By punting on protection racket, Democrats shot selves in foot

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Sacramento Bee

When unscrupulous law firms began operating an ill-disguised protection racket that shook down small California businesses for money, the Legislature – or at least its Democratic majority – found itself in a dilemma.

The shakedown lawyers were combing through the records of state agencies, looking for firms that had committed tiny transgressions of regulatory rules. They threatened their owners with expensive lawsuits under a provision of California law allowing private actions for so-called “unfair business practices,” then offered to go away if the businesses paid specified sums.

Hard-working Californians of modest means – owners of beauty salons, auto repair shops, restaurants, etc. – were being victimized. Many of the businesses were immigrant-owned. It should have been a made-to-order issue for Democrats to attack.

“There are abuses,” Attorney General Bill Lockyer told one legislative hearing about the blizzard of lawsuits and legal threats. “I think they are extortionate and we have do so something about it.”

But Consumer Attorneys of California, the political arm of lawyers who specialize in personal injury lawsuits, opposed any change in the underlying law, which its members frequently use to seek damages from major corporations. And CAC is one of the Democratic Party’s financial mainstays.

The State Bar penalized the Southern California law firm that had the highest profile in shakedown suits, but the shameful practice continued. When push came to shove, the Legislature was not willing to enact even modest reforms to protect small business from extortion. Indeed, at one point last year, legislation purporting to cure the situation was rewritten at the behest of trial lawyers to make it easier to collect on unfair business practices suits. But nothing, in the final analysis, was done.

The Legislature’s refusal to act made it a political issue for Republicans and opened the door for a drive by larger businesses to change the state’s unfair business practices law. They have cranked up a petition effort to place a measure on the November ballot and – in a replay of the dynamics of workers’ compensation – have threatened to pursue it unless the Legislature quickly enacts lawsuit reforms on its own.

Gov. Arnold Schwarzenegger, who has cited lawsuits against business as a threat to the state’s business climate, is pushing the reforms in both the legislative and electoral arenas and those who want to keep the unfair business practices law unchanged are beginning to push back. Last week, an arm of the Foundation for Taxpayer and Consumer Rights – a very close political ally of the lawyer lobby – issued a rhetorical broadside against Schwarzenegger for taking up the cause of tort reform. It cited the fact that many of the same business interests that contributed to Schwarzenegger’s campaign committees are also major financial backers of the proposed lawsuit initiative.

“Campaign contributors shouldn’t be able to rent the governor for $1 million, or any price,” said Carmen Balber of Election Watchdog, the foundation subsidiary. “Governor Schwarzenegger must take a stand against donor interests and protect California’s landmark consumer protection law.”

The allegations of influence peddling are thin at best, given Schwarzenegger’s consistent position on the issue and the fact that the money he collected did not, in the main, go to his own re-election fund but to support ballot measures he was championing. But they indicate that should the business-backed measure altering the unfair business practices law win a place on the November ballot, it will be another of the multi-billion-dollar shoot-outs that seem to be accumulating rapidly.

If it comes to that, the lawyers and their Democratic allies have no one to blame but themselves. The shakedown problem was authentic and demanded serious attention. Democrats, in effect, opted to favor their deep-pocket campaign contributors over the interests of the working people the party supposedly is pledged to protect. Had the Legislature enacted the reasonable reforms that even many Democrats favored, it would have blocked the major business interests from pursuing a ballot measure that would change the law much more fundamentally.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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