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DLNews Legal Eagles:

California’s reputation as a “Judicial Hellhole®” persists, with the state ranked fifth in the American Tort Reform Foundation's 2024-2025 report. This designation sheds light on the impact of excessive litigation on businesses, innovation, and Californians' daily lives. Each year, lawsuit abuse costs every Californian nearly $2,300 and eliminates more than 825,000 jobs statewide, creating a significant burden for families and small businesses.

Victor Gomez, executive director of California Citizens Against Lawsuit Abuse, paints a human picture of the problem: “It seems we all know a small business owner in town who has experienced an unwarranted lawsuit. These suits hurt families that own small businesses hard—all while these same families and businesses are the ones who support and serve their communities. Sadly, small business owners, especially minority-owned ones, are disproportionately targeted.”

One notable contributor to California’s legal challenges is the expansion of product liability theories. A recent Court of Appeal decision in the Gilead Tenofovir case imposed a new "duty to innovate" on manufacturers. Under this ruling, companies may be liable if they were researching safer products but did not release them quickly enough, even if the existing products were neither defective nor dangerous. “The Gilead decision is a prime example of judicial overreach,” said Tiger Joyce, president of the American Tort Reform Association. “It could force companies to prioritize speed over safety, rushing products to market without thorough testing. We urge the California Supreme Court to reject this dangerous precedent.”

Proposition 65 claims and Americans with Disabilities Act (ADA) lawsuits further complicate the legal landscape. As of October 2024, California saw 4,118 Prop 65 notices, a staggering number expected to rise. Meanwhile, nearly 30% of the nation’s ADA lawsuits originated in California in 2023, with filings trending even higher this year. These lawsuits, while rooted in well-intentioned laws, are often exploited. “Americans with Disabilities Act reform should be a priority in the upcoming legislative session,” Gomez urged, emphasizing the need to protect businesses from frivolous claims.

Environmental litigation also significantly influences the state’s ranking. The attorney general's lawsuits against plastic producers and energy companies for climate-related costs and municipal suits for PFAS contamination highlight the complex interplay between environmental advocacy and economic impact.

Despite the challenges, California remains a hub of innovation and entrepreneurship. However, excessive litigation stifles growth and hampers job creation. “Regardless of age or political affiliation, the negative effects of lawsuit abuse are evident,” Joyce remarked. “It’s time for common-sense reforms to address excessive litigation and restore balance to California’s legal system.”

As California grapples with its Judicial Hellhole® status, stakeholders emphasize the need for reform to protect consumers and businesses alike, fostering a fair and sustainable legal environment for all.