Daily Pilot

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THE POLITICAL LANDSCAPE
Getting behind the tax cuts

Alicia Robinson, Daily Pilot

Federal tax revenues in the first fiscal quarter of 2004 increased by 3%, showing President Bush's tax cuts are achieving their goal, Rep. Chris Cox said in a statement.

The U.S. Treasury last week released first-quarter data that reflect a 0.5% increase in individual income taxes, a 30% increase in corporate income taxes and a 3% increase in total tax revenues compared to the same quarter of 2003.

In the statement, Cox, who chairs the House Policy Committee, said the economy's growth - more than 8% in the last quarter - is evidence that the tax cuts are working.

Cox was also busy talking after Tuesday's State of the Union address.

In the aftermath of Sept. 11, 2001, America is safer because of the leadership of the president, Cox said after Bush's speech. Cox praised the president's request to retain some provisions of the Patriot Act, a far-reaching anti-terrorism law that critics have charged restricts Americans' civil liberties.

The Patriot Act includes provisions that permit law enforcement to share foreign intelligence from wiretaps with the intelligence community and that authorize law enforcement and national security officials to share information provided to a federal grand jury. Some provisions are set to expire in 2005.

"Each of these provisions is fundamental to ensuring the security of our homeland in view of the continuing threat of terrorist attack," Cox said.

Figuring out the budget

More people may be able to make sense of the state budget after 70th District Assemblyman John Campbell is through with them.

The assemblyman will host a "Dollars and Sense" workshop on Saturday from 10 a.m. to noon at the Lakeview Senior Center, 20 Lake Road, Irvine. The workshop will address tax write-offs, retirement planning, saving for college and debt management.

Democrats hold 46th District Congressional debate

The Democratic Club of West Orange County will hold a debate on Wednesday for Democratic candidates seeking the 46th District Congressional seat now held by Dana Rohrabacher. Rich Gillock will act as moderator at the event, which will begin at 7 p.m. at the Green Valley Club Room, 17250 Los Jardines West, Fountain Valley. The doors will open at 6:45 p.m.

Residents' group seeking signatures to stop lawsuits

A Corona del Mar residents' group has joined the many organizations collecting signatures to get a legal initiative on the November ballot.

Citizens Against Lawsuit Abuse last week announced it is supporting the 17200 Reform Initiative, which would prevent private attorneys from suing businesses for unfair business practices without an actual client or proof of harm.

The abuse of lawsuits gained attention last year when some attorneys were found suing small business owners over technical violations of state code that had been corrected, Citizens Against Lawsuit Abuse Executive Director Maryann Maloney said. Although no one claiming actual damages was behind the suits, attorneys would threaten litigation unless a financial settlement was reached, sometimes causing financial ruin to the businesses.

Maloney said the proposed ballot initiative would amend the law to prevent such suits. Petitions are now in circulation to collect 370,000 signatures.

Campbell welcomes nod from former California governor

Heading into the March 2 primary, Campbell pulled out the big guns this week, at least with respect to endorsements.

On Tuesday, Campbell, who is running for the 35th Senate District seat, announced an endorsement from former Gov. Pete Wilson. While the two never served in government at the same time, they worked together on Gov. Arnold Schwarzenegger's election campaign last year.

"I've always liked and respected [former] Gov. Wilson as a voter," Campbell said.

"I think he got to see me during the Arnold Schwarzenegger campaign, and he does not endorse a lot of people, so I am very honored to have the endorsement."

Campbell said he and Wilson found a common cause in working to fix the problems former Gov. Gray Davis led the state into.

The likelihood of an endorsement from the current governor is unclear, Campbell said.

"We'll see how that develops," he said. "The current governor has not endorsed in any legislative primaries at this point."

Campbell's opponent in the senate race, 68th District Assemblyman Ken Maddox, has announced his own endorsements from the Assn. of Orange County Deputy Sheriffs and Crime Victims of California.

A former Los Angeles County deputy sheriff and Tustin police officer, Maddox has racked up a long list of public safety endorsements.

Backers show in Assembly race

In the 70th District Assembly race, the latest endorsement announcements came from Chuck DeVore and Don Wagner.

DeVore got the endorsement of former state Treasurer Matt Fong, who will appear at a DeVore fundraiser next month.

The Orange County Young Republicans have endorsed Wagner, he announced Wednesday. The group chose Wagner for his experience as a member of the South Orange Community College District board of trustees and his volunteer work for other Republican candidates, a statement from Wagner said.

If you want other stories on this topic, search the Archives at latimes.com/archives.

