By Jon Coupal and Victor Gomez
Californians are well aware of the heavy tax burden they bear for living in the Golden State. We have the highest income tax rate, highest state sales tax rate and highest gas tax in the nation. But taxpayers may not be aware that they are also paying a $574 “lawsuit tax” each year. That’s the price of unnecessary litigation, added to the price of goods and services, that businesses must absorb to cover the costs of potential lawsuits.
When tort laws are misused, everybody pays for it. Lawsuit abuse is possible when state laws enable private lawyers to hunt for violations, file lawsuits and seek quick settlements. Business owners face a choice between the cost of the settlement and the even higher cost of a long legal fight in the overwhelmed court system. These needless costs add up, and they can ultimately result in closed businesses and lost jobs. Tort reform can help provide protection and relief for business owners from abusive shakedown lawsuits.
The cost of lawsuit abuse is revealed in a new study titled, “The Impact of Tort Costs and the Potential Economic Benefits of Tort Reform in California,” sponsored by Citizens Against Lawsuit Abuse (CALA).
Regrettably, our political leadership has punted on this issue. It would have been helpful had the governor addressed pandemic liability early in the crisis. After all, he has signed 64 executive orders since declaring a State of Emergency on March 4, 2020. And there have been over 400 suspensions or changes to state law during that span as well. But not one was related to legal protection for hard-hit businesses that faced volumes of ever-changing new rules and regulations.
It has now been one full year since small business owners statewide responded to the governor’s challenge to stay open and provide essential services throughout the pandemic, to enable Californians to stay safer at home. These local enterprises are your dry cleaners, hardware retailers, gas stations, pharmacies, grocery stores and convenience outlets.
Unfortunately, when there was an opportunity in 2020 for the governor and Legislature to throw the small business community a lifeline, they held back. Assembly Bill 1035 would have provided the liability protection so sorely needed for all those businesses that complied with all the relevant state and county public health protocols. But the Senate failed to bring up a key bill for a hearing even though it sailed through the Assembly with unanimous bi-partisan support.
There is now another opportunity for the Legislature to get it right. Assemblymember James Ramos, D-Rancho Cucamonga, has recently introduced Assembly Bill 247 to protect small businesses and nonprofits with 100 or fewer employees from frivolous lawsuits related to operations during the pandemic. Specifically, the bill provides that if they have substantially complied with government safety requirements, they will not be held liable for alleged COVID-19 liability exposure claims, unless there has been gross negligence, willful misconduct, or discrimination.
The Assembly Judiciary Committee, based on the committee staff’s view that it was unnecessary, initially said the bill would not be set for a hearing this session. But in the face of intense pressure from business owners and customers alike, the committee relented, and the bill was set to be heard on May 4th, only to be pulled from consideration again.
Given the whipsaw changes in public health orders and the struggles of small businesses statewide due to the pandemic, the state has a responsibility to stand up for these businesses and organizations that are fighting for survival. The threat of lawsuit abuse is real. There is nothing to stop someone from claiming they were exposed to and caught COVID-19 at a local business, and the fear is that opportunists will exploit this gap in the law to file a costly shakedown lawsuit against businesses that did nothing wrong.
COVID-19 has already dealt a massive blow to California’s economy. Now is the time for state elected officials to protect citizens from having to shell out for an unwanted and undeserved expense — a $574 yearly bill for excessive lawsuits.
Jon Coupal is the president of the Howard Jarvis Taxpayers Association. Victor Gomez is the executive director of Citizens Against Lawsuit Abuse.