September 18, 2019

WASHINGTON, D.C.—California’s lawsuit climate was ranked 48th overall in a new national survey released today by the U.S. Chamber Institute for Legal Reform (ILR). Los Angeles continues its ranking as the second worst jurisdiction in the country, while San Francisco sunk from fifth worst in 2017 to third worst.

The 2019 Lawsuit Climate Survey: Ranking the States, conducted by renowned polling firm The Harris Poll on behalf of the U.S. Chamber Institute for Legal Reform, questioned senior business executives about the fairness and reasonableness of state court systems.

Reasons for California’s low ranking abound, including litigation connected to the state’s infamous Prop. 65 law, abusive litigation over the Americans with Disabilities Act (ADA), laws that allow private plaintiffs’ lawyers to sue as if they were the state’s attorney general, and eye-popping jury verdicts.

While the state has a large economy, the poor perception of California’s legal climate should be a concern. That’s because a record-high 89 percent of survey participants said a state’s lawsuit environment is likely to impact their company’s decisions about where to locate or do business.

“California has created a lucrative lawsuit industry where plaintiffs’ lawyers prey on hard-working entrepreneurs and small business owners to extort millions of dollars,” said Harold Kim, chief operating officer of the U.S. Chamber Institute for Legal Reform. “And when the California Consumer Privacy Act goes into effect in 2020, it will usher in an even bigger flood of lawsuits.”

Prop. 65 lawsuits have become a cash cow for plaintiffs’ lawyers. In 2018, companies settled almost 1,000 Prop. 65 lawsuits for $35.2 million; $27.3 million of that money went to pay for attorneys’ fees and costs.

Similarly, ADA lawsuits often target small businesses, alleging minor violations to extort large settlements. From 2017 to 2018, the state saw a 54 percent increase in ADA lawsuits. In 2018, 42 percent of the country’s ADA lawsuits were filed in federal court in California alone. 

Possible reasons why California’s ranking is so low include:

• Juries have returned massive verdicts in some of the state’s worst jurisdictions. In May 2019, an Alameda County jury awarded $2 billion in a single Roundup lawsuit. A judge later reduced it to $87 million.
• California has not adopted the standards used by federal courts and in 40 other states to keep junk science out of the courtroom.
• Its cities and counties continue to hire contingency fee lawyers to pursue public nuisance lawsuits.

California’s lawsuit climate already comes at a steep price. A recent ILR study found that every California household’s share of the state’s tort system in 2016 was more than $4,300, or 2.1 percent of the state’s GDP.

The 2019 Lawsuit Climate Survey: Ranking the States is the 12th time The Harris Poll has conducted the survey since 2002 for the U.S. Chamber Institute for Legal Reform. The final results are based on interviews with a national sample of 1,307 in-house general counsel, senior litigators or attorneys, and other senior executives who are knowledgeable about litigation matters at public and private companies with annual revenue of at least $100 million.

About the U.S. Chamber Institute for Legal Reform

ILR seeks to promote legal reform through legislative, political, judicial and educational activities at the national, state and local levels.

About the U.S. Chamber of Commerce

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.