March 29, 2013

California displaces Pennsylvania as worst state for civil justice

By Anastasia P. Boden Attorney

After a reign of two years, Pennsylvania has given up its crown.  California now claims the woeful title of worst place for civil justice in the nation.  This critique may be due in part to the fact that, according to the American Tort Reform Association, California is the “undisputed heavyweight champion of the consumer class action.”  The state is home to what some have deemed, “The Food Court,” or the U.S. District Court for the Northern District of California–where the courts are eager to certify class actions for food mislabeling.  Such practices have spawned lawsuits against the manufacturers of ice cream, yogurt, potato chips and granola bars.  The claims often have little to do with the nutritional value of the products.  Rather, plaintiffs take issue with semantics.  Is it misleading to say “all natural with vitamins,” where those vitamins are synthetic?  What trace levels of trans fat are allowed in products that contain the label “contains no trans fat?”  These food labeling suits have raked in settlements of up to $35 million.  While some settlements offer the class members refunds, most of the time the class is repaid in the form of vouchers, with the big money going to the plaintiffs’ lawyers.  Some have said mislabeling suits are the “next asbestos.”

In addition to mislabeling suits, California is home to Prop 65—which requires warning labels on products that contain materials the state alleges are related to cancer.  Citizens may enforce the law through private attorney general lawsuits, and as a result, there have been lawsuits over the potential carcinogenic effects of almost everything.  Companies now engage in the practice of defensive labeling.  Prop 65 warnings are ubiquitous in the state, littering parking garages, boxes of matches, Christmas lights, and even your local Starbucks.  It’s difficult to discern the benefit Californians derive from such suits and excessive labeling.  But it’s easy to see what drives the suits: data from the California Office of the Attorney General indicates that in 2011, 74% of the Prop 65 settlement awards were consumed by attorneys’ fees and costs.

According to the U.S. Chamber of Commerce, 79% of the 1,100 general counsels they surveyed responded that a state’s lawsuit environment has a “significant impact on their decision regarding where to locate or expand.”  California’s civil justice system is no doubt hurting its competitiveness, and its potential for economic growth.

Fortunately, reform might be on its way.  AB227, for instance, would give businesses 14 days to make corrections under Prop 65 before they could be sued.  Senate Bill 737 would allow parties to appeal grants or denials of class certification.  (For an editorial on other potential reforms, see here).  Such changes would provide balance to California courts, and ensure fairness in our civil justice system.

But for now, California will keep its title.

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