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The Shakedown State

The Wall Street Journal

July 22, 2003

COMMENTARY 

By WALTER OLSON

From news reports of late, you might think California's legal establishment was working hard to prevent a repetition of the state's recent "shakedown-lawsuit" scandal. On July 10, following a massive state bar investigation, three principals of the Beverly Hills-based Trevor Law Group decided not to fight disbarment on charges they'd wrongfully sent demand letters to thousands of small businesses offering not to sue them in exchange for "settlements" amounting to thousands of dollars apiece. And two days earlier state attorney general Bill Lockyer filed charges against a second law firm engaged in what he called a "quick-buck racket": Brar & Gamulin had mass-mailed lawsuit threats to hundreds of ethnic grocery stores and nail salons. Mr. Lockyer's office is probing three other law firms as well for questionable suits under the state's sweeping consumer-rights law, also known as Business and Professions Code 17200.

* * *

So the system's finally working the way it ought to, right? If you think so, you may have missed the latest from the state legislature in Sacramento, whose Democratic leadership is using the shakedown scandal as an excuse to rush to passage a bill devised by the state's trial lawyers' association which would actually expand the law in question so as to give lawyers more leverage to extract settlement money on dubious 17200 claims.

Shakedown suits are nothing new in the Golden State, but Damian Trevor and two colleagues effectively mechanized the process. They combed through state regulatory records for businesses that had been issued some kind of reprimand, often over trivial paperwork omissions or missed deadlines. They sent letters in the name of Consumer Enforcement Watch, a newly organized group whose mailing address was the same as theirs, offering not to sue the businesses if they came across with checks in the thousands of dollars. The firm's "red letter," named after the color of the paper on which it was printed, put matters bluntly: "Either pay even more money to fight in court or settle out of court and get on with business." Many did pay.

In part because of press sympathy for mom-and-pop immigrant defendants, a furor began to build. And while trial-lawyer spokesmen took a "few bad apples" line, business groups saw Mr. Trevor's treasure hunt as merely the latest logical extension of section 17200, a law so bizarrely pro-plaintiff as to be a major disincentive for many companies to do business in the state. Indeed, the chairman and CEO of mortgage giant Countrywide pointedly cited 17200 in a recent letter to Gov. Gray Davis explaining the company's decision to halt expansion in California.

How pro-plaintiff is section 17200? As in the case of Nike v. Kasky, recently looked at (but then passed over) by the Supreme Court, it lets lawyers run to court without any injured client at all to sue against business practices that are either "unfair" -- a peerlessly amorphous term -- or "illegal," a category that takes in countless technical violations that actual regulators and prosecutors have already settled or view as too trivial to pursue. Lawyers can file valid 17200 suits that piggyback on a business's claimed violation of entirely unrelated laws, even if those unrelated laws make clear that private parties can't sue to enforce their provisions. If the law were a prop in Alice in Wonderland, it would carry a little tag saying, "Abuse Me."

The Trevor lawyers went further than most of their brethren in some key respects, notably in pursuing claims without even cursory investigation and in misleading their targets during settlement discussions. Yet in other tactics that roused public ire, such as use of a bogus consumer group, they merely followed the crowd. John Sullivan of the pro-reform Civil Justice Association of California, who keeps a list of 17200 horror stories, says he's counted something like two dozen ad hoc consumer groups that exist as lawyer-controlled fronts. Identical practices are seen in the parallel bounty-hunting subculture spawned by the state's Proposition 65 law, under which lawyers have sued manufacturers for failing to warn of the claimed toxic emissions given off by brass darts, Christmas lights, hammers, mineral oil, billiard cue chalk, and picture frames, not to mention French fries and chocolate (which are among many foods in which traces of cancer-causing substances naturally occur). One lawyer filed 400 Prop. 65 claims against candle makers, on the grounds that their products emit toxic fumes when burned; the consumer group he represented turned out to have his mother as its only officer.

Robert Fellmeth, a University of San Diego law professor with strong liberal and consumerist credentials, supports 17200's broad objectives but has said that its current configuration "really creates an environment for extortion." This spring Mr. Fellmeth worked with Assemblyman Lou Correa (D., Anaheim) to craft a very modest measure that would have required court approval of settlements and provided public hearings to vent defendant objections. They might have saved themselves the effort: In May the Judiciary Democrats deep-sixed Mr. Correa's bill along with more far-reaching GOP alternatives that in one instance would even (of all things!) have required lawyers to line up actual injured clients before they sued.

