SACRAMENTO, Calif. (Legal Newline) - California is on the verge of earning the dubious distinction of being a "judicial hellhole" by national court observers, a group said Tuesday.

The American Tort Reform Foundation, in its annual study, said the Golden State may in the future "fall into the Hellholes abyss or rise to the promise of equal justice under the law."

For its study, the Washington-based legal reform group examines lawsuit abuse in states as well as laws that favor the trial bar, such as personal injury lawyers.

The report blames the state's courts for creating an unfair playing field for civil defendants.

"Poorly reasoned California court decisions have placed the state's citizens and business owners in jeopardy of expanded liability. California businesses are concerned that they will be unfairly hit with consumer and disabled-access lawsuits by those who have chosen litigation as a lifestyle," the 68-page ATRF report said.

California's legal climate ranks in the bottom 10 of states. The state was ranked 44th in an annual survey by Harris Interactive of states' legal climates from the perspective of in-house corporate counsel around the nation. The ATRF report said trial lawyers have used the state's unfair legal climate to their advantage.

"Plaintiffs lawyers have gamed the system to take advantage of procedural rules, and brand-name product manufacturers find themselves on the hook for injuries from competing generic products," ATRF said.

The report notes a recent study by Californians Against Lawsuit Abuse, which found that eight of California's largest cities and nine of its largest counties spent $504.1 million on lawsuits in 2007 and 2008.

The CALA report examined legal expenditures in the counties of: Alameda, Fresno, Kern, Los Angeles, Orange, Sacramento, San Diego, San Francisco, and Santa Clara, and the cities of: Anaheim, Bakersfield, Fresno, Los Angeles, Oakland, Sacramento, San Diego, and San Jose.

Last year, CALA reported that three cities and four counties spent more than $276 million in litigation costs for fiscal years 2005 and 2006.

California's leading tort reform advocacy said that the state's tattered legal picture could be on the mend.

"It's hard to dispute the California 'watch' classification," said Civil Justice Association of California President John Sullivan.

"But over this past year there have been some positive court decisions, plus promising rule-making work going on by court administrators that holds promise of improvements in key areas such as asbestos litigation, faster trials, and overall court efficiency."

Sullivan pointed to two recent state Supreme Court decisions that he said show the state's legal climate might be improving. The first decision, in the case of Roby v. McKesson, the court found that anything more than a one-to-one ratio between compensatory and punitive damages is excessive.

In the second ruling -- Johnson v. American Standard, Inc. - the justices afforded manufacturers protections against lawsuits, saying companies do not have to warn experts about products they are hired to work with in the course of their jobs.

To level the judicial playing field even more, Sullivan called on the state's Democratic-led Legislature to pass legislation to make courts more efficient.

"With the state facing a projected $20 billion shortfall by mid-2011 and forecasters projecting a double-digit unemployment rate into 2012, now is the time for state leaders to enact litigation improvements that will make California courts more efficient, improve the civil justice system for all litigants, and attract and retain business investment in the state," Sullivan added.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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