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LAW WATCH - In recent years, California residents have faced the devastating impact of the pandemic on small businesses, rising inflation driving up costs, and a labor shortage despite high unemployment. But now, hidden under all the challenges we face is yet another burden we all share. It’s known as the “tort tax” which impacts every person in the Los Angeles, Long Beach, and Anaheim region, negatively impacting with 407,584 lost jobs and a loss of $29.8 billion in personal income.
California business owners, large and small, are trying to hang on. Business owners can survive temporary economic challenges, they are resilient. But these challenges are nothing compared to just one potential shake-down lawsuit that could wipe them out entirely. The results of which could leave business owners and their employees without a job and without a viable future. We need a break from the lawsuit abuse involving litigation examples like this if we want to address these economic challenges.
In the newly released California Citizens Against Lawsuit Abuse (CALA) report titled, “The Economic Benefits of Tort Reform in California,” we see how an overly aggressive litigious environment is further draining California’s fragile economy.
Every day, thousands of California businesses face abusive lawsuits based on technical violations related to the Private Attorney General Act (PAGA) or Americans with Disability Act (ADA) lawsuits, a cost we all pay for through lost jobs, weakened productivity and higher prices as outlined in this report. California is seeing lawsuit abuse inflation with the rise in ADA lawsuits increasing in California, while nationally filings decreased. In fact, plaintiffs will file ADA violations for a mirror that is simply a quarter of an in too high, toilet too low, or the blue striping on a parking lot starting to fade.
CALA’s report shows how an unbalanced justice system results in increased costs, disincentives for innovation and decreased economic productivity and output. The report highlights how the benefits of tort reform can lead to substantial economic benefits.
Enacting tort reform will help stem the tide of businesses leaving the state. The report shows a loss of $95.8 billion in gross product annually. It also shows $30 billion in direct costs a year that negatively affects all major industry groups including retail trade, business services, and health services experiencing the greatest losses. These are problems in dire need of a solution.
Unfortunately for all Californians, Governor Gavin Newsom and the legislature expanded liability across the board for all businesses. California has been in the Top 5 worst Judicial Hellholes for over a decade and was named the “Everlasting Judicial Hellhole” for being named a top Judicial Hellhole for the last 16 out of 20 years.
The economic challenges tied to tort abuse are on top of the city of Los Angeles’s out of control spending problem. Litigation against the city is a major part of the challenges the city faces.
There is still time for Governor Newsom, the legislature, and city officials to step up to fix the local problems that add to the burden of lawsuit abuse, or better yet, support legislation like SB 84 and offer relief to small businesses. We must all send a message to the Governor and our lawmakers in Sacramento, so they realize that unchecked expansion of abusive lawsuits cost all of us dearly.
(Victor Gomez is the executive director of California Citizens Against Lawsuit Abuse and the founder/president of Pinnacle Strategy LLC, a government affairs and land-use consulting firm in the Monterey and San Francisco Bay areas. Visit californiacala.org).
