Court Rules Prop. 64 Curb on Lawsuits Is Retroactive

A California appeals court ruled Wednesday that a state ballot measure passed in November to limit lawsuits against businesses may be used to dismiss cases filed before voters approved the initiative.

The decision by the 2nd District Court of Appeal in Los Angeles came about a week after another state appeals court reached the opposite conclusion, making it probable that the state Supreme Court will resolve the question of whether Proposition 64 can be applied retroactively.

Proposition 64 requires that plaintiffs, before suing for deceptive advertising or other fraudulent behavior, prove that they personally suffered injury or financial loss because of a company’s behavior. Since election day, companies including AT&T; Corp. and DaimlerChrysler have asked California judges to dismiss lawsuits filed before the law’s enactment.

The measure “applies to actions that were filed but not finally resolved before Nov. 3, 2004,” wrote Justice Richard Mosk in a decision for the three-judge panel.

The case concerns a suit filed in 2002 by two consumers who alleged that Downey Financial Corp.’s Downey Savings & Loan overcharged certain fees in real estate transactions. The trial court granted Newport Beach-based Downey’s motion to dismiss, saying the claim is preempted by federal law.

The appeals court disagreed with the trial court’s ruling, then went on to say that Proposition 64 applies to this case. The plaintiffs’ suit will still be dismissed unless they can prove that they or substitute plaintiffs personally suffered financial harm from Downey’s alleged practices.

On Feb. 2, another court ruled that Hayward, Calif.-based Mervyn’s, a department store chain with 126 stores in the state, can’t use Proposition 64 to seek the dismissal of a lawsuit brought by Californians for Disability Rights.

“We’ve got one on each side of the coin now, so it’s on to the Supreme Court,” said John H. Sullivan, president of the Civil Justice Assn. of California and co-chairman of the Yes on 64 campaign.