A group of California trial lawyers is backing a package of bills aimed at policing their industry by ramping up the penalties for attorneys who recruit clients illegally or prioritize the desires of hedge fund investors.
The Consumer Attorneys of California, a prominent trade group, said it is supporting two bills this session meant to crack down on the “small number of bad actors engaged in illegal conduct that threatens to undermine public trust” in the state’s legal bar.
The group said the bills, introduced Monday by Assemblymembers Ash Kalra (D-San José) and Rick Chavez Zbur (D-Los Angeles), were a response to recent Times investigations involving California lawyers. The Times found nine clients within L.A. County’s $4-billion sex-abuse settlement who said they were paid to sue and, in some cases, fabricate claims that became part of the historic payout. Another story examined opaque investor financing arrangements used by some firms.
“We’re not trying to insulate ourselves from accountability,” said Douglas Saeltzer, president of the attorney group, in an interview. “There needs to be consequences.”
The bill introduced by Zbur would disbar any attorney who is convicted of illegally soliciting clients. Kalra’s bill would ban private equity firms and hedge funds from dictating case strategy after giving money to a law firm.
Plaintiff’s attorneys say the legislative push is an attempt to clean up their profession’s image. It comes amid efforts by companies and governments frequently targeted by lawsuits to rein in a barrage of litigation.
Uber is pushing a measure for the November ballot that would limit how much lawyers can collect in fees for car crash cases, encouraging Californians to “stop the billboard lawyer scam.” A coalition of California counties has simultaneously begun circulating language to lawmakers that would limit attorneys’ ability to sue over older sex-abuse cases, pointing to recent allegations of fraud.
Zbur’s legislation, Assembly Bill 2039, would require the State Bar strip the license of any attorney with a felony conviction for a practice known as capping, in which law firms directly solicit or procure clients to sign up for lawsuits. Currently, attorneys convicted of capping can face suspension or probation, but are eligible to keep their license.
Under the bill, the attorney also would be disbarred for a misdemeanor capping conviction if the lawyer “acted knowingly and for financial gain.”
“It really is making very clear that if you’re engaging in this kind of capping, then there’s going to be a consequence,” Zbur said.
All clients who said they were paid to sue L.A. County over sex abuse were represented by Downtown LA Law Group, one of Southern California’s largest personal injury firms. The firm, also known as DTLA, is under investigation by the district attorney, the State Bar and L.A. County.
DTLA has denied any wrongdoing and said its lawyers “operate with unwavering integrity, prioritizing client welfare.”
Zbur’s bill also would provide whistleblower protections to people who report on attorney misconduct and tighten the rules around client loans. California is one of the few states where lawyers can lend money directly to clients.
Other states have barred the practice, concerned that direct loans give an attorney too much leverage over their clients.
The second bill introduced Monday, AB 2305, is aimed at the rising trend of private equity firms and hedge funds lending money to law firms and profiting from the payouts. The Times reported in December that investors were financing some of the flood of sex-abuse litigation against L.A. County.
Supporters of litigation finance say it gives attorneys the funding they need to take on deep-pocketed corporations and represent victims who can’t afford to sue on their own. Critics say investors can secretly sway case strategy, putting their profit before the best interests of a client.
“These Wall Street investors are salivating,” Kalra said. “This is just gonna clearly say, ‘No, no more. We’re not gonna allow these types of investments to influence the practice of law.’”
Kalra’s bill would bar investors from weighing in on litigation, such as who the firm should take on as a client and when they should settle a case. Any contracts that allow investor influence would be void under the law.
It’s unclear how the restrictions would be enforced. It’s often difficult to tell when an investor is financing a firm’s caseload, much less whether they’re exerting influence on a case.
Lawyers already are barred under the State Bar’s rules from allowing a third party to dictate case strategy and are barred in many cases from sharing legal fees with a nonlawyer.
“We’re finding that’s not enough,” Kalra said. “We actually need clear statutory safeguards.”
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