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SACRAMENTO — After several months of negotiations that may have been tantamount to a political root canal, key legislative allies of the plaintiffs bar have released a package of reform bills that could actually expand the state’s unfair competition law. Sen. Martha Escutia, D-Montebello, and Assemblywoman Ellen Corbett, D-San Leandro, have joined forces on a two-bill plan that includes one potentially lucrative nugget for plaintiffs lawyers. The legislators want to overturn a pair of recent state Supreme Court decisions that strictly limited disgorgement of profits in cases lost by defendants under the unfair competition law, Business and Professions Code � 17200. If enacted, the bills would allow money to be distributed through fluid recovery or cy pres award. “You have to at least compliment the plaintiffs lawyers for not trying to disguise their intent of using the 17200 litigation crisis to feather their own nests,” said John Sullivan, president of the Civil Justice Association of California, the tort reform group that has been attacking 17200 for years. The proposals by Escutia and Corbett already have the backing of the plaintiffs bar and are the result of negotiations among trial lawyers, labor interests and legislative Democrats. They are competing with a handful of other, mostly Republican, bills — though Democratic dominance in Sacramento means the latest package is the one most likely to succeed. Escutia and her staff said the bills, SB 122 and AB 95, are intended to prevent 17200 abuse while still protecting the rights of legitimate plaintiffs. “I think it’s a comprehensive package in terms of allowing judges every step of the way to [oversee a case],” Escutia said. For months, legislators have been dickering over tightening the unfair competition law as a cadre of plaintiffs lawyers have come under fire for allegedly misusing the statute to leverage settlements. The attorney general’s office and federal authorities are investigating the lawyers, and the State Bar is attempting to disbar three attorneys at the Trevor Law Group, a Beverly Hills plaintiffs firm. The proposal from Escutia and Corbett attempts to address one of the main complaints against firms like the Trevor Group — that they joined defendants in their suits just because they were part of the same industry. The legislation would prevent defendants from being joined for that reason. Escutia said she believes judges already have that power but she just wants to provide more ammunition for defendants targeted by unethical lawyers. The joint proposal would also amend the statute to require plaintiffs lawyers to notify defendants of their rights when a suit is filed under 17200. It would also require courts to review attorneys fees in 17200 cases, even if they are settled or dismissed. Corbett’s bill is scheduled to be heard today in a special meeting of the Assembly Judiciary Committee. Escutia will hear her bill in committee Tuesday. The measures are linked, and one cannot be made law without the other’s passage. Bruce Brusavich, president of Consumer Attorneys of California, praised the proposals and defended the inclusion of disgorgement recovery. He said not allowing plaintiffs to go after the ill-gotten gains of defendants is like finding the bank robber but letting him keep the money. Sen. Dick Ackerman of Fullerton, a Republican who is carrying some of the competing bills, predicted the joint measure will get through because of Democratic dominance of both houses. But Escutia and Corbett may still have some fence-mending to do in their own party. Assemblyman Lou Correa, D-Santa Ana, drove this year’s push to reform 17200 after plaintiffs firms filed suits against thousands of small businesses in his district. The plaintiffs bar doesn’t like Correa’s bill, however. Corbett said she is still reviewing it, but has already asked Correa to join her legislation as a co-author. In crafting his measure, AB 69, Correa enlisted the help of Robert Fellmeth, executive director of the Center for Public Interest Law at the University of San Diego School of Law. Fellmeth has tried to reform 17200 since at least 1997 when he worked with the California Law Revision Commission to examine the statute. Although Escutia’s and Corbett’s proposal has at least one provision in common with AB 69 — court approval of fees — Fellmeth said their bills are still “missing the big point.” “You need finality and due process,” he said. Fellmeth believes that if a plaintiff is going to represent the general public, there must be a way to resolve the dispute once and for all so other plaintiffs attorneys can’t come in and sue over the same issues. And where Escutia and Corbett would require courts to review attorneys fees in the cases, he wants to see courts scrutinize the entire settlement. He also wants the attorney general’s office to be notified of all 17200 suits and let people keep track of them over the Internet. “What meritorious [suit] is going to be hurt by giving public notice?” Fellmeth said. In response to Fellmeth’s criticisms, Brusavich said the new bills do give courts the power to review settlements because of the new requirement to approve attorneys fees, and the fact that courts would administer any disgorgement fund. As for finality, Brusavich said the problem there was the chance of “sweetheart settlements” between colluding plaintiffs and defendants. For its part, the attorney general’s office has said it would likely need additional resources to keep track of 17200 cases. Besides that, Tom Dresslar, a spokesman for Attorney General Bill Lockyer, said the office is pleased that legislators seem to be making progress. “We had hoped that the proposal might have been a little stronger, but this is a good start,” Dresslar said. Although they had hoped for more, both Fellmeth and the AG’s office support the restoration of disgorgement. The Supreme Court undercut plaintiffs lawyers’ ability to seek disgorgement in 17200 claims with Kraus v. Trinity Management Services, 23 Cal.4th 116, which was decided in 2000, and in Korea Supply Co. v. Lockheed Martin Corp., S100136, decided in March. Responding to the criticisms of tort reformers, Sen. Escutia said, “I don’t think CJAC is going to be satisfied with anything [I do].” She sees her proposal as a way of addressing the complaints of some members of the business community who say frivolous lawsuits are one of the reasons businesses leave the state. Although she said she did not plan to tie her proposal to any other issue — such as other business concerns like worker’s compensation reform or the manufacturer’s investment credit — she does hope business activists will recognize her efforts. “Let’s assume [the business community] was to get worker’s comp reform and reform in unfair competition law, what am I, as a Democrat, going to get in exchange?” Escutia said. “I think this proposal is a benefit to the business community. We could have killed everything.”

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