Class action reform needed for economic recovery, group says

Legal News Line Feb. 19, 2009, 12:52pm

John Sullivan

SACRAMENTO, Calif. (Legal Newsline) -- With the state of California careening toward financial ruin, the Civil Justice Association of California has urged deadlocked legislators to support its proposal to bring balance to the state's class action law, which the organization asserts would entice businesses to invest in the state.

The organization has sent a similar request to Gov. Arnold Schwarzenegger during the months-long battle to shore up the state's deficit, which now projects to more than $42 billion by the end of this fiscal year in June.

"State government ... can send a powerful national message that we welcome private investment in California employees and production of goods and services more than in the past," CJAC President John Sullivan wrote to Schwarzenegger recently.

Sullivan said forecasts of higher unemployment for the next two years suggests the state must do more to recruit new business.

"Tangible legislation that will make California a more attractive place to do business is bound to result in more jobs sooner," Sullivan wrote.

That tangible legislation is currently before the lawmakers. CJAC asked legislators on Tuesday to support a bill authored by Assemblyman Van Tran, R-Costa Mesa, that allows defendants an equal opportunity to appeal a judge's decision to certify a class action.

"California's class action law creates an unbalanced and unfair legal climate in this state. With our current economic crisis, we need to take steps that create a positive business environment and help California's economic recovery," Tran said. "I am proud to author AB 298 as one step to promote our economic recovery and ensure that jobs stay here in California."

California class action law only allows the plaintiff to appeal a class-action certification ruling. The defendant can only appeal after the lawsuit has gone to trial, which defendants bemoan is often more costly and damaging that the lawsuit itself.

The state Legislature has been holed up in 11th hour negotiations for a better part of the last three days. But with talks lasting until the wee-morning hours, votes for a budget that would shore up the state's financial crisis have come up just short, according to published reports.

"The state is close," wrote political commentator Bill Bradley. "Both to a deal that nobody much likes. And to total disaster."

Because the state requires a super-majority on budget votes, conservative Republicans have held onto a narrow voting block against compromise deals that include both spending cuts and tax increases. Conservative talk shows and media outlets have targeted any member of the GOP who backs away from a no-tax pledge.

"The far right ideologues who presently dominate the California Republican Party are reduced to nothing more than a no tax/slash government mantra," Bradley said.

Democrats and Schwarzenegger needed three Republican votes from both the House and the Senate this weekend, putting enormous pressure on potential swing votes at risk of being opposed by their own party.

Democratic Senate President Pro Tempore Darrell Steinberg said he would lock down the Senate until a deal is hammered out on Tuesday.
"Bring a toothbrush," he declared Monday night. "Bring whatever necessities you need to bring."

Republicans have been critical of the budget deal that would increase taxes on gasoline, vehicle licensing and the sales tax, and the lack of incentives for businesses that will help grow the economy and the state's workforce.

CJAC has long argued that the court's reputation as being unfair to plaintiffs has forced businesses out of California and cost the state revenue and jobs. Balancing the state's class action law, according to CJAC's president, would fuel economy recovery.

"As economic conditions improve, companies will have the opportunity to decide whether to restore jobs here or elsewhere," Sullivan said. "Legislators should stop our litigation climate from blocking the sunshine of jobs and paychecks for thousands of Californians."

The bill would bring the same balance to class action litigation that exists in federal courts and many states, he said.

Sullivan said the state's low ranking for business climate has directly contributed to the state's current fiscal problems.

Barring such incentives, Republicans are not likely to bend on the proposed budget deal as it is now presented, meaning continued deadlock, in the face of dwindling cash reserves could continue.

With the failure of the Legislature to approve the budget, Schwarzenegger said he would send out layoff notices to 20,000 state workers on Tuesday, which follow the implementation of mandatory unpaid days off the governor instituted earlier this month.

The two-page Surplus Notice being mailed out, required by California law, claims that "even when a budget is passes, and even with the mandatory furlough, elimination of programs, offices or other reductions in workforce and layoffs will be required."

The letter states that those receiving the notice "have been identified as one of the least senior" in their respective departments, and thus facing the potential of being laid off.

This weekend, California's largest state employee union reached a tentative deal with Schwarzenegger that would cut the number of unpaid furlough days required by more than 200,000 state employees from two days a month to one.

Union officials said the reduction of furloughs would mean on average a pay cut for state workers of 4.62 percent instead of more than 9 percent under the two-day-a-month executive order issued by Schwarzenegger.

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