Los Angeles Business Journal

Texas-Size Problem

Ease of filing nuisance lawsuits in California could spur businesses to head for Lone Star State. By Maryann Marino Monday, February 18, 2013

Big impact?

David Houston, owner of Barney’s Beanery restaurants in Los Angeles, was forced to pay almost $1 million to settle an abusive class-action lawsuit regarding workers falsely claiming that they were unable to take legally mandated breaks. A similar lawsuit cost Joe Ramirez, owner of Pacific National Security in Culver City, $40,000, even though he, too, had done nothing wrong.

How big of an impact does California’s legal climate have? A recent study from NERA Economic Consulting found that Californians could save $5.2 billion in tort costs and the state could create between 115,000 and 320,000 jobs by improving its legal environment. In a state that has faced double-digit unemployment for years on end, creating that many jobs would be a game-changer.

And while the governor and California’s other leaders do not seem to agree, Californians as a whole certainly do. A recent poll found that approximately two-thirds of California voters believe the number of lawsuits filed against businesses or public entities in California has hurt the state’s economy, and 74 percent believe that enacting lawsuit reform is an important part of improving California’s business environment and attracting and keeping jobs.

Californians, especially small-business owners, are crying out for relief from the threat of abusive lawsuits. Yet Brown, when faced with an opportunity to acknowledge how the state’s policies hamstring small businesses and carve a new path forward, instead compared the situation to flatulence.

If California doesn’t pass legal reform soon, the next questions reporters might be asking Brown might not be why businesses might move to Texas, but why they did move.

Maryann Marino is the Southern California regional director for California Citizens Against Lawsuit Abuse.

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