Small Businesses Hurt by California’s Lawsuit-Friendly Legal Climate

 

By John Kabateck  Fox & Hounds Daily

It isn’t easy being a small business owner in California with excessive regulations, the threat of higher taxes, and a lengthening recession. It’s no wonder most never know from one day to the next if they will be able to keep their employees on board and their doors open. Perhaps one of the worst challenges they face is a horribly broken legal climate that creates the opportunity for abusive lawsuits at every turn.

Recently, NFIB polled its members about the affects of lawsuit abuse – and the results were sobering. More than one-third of small business owners have been sued in the past five years and nearly 6 in 10 have been threatened with a lawsuit during the same period. More than three-quartersare concerned that their business may be sued in the next five years.

These small business owners report that the fear of a lawsuit could impact their businesses by forcing them to:

– Raise their costs

– Make their products or services more expensive

– Restrict, reduce or change products or services offered to their customers

– Reconsider expanding their business

– Lay off employees

– Consider closing their business

NFIB has spent time traveling the state and talking to members about their personal experiences with lawsuit abuse. One Northern California member, a bookstore owner went to the effort (and expense) to retain the services of an American’s with Disabilities (ADA) compliance ‘expert’ before she opened her business and was still sued. Another member in Southern California, a music store owner, was sued for ADA violations – and her son is in a wheelchair. Both of these members were willing to make accommodations for those who were disabled and wanted to access their businesses. Both times they ended up having to spend precious, limited resources to fight these lawsuits – dollars that instead could have been used to hire employees or expand their business.

Think you won’t be sued? Think again. Does your place of business contain one of the over 900 chemicals regulated by Proposition 65? If you don’t have a warning sign, you can be sued by any lawyer who feels like making a quick buck. There are many law firms that get the bulk of their fees from settlements with small businesses in Prop. 65 lawsuits. In fact, of the $13.6 million in Prop 65 settlements in 2010, lawyers received $7.8 million, or roughly 57%, for attorneys’ fees.

In the State Capitol, NFIB has supported many pieces of legislation that would have reformed the practice of frivolous lawsuits here in California. Sadly, thanks to the powerful trial lawyers lobby, most of these bills never even made it out of committee…and the window for meaningful reform was missed once again. There is a need to do more and hold trial lawyers accountable at both the state and federal level.

We hear from legislators on both sides of the aisle how plaintiffs’ attorneys are ravaging their communities, how they have maligned the legal system and – because money speaks louder than words – lost sight of the difference between justice and a quick buck.

Now is an opportune time for the Governor along with Democrat and Republican leaders to unite in the same way they have nobly done with redistricting and regulatory reform, to help Main Street in our communities. As California struggles to emerge from an epic recession, our leaders need to pass laws that stop the bad lawsuits – and ruthless attorneys – that are victimizing hard-working “mom and pops,” damaging our state’s small businesses and costing our communities good jobs.