddard Claussen has created. Its first ad ran earlier this month and featured a scene where a lawyer told paralegals to get busy writing shakedown letters.
State Attorney General Bill Lockyer, who was in Irvine earlier this month to speak at a Business Journal executive roundtable, said he supports 17200 reform but believes Proposition 64 goes too far.
“I think with 64, there is overbreadth,my big worry is the impact on the environment,” Lockyer said.
Lockyer has been a key fighter against 17200 abuses. His office managed to put notorious Beverly Hills-based Trevor Law Group out of business with a lawsuit that led to the firm’s partners being disbarred.
The attorney general also is going after similar 17200-focused law firms such as Tustin-based Callahan, McCune & Willis.
“If Prop 64 fails, then I’d be happy to help, if asked, with reform,” Lockyer said. “Generally it’s better to create new laws in the legislature rather than going to an initiative. It’s better for everyone to feel they had a stake in the final law,a sense of compromise is best.”
Election Watchdog, part of the Santa Monica-based advocacy group Foundation for Taxpayer Rights, has taken a lead position in building a “no” coalition.
The group’s Web site includes a list of companies supporting the initiative and how much they are contributing. Auto dealers are contributing the biggest share of funds, as expected. But the list also includes heavyweights such as Microsoft Corp., Nike Inc. and Oracle Corp.
Trial lawyers are a group of Prop. 64 opponents that would have the resources to help launch an ad campaign. But they’ve been quiet so far.
“We’re trying to help with some funding where we can,” said Sharon Arkin, president-elect of the Sacramento-based Consumer Attorneys of California. “But for most of our members, this isn’t a high priority issue for their practices. It’s important to us in legislature to keep 17200 viable and strong for environmental and consumer groups. But the fund-raising side of it is difficult.”
