Cal Biz Lit

A Better Consumer Legal Remedies Act

As we rang in the new year, CBL committed to post some ideas about how to improve three problematic areas of California law, making them less business-unfriendly while maintaining California's position as a very pro-consumer, pro-green state.  On January 4, we solved a Proposition 65 problem.  So this time, let's look at the Consumer Legal Remedies Act, Civil Code section 1750 and following.

Here's what the CLRA does at its heart:  it outlaws some 22 deceptive business practices, including "[p]assing off goods or services as those of another," and "[r]epresenting that goods or services have . . . characteristics, ingredients, usies, benefits, or quantities which they do not have . . . " and "[r]epresentinig that goods or services are of a particular standard, quality or grade. . . if they are of another."

Fine.  It's the twenty-first century, and we can agree that sellers of goods and services shouldn't make false representations about them.  But where the CLRA runs off the rails is when it gets to remedies and the class action provisions.  The successful plaintiff can recover actual damages, an injunction, restitution, punitive damages, attorneys' fees and costs and "[a]ny other relief that the court deems proper."  Civil Code section 1780. And the CLRA has its own class action provisions, which allows certification of a class without a showing of substantial benefit to the litigants and to the court.  Civil Code section 1781, Corbett v. Superior Court (2002) 101 Cal.App.4th 649,669, fn 9.

So, as with Proposition 65 litigation, the odds are stacked against the company.  A company that thinks it has a meritorious defense risks a very large hit if it guesses wrong.   But there is supposed to be one potential safety valve for the company.  Thirty days before the consumer can seek damages, she must give notice of the violation and give the company an opportunity to "correct, repair, replace or otherwise rectify" the problem (Civil Code section 1782).  

Under section 1782(b), an individual action is barred if "an appropriate correction, repair, replacement or other remedy is given, or agreed to be given within a reasonable time, to the consuemer within 30 days of the notice."  And under section 1782(c), no class action for damages may be brought if the company shows it has identified, or made a reasonable effort to identify, all the class members, offered and given a remedy to all the class members, and stopped the unlawful practice.

So, what's wrong with that?  Well, for one thing, a consumer can seek equitable remedies -- including injunction, restitution and rescission -- without giving the thirty days notice, so the notice requirement is pretty much illusory.  Also, the notices never fully describe the legal consequences of failing to resolve the claim, so most non-California companies who get the pre-filing notice have no idea about the consequences of ignoring the requests.   Consumer attorneys don't want to provide this information;  they want the company to ignore the letter so they can file suit.  Furthermore, the statutory structure encourages plaintiffs' attorneys to make all kinds of class demands in every pre-filing notice, since compliance is almost always impossible within thirty days.

And finally, the statute is silent as to whether consumer attorneys may insist on receiving fees as part of their initial demands, and pre-filing notices almost always  demand attorneys' fees. CBL's best analysis is that there is no right to fees if the company offers a remedy within the statutory time.  But CBL acknowledges there is some ambiguity.

So why not make these changes?

• Provide that notice must be given before filing any action under the CLRA;
• Prescribe language that must be included in the notice advising the company of its rights and duties, and the potential consequences of failing to respond to the notice;
• Provide a longer notice -- say, 120 days -- prior to filing a class action suit, so that the company has a full and fair opportunity to conduct an investigation o the allegations;  and
• Make it clear in the statute that a company that acts in good faith during the statutory period to remedy the violation will not be liable for attorneys' fees.  And make it a requirement that this information be provided in the pre-filing notice.

The statute would still be very protective of consumer rights.  It would include all the protections of the existing statute.  And, unlike the existing statute, it would encourage early and immediate resolution.  What could possibly be wrong with that?

A Modest Proposal For Fixing Proposition 65

This week, we're looking at CBL's proposed tweaks to California laws to make them more business friendly without hampering those laws' overall purposes.  For starters, take Proposition 65. Please.

To a green and environmentally/politically correct group of California voters, Proposition 65 seems like a great idea:  if a business is going to "expose" people to carcinogens or reproductive toxicants, it ought to at least give a "clear and reasonable warning."  And when you tell Californians that this is what the statute does, they are overwhelminginly in favor of it.

