A bill by Assemblyman Mike Gatto (D-Silver Lake) that would protect businesses against "shakedown lawsuits" sailed through the state Assembly Friday on a unanimous vote.
The bill was Gatto's attempt to remedy what small-business owners in his district — which spans from Silver Lake to La Cañada Flintridge — said was a problem with Proposition 65, a voter-approved law that requires establishments to post "clear and reasonable" warnings if the public is at risk of being exposed to chemicals known to cause cancer or birth defects.
According to business owners, the law opened them up to predatory legal claims since it allows the public to sue for up to $2,500 for each day the signage isn't properly displayed. Many of them end up being restaurants that serve alcohol.
At the time Gatto introduced the bill in February, a dozen restaurants in his district were being targeted for legal action for Proposition 65 violations by Miguel Custodio Law in Pasadena.
Under the current structure, plaintiffs are required to file a notice of violation with the state, which then has 60 days to decide whether it wants to sue before any other lawsuit can be filed. If state officials choose not to, thereby allowing a private plaintiff to sue, businesses often agree to pay a settlement to avoid costly litigation, hence the term "shakedown."
Gatto's bill would change the penalty to allow businesses a grace period of 14 days to fix the violations without suffering financial penalties.
"I am proud to have brought together groups that are normally on opposite sides of this issue to craft a common-sense bill that will help California businesses avoid costly litigation, while ensuring that the public has prompt and proper warnings about potentially dangerous chemicals," Gatto said in a statement.
Since Gatto's bill, AB 227, actually amended Proposition 65, it needed a two-thirds majority vote to pass. The bill cleared the Assembly on a 71-0 vote and now heads to the state Senate.
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