But that was just a prelude to what happened next. On July 8 the respective Judiciary chairs stunned business observers by pulling from a hat and passing substitute bills devised by the state's trial lawyer group, which styles itself Consumer Attorneys of California. Section 122, sponsored by Sen. Martha Escutia (D., Whittier), with its companion Assembly bill, would impose essentially superficial curbs on abuse. Most significant, judges would for the first time review fees (as opposed to settlements in general) but would be instructed to approve any and all fees if "consistent with applicable law." Lawyers would have to send a copy of each lawsuit to the state bar, and would have to include new boilerplate in their demand letters advising defendants of their right to consult their own attorney and so forth.

After that begins a trial-lawyer wish list, starting with liberal rules for "joinder" of defendants, along with explicit authority for lawyers to sue multiple businesses without knowing which ones have actually committed a violation. Most ominous of all, the bill would overturn a March decision in which the state supreme court barred lawyers from demanding the "disgorgement" under 17200 of any and all revenue a business had earned while an infraction was in progress, as opposed to restitution for customers affected by a practice, which they are still free to seek. The difference between the two is dramatic: If you're a pizzeria owner and get sued for unfairly claiming that your pie is the best in town, restitution might consist of giving away consolatory baskets of garlic bread, but disgorgement could mean paying out all the revenue you've taken in while the slogan was printed on your boxes. It's a remedy so drastic that courts seldom impose it; its real function is usually to give lawyers the leverage to terrify defendants into settlement. To top it all, the Escutia bill would allow lawyers to steer settlement funds not paid to actual consumers to organizations that "promote justice," code for the consumer and pro-litigation groups with which the lawyers are allied.

The trial lawyers' bill has now passed both houses in different forms and could reach final-action votes any day now. Don't count on Democratic Gov. Gray Davis to exercise his veto: trial lawyers are likely to be major sources of the war chest he'll need for his forthcoming recall battle. Thus do the trial lawyers turn even their own scandals to tactical advantage. Is it any wonder they're the most successful special-interest lobby in the land?

Mr. Olson, senior fellow at the Manhattan Institute, is the author of "The Rule of Lawyers" (St. Martin's, 2003). He edits Overlawyered.com.

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Bills to fix lawsuit abuse contain big sweetener for lawyers

By Dan Walters -- Bee Columnist

Published 2:15 a.m. PDT Wednesday, July 9, 2003

Thousands of California small businesses, many of them owned by recent

immigrants from Asia and Latin America, were hit with lawsuits or threats of

lawsuits under the state's broad "unfair competition law" (UCL) but were

told that they could buy their way out by sending checks to the law firms

involved.

Attorney General Bill Lockyer and others labeled the mass mailings as

ill-disguised attempts at extortion. He filed a lawsuit -- alleging unfair

competition, ironically enough -- against one of the law firms, and the

State Bar hit the firm with tough sanctions. But the syndrome has continued,

albeit on a smaller scale.

Clearly, the Legislature should step into the legal scandal and impose some

reasonable regulations on how the UCL is used, protecting small-business

operators from being coerced into sending checks to aggressive law firms.

But it's become a major skirmish in the perennial political war between

personal injury lawyers and business and professional groups.

The Legislature decides, in effect, who can sue whom and how damages can be

collected, so lawyers and their rivals joust constantly over the rules of

the tort game, with multibillion-dollar consequences. Corporation-and

insurance industry-backed "tort reform" groups immediately seized upon the

extortion of the small-business operators to demand a tightening of the

state's UCL, and lawyers counterpunched, exploiting their very close ties

with the liberal legislative leadership. Personal injury attorneys have

contributed millions of dollars to Democratic campaign treasuries in recent

years, hoping that Democratic dominance of the Capitol would expand

opportunities to sue and collect damages.

The lawyer-dominated judiciary committees in both legislative houses killed

off the business-backed measures that would have made major changes in the

UCL. And then the chairwomen of the two committees, Assemblywoman Ellen

Corbett, D-San Leandro, and Sen. Martha Escutia, D-Whittier, unveiled a

two-bill package, largely written by the Consumer Attorneys of California,

that made a few procedural changes they said would protect business from

extortionate lawsuits. With strong leadership support, the measures sailed

through their original legislative houses.

Corbett's Assembly Judiciary Committee took up Escutia's measure Tuesday,

while Escutia's Senate Judiciary Committee heard Corbett's bill in an

adjacent Capitol hearing room -- and it quickly became apparent that another

game was being played.