About a year ago, we undertook an informal and unscientific survey at gas stations, fast food stores and in front of UCLA law school (home of future Proposition 65 bounty hunter lawyers) to ask people what they thought.  Here are some examples of what we heard:

 

I have to wonder what would have happened if we had asked citizens this question:

Do you favor a California law that requires small, non-California businesses to pay small penalties and large attorney fee awards for failing to give Proposition 65 warnings even if they had never heard of the statute before?

The issues posed by this question have a huge impact on little businesses from outside of California with small amounts of internet, catalogue or distributor sales in this state.  At least once a month, CBL gets a call from the owner of a mom and pop company in some remote state, with 11 employees,  who sells maybe 1,000 widgets a year in California and has just been served with a sixty day notice.  Here are the typical first questions: 

• What in the hell is this "Proposition 65?"
• Can't I just immediately start warning and avoid the lawsuit?
• Are you people crazy?

If you're a regular reader, you already know what Proposition 65 is.  If not, there's plenty of information here. And if you spend any time around this world, you know that the answer to the second question is "sorry, no way." Once the bounty hunter has caught you, you can't make him go away by starting up a warning program.  In other words, by the time many non-California business first hear about Proposition 65, it is too late to implement a compliance program.

So here's the first proposal:  Why not make the sixty day notice a meaningful notice to the company?  Have the law provide that if a company receives a sixty day notice, it may, within the ensuing sixty days, implement a compliance program and then certify that it does not expose any person in California to a listed chemical without first giving clear and reasonable warning.  And if it can do so within sixty days, the implementation of the compliance program will be a complete defense to an enforcement action.

This will accomplish what the statute sets out to do:  increasing public awareness of exposure to toxins.  In fact, it will do more than the litigation does.  Right now, if a bounty hunter goes shopping and buys a widget containing excess amounts of lead, and no warning,he can force compliance only as to widgets.  If the company also sells blidgets, and hasn't been giving warnings, the bounty hunter can't usually add blidgets to the case. 

But under CBL's proposal, the company would have to broadly certify to no unwarned exposures of any kind from any product within sixty days in order to avoid suit.  And if we wanted to put some teeth in the "certification," we could add double penalties for subsequent violations.

Can anyone think of a single policy reason why this would be a bad idea?

Cal Biz Lit's Proposals for New Legislation in 2011

Happy New Year to Cal Biz Lit  readers!

This is the time of year when  pundits, bloggers and law firms write about the new laws coming into effect in the new year.  But frankly, the new California laws for this year are kind of a snooze:  Yeah, ok, marijuana possession is now only an infraction, subject to a $100  hand slap (although you'd better first give clear and reasonable warning, since it's a Proposition 65 toxin).  And there's a new procedure for expedited jury trials, a procedure CBL bets few, if any litigants will use.  Hospitals will soon be required to report radiation doses during CT scans (this actually takes effect in 2012).  It's now illegal to put more than half a gram of artifical trans fats in cake batter or yeast dough that will be deep fried.  And (big sigh of relief here by celebrities) there are now increased penalties for overly aggressive behavior by paparazzi. 

However.  Here at CBL, we've used a few minutes of the holiday break (and a two week blogging break) to think about this question:  How could we amend California laws in a way that kept them consistent with the will of Californians -- who are, let's face it, pretty progressive, pro-consumer and green -- while at the same time creating a level playing field for both sides in some of the litigation most often discussed in this blog. 

Here, in broad brush, is what we are thinking.  Most of the rest of the world thinks our Proposition 65 and its regulations ar the result of mass insanity on the part of California voters, and that our consumer protection and product liability laws were designed to drive all of those pesky businesses entirely out of the State, so we wouldn't have to be troubled by having an economy any more.  But for better or worse, Californians support these kinds of laws.  So reform, if it is ever to come, will come from tweaks that create a more business-friendly environment while at the same time allowing state citizens to keep their beloved precuationary principle, their relaxed class action rules for consumer litigation and their even more relaxed rules for product liabiilty litigation.

Impossible?  CBL says "no."  Politically possible?  Well, that's a different question.

But in the coming series of posts, CBL will suggest a handfull of modest proposals  that would, if enacted, make this state a whole lot more business-friendly while preserving the pro-consumer, risk-sharing, pro-environmental environment Californians seem to really want.

In the next post, we'll start with Proposition 65.