Protecting Small Businesses from Meritless Lawsuits

by Mike Gatto

Can you imagine being faced with the prospect of having to pay thousands of dollars to put up a $20 sign?

As crazy as it sounds, that’s exactly what happened to a coffee-shop owner from our area when he was threatened with a several hundred-thousand dollar lawsuit for allegedly failing to post a warning sign that beer can cause cancer. In 2012 and 2013, more than three dozen small businesses in Southern California (including several restaurants and cafés in Pasadena, Glendale, Burbank and Los Angeles) were threatened with similar lawsuits—with some paying thousands of dollars in settlements and attorneys’ fees to avoid spending precious time and money defending themselves in court.

These suits are all a result of California’s Proposition 65. Approved by voters in 1986, the act was intended to prevent and warn the public about possible exposure to carcinogens. Regrettably, there are unscrupulous individuals who have taken advantage of certain provisions in Prop. 65 to ensnare small businesses in lawsuits that were never contemplated by the voters when they passed it.

Brett Schoenhals, Owner of the Coffee Table in Eagle Rock
and a member of my Small-Business Advisory Commission
was threatened with litigation under Prop. 65.

To help these people, and all of us who believe in sensible government, I’ve introduced AB 227, which would allow small businesses to correct technical signage violations of Prop. 65 within fourteen days and pay a small civil fine. It essentially creates a “fix-it ticket” for signage violations for the most common, everyday substances covered under Prop. 65. If the business owners comply, they would be safe from legal action — including the crushing $2,500 per-day retroactive fine — plus legal fees, and the stress of battling meritless litigation.

In May, following the exposure I and my Small Business Advisory Commission brought to this issue, Governor Brown announced his support for my AB 227, and said that he was open to additional reforms. I am proud to have brought together so many other individuals and organizations that are normally on opposite sides. It’s not every day that business groups, environmental-justice coalitions, organized labor, and attorneys’ organizations agree on anything, much less how to reform Prop. 65 — a measure that has been substantively amended just once in nearly 30 years.

Threatening a small business with a lawsuit for serving its customers coffee with their breakfast, a burger with their lunch, or a glass of wine with dinner is absurd. Most business owners work hard to follow the law and protect customers so they return. This is especially true with the majority of our local business owners whose customers are neighbors, friends and relatives.

By giving businesses the opportunity to post a sign and fix a simple mistake, AB 227 strikes a balance by helping businesses avoid senseless litigation while preserving the public’s ability to obtain proper warnings about dangerous chemicals. It shouldn’t cost California’s small businesses thousands of dollars because of issues with a $20 sign.

This opinion editorial originally appeared in the Pasadena Star News.  You can read this Op-Ed and more by visiting  http://www.pasadenastarnews.com/20130822/protecting-small-business-from-meritless-lawsuits-mike-gatto

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Mike Gatto chairs the Appropriations Committee in the California Assembly. He represents Burbank, Glendale, La Cañada Flintridge, La Crescenta, Montrose, and the Los Angeles neighborhoods of Atwater Village, East Hollywood, Franklin Hills, Hollywood Hills, Los Feliz, and Silver Lake.