SACRAMENTO, CA - Predatory attorneys have had things their way for a long time in California. But that may change after November because of Proposition 64.

California's 71-year-old Unfair Business Competition Law has been used successfully to stop fraudulent acts such as the relabeling of old meat in grocery stores. In its current form, however, lawyers often misuse the law to extort money from honest business owners.

The Unfair Business Competition Law allows any person to sue a proprietor without proof of personal injury or monetary or property damages. In fact, the law doesn't even require that the claimant be a customer of the business. This permits lawyers to file without a client and to profit if victorious.

Attorneys go after businesses for petty matters such as using an abbreviation for "annual percentage rate'' or for minor health code violations already handled by county health departments. While the issues may be trivial, the lawyers' shakedown is definitely not. They often demand settlements of a few thousand dollars, which can make or break a mom-and-pop store.

Faced with these claims, owners must choose between fighting in court or settling. Either option costs them time and money. Take the case of a Santa Ana auto body shop that was sued for not paying a licensing fee, when in fact the Bureau of Auto Repair had misplaced the owners' check.

A law firm accused them of operating without a license and demanded $2,000 to settle the case. The owners opted to fight instead and won, but it cost them a hefty $10,000. Then there were the lawsuits against several nail salons for reusing the same nail polish on multiple customers, even though the practice is legal under the state's Barbering and Cosmetology rules.

Although no customers came forward to say they were injured, the law firm slyly gave the mostly immigrant owners the option of quietly settling for less than a thousand dollars each. Many conceded in order to save their salons and their reputations. The most galling case involved a Lake Forest manufacturer accused of deceiving the public by promoting a door lock as "Made in America.''

The lock was made in America but had six Taiwanese screws, a detail the attorneys exploited to their benefit. The company lost the case and was forced to pay $3 million to the law firms involved. These shakedowns have become so lucrative that the Consumer Attorneys of California offers a seminar in Hawaii on how law firms can profit from this law.

Prop. 64 would close the loophole allowing non-injured parties to sue. Only the Attorney General and local prosecutors would be able to bring lawsuits on behalf of others. This would preserve channels to prosecute serious fraud, end the parade of private attorneys acting as self-appointed public advocates, and help improve the business climate in California.

The 2002 Economic Report of the President estimates that the cost of lawsuit abuse in California is more than $24 billion a year. According to a study by the U.S. Chamber of Commerce, California's litigation environment is one of the least fair to businesses. That must change if the state's economic fortunes are to improve.

Anthony P. Archie is a Policy Fellow in Business and Economic Studies at the Pacific Research Institute. He can be reached via email at aarchie@pacificresearch.org.