NCPA - National Center for Policy Analysis

None Dare Call it Barratry

July 22, 2003

Not content with class action lawsuits, some California trial lawyers specialize in demanding cash settlements from thousands of businesses in exchange for not suing them. These shakedown suits don't require allegations of injury -- or even the inconvenience of clients: just the threat of a lawyer armed with California's bizarre consumer protection laws.

California's pro-plaintiff law is a major disincentive for many companies to do business in the state, according to Walter Olson, author of "The Rule of Lawyers" (New York: St. Martin's, 2003):

  • The state's consumer-rights law, or "Business and Professions Code 17200," lets lawyers without any injured client at all sue businesses for practices that are either "unfair" or "illegal," including technical violations that regulators and prosecutors have already settled or view as trivial.
  • 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.
  • Roughly two dozen lawyer-controlled consumer groups have been formed to pursue such suits, say legal reformers.

Because of recent scandals, consumer law reform bills were introduced in the state legislature. But the state's trial lawyer group, which styles itself Consumer Attorneys of California, has proposed its own bills, which have passed both legislative houses in different forms.

Olson says the bills would expand the reach of such suits. For example, lawyers would have explicit authority to sue multiple businesses without knowing which ones have actually committed a violation.

They would also allow lawyers to demand all revenue that a business earned while an infraction was in progress, and would allow them to steer settlement funds to organizations that "promote justice," such as front groups with which the lawyers are allied.

Source: Walter Olson (Manhattan Institute), "The Shakedown State," Wall Street Journal, July 22, 2003.

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