Friday, 31 January 2003 17:00

Lawmakers take up the plight of 2000 shops sued

Owners of small businesses ranging from auto repair shops to restaurants and nail salons have been howling about the lawsuits being filed against them in massive numbers by attorneys who allegedly abuse a section of the state's Unfair Competition Law known commonly as the Private Attorney General Act (Business & Professions Code Section 17200). The attorneys can use Section 17200 to sue small businesses and then pressure them for a quick settlement. In the case of auto repair, over 2,000 mechanical and collision repair shops have been sued, many of them for nothing more than a technical violation of BAR regulations such as failing to renew their registration on time - matters which they have since corrected. While many call such suits frivolous, they can never-the-less be costly to defend, and many business owners have chosen to settle them.  

One recent response to these suits has been that Caliber Collision, the largest collision repair operator in the state, filed a lawsuit to stop the California Bureau of Automotive Repair from posting violations of BAR regulations on its website, saying such postings violate due process and lead to unwarranted lawsuits from unscrupulous attorneys (for details on the Caliber suit, see page 1 of this issue).
Town hall meeting in Anaheim

Assemblyman Lou Correa (D-Anaheim) held a meeting in his district on January 10 to hear from owners of auto repair shops and other businesses who complain that they are essentially being blackmailed into settling these so-called consumer protection lawsuits. Correa, who has since introduced legislation to reform B&F Code Section 17200, called that law "a sharp sword" that has been used to protect consumers in the past but that is now begin abused. "Clearly, something has gone wrong."

The Anaheim meeting was attended by many business owners who consider themselves victims of these lawsuits, and tempers ran high. The crowd cheered speakers who used terms such as "shakedown," "extortion" and "scam" to describe the lawsuits. They booed anyone who sounded even remotely neutral on the issue, including Assistant Attorney General Albert Shelden who was present to explain the Attorney General's position on the matter. Attorney General Bill Lockyer has labeled some of the Section 17200 lawsuits "extortions" but has also said that he wants to preserve the public's right to bring consumer actions under that section, according to his spokesman Tom Dresslar.

Several of the legislators at the meeting told the crowd that they believe the Beverly Hills law firm Trevor Law Group, which filed most of the suits in question, targeted minority and immigrant communities because they are less likely to be versed in the law and are often reluctant to seek help from an government authorities. Attorney Damian Trevor, head of the Trevor Law Group, was not present to answer the allegations.

The Consumer Attorneys Association of California, through its president, Bruce Brusavich, a Los Angeles attorney, has said it wants to take the profiteering out of Section 17200 while at the same time preserving consumers' rights to sue. Brusavich proposed judicial review of all proposed Section 17200 settlements as a way to accomplish this, but a spokesman for the Automotive Repair Coalition, Chris Walker, said that judicial review "would only drag out the legal issues for my clients and increase the extortionist threats lawyers have (in mind) when they initiate the complaint."

Action heats up in Sacramento

Another State legislator, Assembly-woman Ellen Corbett (D-San Leandro) who heads the Assembly Judiciary Committee, held a meeting in Sacramento on January 14 to address the matter. The committee heard testimony from experts on Section 17200.

Tom Papageorge, who leads a consumer unit of the Los Angeles District Attorney's office, said the State should adopt reforms advocated by the California Law Revision Commission in 1997. Those include requiring attorneys to notify the state attorney general and local district attorneys when they file suits under Section 17200, a ban on secret settlements of such suits and judicial review of proposed settlements and attorney fees to ensure that the public - not just the lawyers - benefits from the suits. He urged that legislators strengthen ethical requirements for lawyers and give the State Bar more authority to stop abuses.

Assemblyman Robert Pacheco (R- Walnut), himself a lawyer, said, "The problem is the profession doesn't police itself. We've always had a problem with the State Bar following up on complaints."

In response, Mike Nisperos, chief trial counsel for the State Bar, said the BAR has convened a huge task force to investigate complaints against some law firms accused of Section 17200 abuses. He said the investigation, including some 4,000 interviews, should be concluded by April.

"Two-bit legal whores"

One lawmaker summed up the feelings of small business owners when he addressed two lawyers who work for the Trevor Law Group, Shane Han and Allan Hendrickson. "You're nothing but a couple of two-bit legal whores," said Sen. Bill Morrow ( R-Oceanside). In testimony, Han estimated that The Trevor Law Group has filed between 2,000 and 5,000 Section 17200 actions. The firm often uses public information (such as the BAR website) to learn of violations from regulatory agencies as a source for their complaints. They acknowledged that the firm has no professional investigators on its staff.

The law group filed many of its claims on behalf of Consumer Enforcement Watch Corporation, which the lawyers disclosed is a for-profit group with only one shareholder; a shareholder who Han acknowledged has received income from the law suits.

State Attorney General Bill Lockyer testified that he has issued subpoenas against Trevor Law Group and several other law firms that have filed the glut of Section 17200 claims.

Consumer advocates at the meeting urged legislators not to rush to judgment and gut Section 17200, which they said has been used successfully to protect the public. Lockyer indicated his agreement, saying "We need a surgeon's scalpel, not a lumberjack's ax."

The Consumers Union would like to see a judicial review of Section 17200 settlements, but several lawmakers said this would do nothing to stop lawyers from extorting small businesses into settling suits to prevent more costly litigation.

Prior to the hearing, Pacheco and Assemblyman Tom Harmon (R-Huntington Beach) said they had just introduced a law that would require judicial consent before a Section 17200 claim could be filed. AB102 also would mandate the claim be filed for a plaintiff with a "distinct and palpable injury." ("Injury" here does not mean a physical injury, but refers to damage done to an individual.) Pacheco pointed out that the legislation was nothing new. He has introduced similar bills four times and all have failed. He feels that now "the time is right" for such a bill to pass.


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