The Right Coast

September 20, 2004
Schwarzenegger Speaks
By Gail Heriot

Muscle men are not usually my type (and, in fairness, I am usually not their type either). But I am starting to have warm feelings for California Governor Arnold Schwarzenegger. Over the weekend, for example, he vetoed a minimum wage bill. "Now is not the time to create barriers to our economic recovery or reverse the momentum we have generated," he said. "I want to create more jobs and make every California job more secure." Exactly, Arnold.

Many politicians are afraid to do what they think is right in these situations for fear that they will be criticized as insensitive. In fact, I believe it's those who would raise minimum wage who are insensitive to the concerns of unskilled employees; they don't seem to care that unskilled jobs are lost when wages are artificially forced up.

The minimum wage veto is not the only example of Schwarzengger's willingness to use his personal popularity to promote sound public policy. About a week ago, he endorsed Proposition 64, which, if passed, will restore the traditional common law requirement of standing to California unfair business practices law.

The hallmark of a civil lawsuit is that it is a dispute in which a plaintiff asserts that the defendant has harmed him in some legally cognizable way. Ah .... but not in California. Alone among states, California allows anyone to sue a business, small or large, for unfair business practices; "standing" is no obstacle. A plaintiff need not be suing to protect his own interests; it's enough that he is seeking to protect some abstract interest of "the general public." In effect, every Californian is authorized to be a private attorney general roaming the state in search of wrongs that need righting. Who cares if he or anyone else has actually been hurt?

That might have worked tolerably well back in the days when laws governing business were few in number and clearer in meaning. But in the modern regulatory state, it's difficult for anyone to be in perfect compliance with the law. Even lawyers don't know one-tenth of what's out there. California's freewheeling approach to standing has spawned a whole army of lawyers who specialize if finding some flaw (or arguable flaw) with some business's compliance and then shaking that business down for money.

The Official California Voter Guide's Argument in Favor of Proposition 64 gives the following examples:

"Hundreds of travel agents have been shaken down for not including their license number on their website.

"Local homebuilders have been sued for using 'APR' in advertisements instead of spelling out 'Annual Percentage Rate.'"

It also quotes from the following statement by Humberto Galvez of Santa Ana:

"M y family came to this country to pursue the American Dream. We work hard to make sure our customers like the job we do. One day I got a letter from a law firm demanding $2,500. The letter didn't claim we broke the law, just that we might have and if we wanted to stop the lawsuit, we needed to send them $2,500. I called a lawyer who said it would cost even more to fight, so we sent money even though we'd done nothing wrong. It's just not right."

I'm not familiar with Mr. Galvez's case in particular (or with the other cases cited in the argument), but it's consistent with the cases I have read and heard about. This a problem that needs fixing. I'll be interested in what California voters do in November. In the meantime, Schwarzenegger is looking more and more impressive.