While the joined-at-the-hip bills do impose some reforms, such as judicial

oversight of legal fees in UCL cases, a provision in Escutia's measure,

inserted last week, could vastly expand the potency of UCL as a legal weapon

by authorizing a much-wider array of damages. If enacted, the measures would

expand the UCL into a form of class-action lawsuit law -- without the

procedural safeguards of class actions.

The new provisions would effectively overturn a state Supreme Court ruling,

issued just last March, that strictly limited UCL judgments to restitution

for specific victims of unfair business practices. The Escutia measure,

however, would authorize "any appropriate relief" in UCL suits, thus

widening its potential impact by untold millions of dollars -- with bigger

legal fees to match.

The new language drew sharp criticism from opponents, including the

small-business advocates who had pressed the Legislature to protect hair

salons, cafes, auto shops and other micro-businesses from predatory lawyers, but the bill sailed through the Assembly Judiciary Committee on a party-line vote and the Senate Judiciary Committee was approving the companion bill. As revealing as the actions may have been -- Democrats backing the personal injury lawyers' political agenda over small-business operators -- there's still another aspect to the situation. The two bills are written in such a way that if the courts were to invalidate any of their provisions, all of their contents would be voided. Thus, if the new lawyer-backed expansion of UCL's monetary reach were to be tossed out by the courts, which is very possible, the law's real reforms would be wiped out as well. That's how the scorched-earth legal game is played in the Capitol.

The Bee's Dan Walters can be reached at (916) 321-1195 or

dwalters@sacbee.com

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3 Lawyers Suspended Over Flood of Suits

State Bar ruling follows allegations that the firm abused consumer law to target small businesses.

LOS ANGELES TIMES

By Monte Morin, Times Staff Writer

May 22, 2003

Three Beverly Hills attorneys accused of extorting cash from thousands of Southern California auto garages and restaurants by filing frivolous lawsuits were suspended Wednesday from practicing law.

Trevor Law Group attorneys Damian S. Trevor, Allan Charles Hendrickson and Shane Chang Han were each placed on involuntary inactive status by State Bar Court Judge Richard A. Honn, and the State Bar of California said it would begin formal disbarment proceedings in the next few weeks.

The attorneys were accused of abusing a state consumer law to wring settlements from small businesses. Many repair shops and restaurants settled the cases for a few thousand dollars each in order to avoid the costs of going to trial.

"Their relatively small firm was capable of far-reaching harm," Honn wrote in his ruling. "With little or no investigation, lawsuits were filed on a mass scale."

State Bar officials said it's highly unusual for the organization to take such action against an entire law firm.

"I've never seen anything like this," said Mike Nisperos, chief trial counsel for the State Bar, which served as prosecutor in the State Bar trial. "This is a finding that they're a threat This way, they can't do any further harm to the public."

Attorney Kevin P. Gerry, the lawyer representing the Trevor lawyers, said he was disappointed with the judge's 126-page decision. "It looks to me like the judge literally cut and pasted from the State Bar's position. The lawyers at Trevor Law Group do intend to fight this decision, and I expect that their efforts will be successful," he said.

During State Bar trial court hearings last month, Gerry insisted that the lawyers did nothing improper and that the lawsuits were legitimate.

Those suits were filed under the Unfair Competition Act, which allows private citizens or organizations to sue commercial businesses for such practices as false advertising. The act lets attorneys file suit even if the plaintiffs were not directly harmed by the alleged misdeeds.

Trevor sued more than 3,000 defendants, often using boilerplate language. The plaintiff in many of the cases was Consumer Enforcement Watch, an organization that the State Bar said was created by the lawyers for the purpose of filing the suits and collecting settlements.

The case has focused attention on the Unfair Competition Act and other consumer laws that give plaintiffs the right to collect damages even if they have not suffered at the hand of the defendant. The laws were developed to give consumers power to take on big companies. But some small-business organizations believe the laws are being abused.

Earlier this year state Atty. Gen. Bill Lockyer sued the Trevor Law Group, accusing the attorneys of abusing the Unfair Competition Act and shaking down small businesses. His office likened Trevor's action to extortion. That case is pending.

Honn's ruling is not considered formal punishment by the bar. But it prevents the attorneys from practicing until further notice. It also gives the State Bar the ability to begin disbarment proceedings.

"In a day of severe economic challenges to our court system, the [attorneys] clogged the courts with thousands of what appear to be frivolous lawsuits," Honn wrote.

Critics of the Trevor firm hailed the judge's decision.

"These characters just brought this on themselves," said Marty Keller, executive director of the Automotive Repair Coalition, which fought the suits. "They never followed simple rules of procedure Maybe this will drive the nail in the coffin of these cases."