BAITING THE HOOK PROP. 64 ON THE NOVEMBER BALLOT HAS BUSINESSES AND CONSUMERS DIVIDED.

Byline: Evan Pondel Staff Writer

Consumer groups and plaintiff attorneys may find fighting big business less effective this fall.

California businesses have contributed millions of dollars to a November ballot issue that would curb lawsuits challenging their practices. Though Proposition 64 is intended to tame a business environment run amok by legal abuses, consumer groups say the initiative will ultimately derail a still infant era of corporate accountability.

``There are bad people in every single profession. But instead of stopping shady lawyers, this proposition unjustly protects HMOs, banks and other businesses,'' said Carmen Balber, a consumer advocate with Santa Monica-based Election Watchdog. ``There are other ways to root out bad actions without eliminating consumer and public protections.''

At issue is California's Unfair Business Competition Law - the cornerstone of myriad lawsuits filed against Blue Cross of California, 21st Century Insurance, Southern California Edison, State Farm, Microsoft, General Motors, Wells Fargo Bank and Nike. The law allows consumers, interest groups, companies and prosecutors to sue to stop a business from using practices that give them an unfair advantage over competitors. But California businesses - many publicly traded and already occupying highly litigious sectors - are tired of the costly legal exposure.

Proponents of Proposition 64 say unscrupulous attorneys are abusing the law by simply suing companies to generate a settlement. The abuse goes even further when the same attorneys represent themselves, according to John Sullivan, president of Civil Justice Association of California, a Sacramento-based lobbying group.

``Prop. 64 doesn't stop lawyers from bringing lawsuits. It stops lawyers from bringing lawsuits with no clients and no evidence of harm,'' said Sullivan, who has been advocating reform in this area for several years.

Sullivan and other supporters of Proposition 64 often point to the now defunct Trevor Law Group as a motive for their cause. Three attorneys who worked for the Beverly Hills-based firm resigned from the state bar after being accused of shaking down thousands of business owners through the filing of frivolous lawsuits. The cases ranged from suing car dealerships for false advertisement to finding minor technical violations of the Automotive Repair Act. Proposition 64 was added to this November's ballot following a signature drive funded mostly by car dealerships throughout the state.

Balber said the Trevor Law Group is clearly an example of how overzealous attorneys can abuse their power with respect to car dealerships. But while Proposition 64 would curtail this activity, she said it also sets the legal bar far too high for legitimate cases.

After the 1994 Northridge Earthquake, John Trapani filed a lawsuit against State Farm when he didn't receive what adjusters had previously promised. He eventually reached a settlement, but the whole process left a bad taste in his mouth.

``I walked outside my home and realized that even though my home would be fixed, that didn't necessarily mean my neighbor's home would be fixed,'' said the former Northridge resident. ``And I just didn't feel right that we could recover and the rest of the community could not.''

So Trapani decided to launch Community Assisting Recovery Inc., a nonprofit organization dedicated to helping property owners rebuild their homes following a natural disaster. Members of the group eventually decided that they were entitled to more than what State Farm provided. About 117 people eventually filed a lawsuit, reportedly netting the homeowners tens of millions of dollars. Should Proposition 64 pass, consumer advocates say Trapani and groups like CARe will face significant obstacles.

``Obviously, there are systems in place to eliminate the bad apples. You just don't want to put another system in place and throw away all of the good apples,'' Trapani said. ``By doing that you are eliminating the freedom and rights for the public.''

State Farm deferred all comments to Californians to Stop Shakedown Lawsuits, among the recipients of the insurer's $100,000 donation in support of Proposition 64. Christy Wilson, a spokeswoman for the lobbying group, said contrary to what opponents believe, consumers would actually benefit from the new law.

``Big businesses are going to court to defend themselves against these lawsuits. And businesses are not taking the cost of these lawsuits out of their own profits,'' she said. ``They are passing the costs along to consumers.''

For example, 21st Century Insurance, which has contributed at least $50,000 in support of Proposition 64, has fought wage and hour lawsuits launched by plaintiffs who weren't even employees of the Woodland Hills-based auto insurer. Larry Krutchik, a spokesman for the company, said policyholders end up suffering from these legal entanglements.

``The abusive lawsuits hurt California businesses such as ours and then drive up costs for our policyholders,'' he said.

That's not stopping Drew Pomerance, a Westwood-based attorney who recently sued 21st Century on behalf of a ``consumer representative.'' Though Pomerance's client was never overcharged by 21st Century for lacking prior coverage, the plaintiff decided to sue the company for such practices.

``I am not a victim of 21st Century's illegal conduct, but I am happy to lend my name to a lawsuit which will hopefully benefit consumers,'' the plaintiff said through Pomerance.

The attorney has logged several years representing companies and consumers. He agrees that there are plaintiff attorneys, such as the Trevor Law Group, who abuse their power. But every profession has its nefarious ways '`and I believe Prop. 64 would go too far, eliminating a lot of consumer-based litigation that would be helpful for the consumer in battling business abuses,'' he said. ``I understand the outrage of these companies fighting frivolous lawsuits. But you can curb some of the abuse without ruining it for everybody.''

Pacificare Health Systems, which occupies one of the most litigious sectors, doesn't side with Pomerance. ``The health care dollars need to stay in the delivery system and the quickest way to get people the care they need is not through the courts,'' said Tyler Mason, a spokesman for the Cypress-based health maintenance organization. ``We need to curtail as many lawsuits as possible.''

But not all lawsuits under the Unfair Business Competition act target large corporations. Several years ago a small Los Angeles-based company claimed they were selling water filters when they were actually selling water softeners. ``The company targeted low-income Latinos, telling them that the water they were drinking was not healthy,'' said David Pallack, an attorney with Neighborhood Legal Services who sued the company. ``If Prop. 64 passes, it would make these cases cumbersome and very expensive.''

Pollack said Proposition 64 would alter California's Business and Professional Code 17200, essentially curbing representative lawsuits on behalf of the general public.

``That could be very harmful. 17200 is a streamlined vehicle to stop unfair business practices. And if businesses are following the law and being fair to the consumer, they should really not feel any hindrance.''

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

CAPTION(S):

2 boxes

Box:

(1) SUPPORTING PROPOSITION 64

(2) DEBUNKING PROPOSITION 64

Source: Cal-Access, California Secretary of State Kevin Shelley; ElectionWatchdog.org, Associated Press 

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