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“Business Continues To Be Under Siege In California” by Gary Wolensky

Monday, January 31, 2011  |  posted by Hugh Hewitt
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More on the deteriorating business climate inthe Golden State, from my law partner Gary Wolensky

Business Continues to be under Siege in California by Gary Wolensky

CAUTION to all companies who do business in California: you are not only over-regulated in my fair state but now you are going to be over-sued resulting in the loss of hundreds of millions if not billions of dollars in legal costs and settlements. This is as a direct result of the California Supreme Court decision in the Kwikset Corporation v. The Superior Court of Orange County lawsuit where the court turned back the clock and held that in unfair competition and false advertising lawsuits plaintiffs no longer need to plead or prove that they have “lost money or property.” As a result, the floodgates for consumer class actions, unfair competition and false advertising lawsuits will now proliferate to unimaginable proportions as plaintiffs no longer need to prove that they were harmed.
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The background is still fresh in the minds of business when at the turn of the century the trial lawyers latched on to class actions and the California Unfair Competition Law (UCL) blatantly bringing scores of meritless lawsuits. This lawsuit abuse culminated in the notorious Trevor Law Group (TLG) scandal where recent law school graduates took advantage of loopholes in the UCL to bring suit against various industries such as the restaurant industry, automotive repair shops and others. TLG brought these fraudulent suits in the names of their employees and relatives who were not harmed. In response California citizens passed proposition 64 in November 2004 which closed the UCL loopholes including limiting an individual’s right to sue by allowing private enforcement only if that individual has been actually injured by, and suffered financial/property loss because of an unfair business practice.

The Kwikset decision has now destroyed the standing requirement so that if plaintiffs can “truthfully allege” they were deceived by a product’s label into buying the product, and would not have purchased it otherwise then they have standing to sue as they have “lost money or property” within the meaning of Proposition 64!

In the worst economic climate in 70 years California continues to thumb its nose at business attacks business in the regulatory and litigation arenas with a vengeance. My partner Liz McNulty spends most of her time representing companies in Proposition 65 claims and advising those companies with respect to the coming Green Chemistry regulations which will apply to virtually every consumer product sold in California. Shakedown lawsuits will now add to the cost of doing business in the Golden State. It is imperative that businesses of all take a critical look at the accuracy and defensibility of all statements about its products and services. This includes everything from “Made in U.S.A” to representations regarding what footwear can do for your fitness, to nutrition information provided. Unless warnings on products are preempted by a Federal regulation, there is no product or service sold or provided in California that is safe from a potential UCL or false advertising lawsuit.

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