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The San Francisco Chronicle
Jan 05, 2005

by Bob Egelko, Chronicle Staff Writer

Court to decide when lawsuit limit began

The fate of 100 or more consumer lawsuits in California, claiming such illegal practices as marketing cigarettes and beer to minors and overcharging cell phone customers, may be at stake today in a state appeals court hearing on the scope of a voter-approved ballot measure.

A Court of Appeal panel in Los Angeles will hear arguments on whether Proposition 64, which limited private citizens' rights to sue businesses, applies to cases that were pending Nov. 2, when the initiative passed with 59 percent of the votes.

Prop. 64, sponsored by retailers, auto dealers, insurers and other businesses, prohibits suits alleging unfair business practices unless the plaintiff has suffered personal or financial harm.

Such suits were commonly employed by consumer and environmental organizations, and law firms, to seek orders halting allegedly abusive practices without the need for a class action, which can be filed only by victims. Business groups described the suits as shakedowns and said they were typically used to coerce companies into settlements that included attorneys' fees.

Since Prop. 64 passed, businesses in numerous cases -- probably well over 100, according to advocates on both sides -- have sought to dismiss suits that were filed before Nov. 2. Some of those suits include claims of illegal marketing to minors, cell phone overcharges, concealment of credit card fees and understaffing at a nursing home, said the Foundation for Taxpayer and Consumer Rights.

Lawyers say some of those cases could be refiled with other plaintiffs, but many would be permanently scuttled. That would be fine with John Sullivan, president of the Civil Justice Association of California, which sponsored Prop. 64.

"We're not looking at a case that is trying to get some money back," he said. "We're talking about lawyers looking for their fees. So there's no harm in stopping those kinds of cases immediately."

The harm, said Newport Beach attorney Sharon Arkin, president of Consumer Attorneys of California, includes the dismissal of some suits that were filed several years ago and resulted in injunctions that businesses are still appealing. "These are legitimate cases that people were bringing on behalf of consumers," she said.

At least 15 Superior Court judges have already ruled on whether Prop. 64 applies to pending cases. Today's Los Angeles hearing, in a suit by an insurance company that accused another insurer of stealing its clients, is the first before an appeals court, whose rulings serve as precedents for other cases.

An appellate court in Santa Ana, considering only written arguments, isscheduled to rule by mid-March on whether Prop. 64 applies to a consumer group's suit against DaimlerChrysler, in which a judge ordered the automaker in 2001 to repair or replace defective cars. Either or both of those cases could soon reach the state Supreme Court for a definitive ruling.

The text of Prop. 64 did not discuss its application to cases already on file. The omission was deliberate, because "nobody wanted to clutter it up with an issue that I felt we had a pretty good chance of winning in the courts," said Fred Hiestand, the Civil Justice Association's general counsel.

Arkin, of the Consumer Attorneys group, said an initiative that fails to mention retroactivity shouldn't be ruled retroactive. "This was their wish list," she said. "They could have put into it anything they wanted, including a retroactivity clause."

No such clause was needed, argue lawyers for business defendants, because Prop. 64 decreed that certain plaintiffs -- those who fail to claim direct injury -- should no longer be allowed in California courts, regardless of when they sued.

Consumer advocates believe they hold a trump card: an e-mail sent in September from the official Prop. 64 campaign, saying the measure was not retroactive, in response to an inquiry from Daniel Sigler, an Orange County attorney. But the Civil Justice Association's Sullivan shrugs it off.

"True, it's not retroactive," he said. "The initiative took effect on Nov. 3. It doesn't change any litigation that was concluded or decided before that date."
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E-mail Bob Egelko at begelko@sfchronicle.com

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