"Shakedown" lawsuits against businesses have a new champion: Florida Democratic Rep Alan Grayson.
The lawmaker from Orlando wants to import to the District of Columbia a scheme that allowed lawyers in California to run a litigation protection-racket against mom-and-pop businesses.
In a case now before D.C.’s local Court of Appeals, Grayson is asking to have the District’s consumer protection ordinance interpreted—or, rather, misinterpreted—to permit lawsuits against businesses even if the plaintiff didn’t suffer any injury.
In other words, this self-described "progressive Democrat" is trying to subvert a key safeguard against frivolous lawsuits: The requirement that the plaintiff show tangible "standing," including harm caused by the defendant’s conduct.
California’s disastrous experiment with gutting the rules of standing should flash warning signals to the judges who are considering Grayson’s case—and to the D.C. business owners and residents who would be the ultimate losers if he wins.
California’s Unfair Competition Law was a classic example of a consumer protection law that didn’t help consumers nearly so much as it enriched ethically challenged attorneys. Lawyers could sign up basically anyone as a plaintiff, whether or not the person had ever patronized the business being sued, much less been harmed by it. Thousands of other uninjured individuals would then be added to the suit, in a class action-style scheme.
The main goal? To force the business to settle.
Lawyers who specialized in this lucrative practice would form "watchdog" or "consumer" front-organizations, and scour public records on the Internet for ridiculously minor regulatory or legal violations by small businesses. Favorite targets were family-run restaurants, often owned by immigrants.
When a "mark" was identified, the unfortunate business would be notified that it was being sued.
The attorneys would follow up by contacting the owner and generously pointing out that a quick settlement would make things go away.
These litigation mills amassed huge sums by chiseling small settlements from thousands of intimidated business—all in the name of redressing "harms" that nobody had suffered.
California state legislators, many of them beholden to the trial-lawyer lobby, refused to reform things, so the task fell to outraged citizens. A reform initiative-Proposition 64-was drafted, and voters passed it in November 2004. It amended the Unfair Competition Law to require a private plaintiff to show that he or she "has suffered injury in fact and has lost money or property," and further required that "representative" actions follow established rules regarding class actions.
But now, Rep. Grayson proposes bringing to D.C. the odious practices that were rejected in California. Even though he is an out-of-District plaintiff who has suffered no injury, he argues that he should be allowed to be the lead party in a "representative" action, purportedly on behalf of District residents, none of whom have demonstrated any injury either.
The defendant is AT&T, and the issue is phone cards: Who gets the money that is left over when people don’t use all the minutes? Grayson’s lawsuit says this money should be given to the District, rather than kept by the phone company.
It is undisputed that Rep. Grayson would not be allowed to pursue this lawsuit if he were required to show that AT&T caused him any injury.
The District’s Court of Appeals can put a stop to this by reading the Consumer Protection Procedures Act as it always has in the past, to require standing.
With unemployment north of 10% and a local government notorious for mismanagement, the District can’t afford the added problems that Grayson’s promiscuous approach to litigation would bring.
If the court sides with the Rep. Grayson—and says, in effect, "No injury? No problem!"—D.C. will become the newest happy-hunting ground for lawyers seeking fast bucks at employers’ expense.