Opinion: For California Businesses to Thrive, Lawmakers Must End ‘Tort Tax’

The new downtown San Diego Superior Court and satellite courts will have new download charges starting Jan. 1, 2021.
The Superior Court building in downtown San Diego. Photo by Chris Stone

Right now, California is a bad place for business. And it’s a bad place to be a consumer, too.

We’ve all seen the headlines about inflation, soaring gas prices, supply chain bottlenecks, and the persistent labor shortage. But would you believe it if I told you that our state’s legal system is the real reason California seems to be worse off than any other state?

Believe it or not, California was just ranked the worst Judicial Hellhole in the entire country. And despite how it may seem from the outside, the justice system is deeply intertwined with the overall business climate and spending power of average consumers.

According to the Perryman Group, our state loses over $75 billion in Gross Domestic Product annually, in addition to nearly 750,000 jobs. Broken down, most Californians pay a “tort tax” of up to $3,600 without even realizing it. And that number is even worse in major cities.

While these numbers may seem shocking to most, as a longtime California small business owner I can only shake my head. Not only are these numbers unsurprising, but I can only imagine they are getting worse by the day. For decades, I have felt the squeeze of a legal system that forces me to allocate disproportionate funds for legal expenses, while severely limiting opportunities for expansion of my business and workforce.

For example, one of the worst headaches for small businesses is California’s Americans with Disabilities Act. In 2020 and 2021, we led all states in ADA filings, and we have established special notoriety when it comes to website accessibility lawsuits. Over issues as minor as websites not including distances from bathroom sinks to the floor or how much space is underneath a desk, thousands of lawsuits pile up each year — most against small businesses.

Recently, one plaintiff sued almost 50 small wineries in Napa Valley. Before that, 7 plaintiffs —all represented by the same law firm — filed over 450 ADA lawsuits. Stories like these continue to pile up, and the targets in nearly all these cases are small businesses. But why?

Thanks to our state’s Unruh Civil Rights Act, ADA fines total $4,000 per violation, and plaintiff’s lawyers seek damages multiplied by however long a supposed violation has been present, regardless of if their clients were hurt by it. Even worse, most ADA lawsuits are filed without even notifying the business in question of any concerns and allowing them the opportunity to remedy the issue.

From mirrors an inch too high or sidewalks with ever-so-slightly imperfect angles, the predations of California ADA lawsuits are destroying small businesses left and right. Our system incentivizes going after small businesses since most cannot afford to take these cases to trial. Instead, we get backed into a corner and forced to settle, regardless of the merits of the case.

And lawyers know that. Whole livelihoods are made filing ADA lawsuits in California now.

Of course, over the years we have learned to protect ourselves, but that doesn’t make things any better. In expecting predatory lawsuits, we are forced to redirect funds to our legal coffers at the expense of new hires or ambitions to expand our services into new communities. Further, the laws of supply and demand dictate that most businesses must also raise prices on consumers to help offset costs.

California’s ADA lawsuits are just one example of how legislative overreach and legal exploitation are making things so much worse here in the Golden State. While most Americans and American businesses are struggling through the post-COVID-19, inflationary economic environment right now, our legal system is turning universal headwinds into a Category 5 hurricane for Californians.

Simply put, California has the 5th largest economy in the entire world, but we can’t seem to get out of our own way. If we have any hope of reigniting our state’s economic engine, restoring jobs, and attracting businesses once again, lawmakers must prioritize restoring balance to our legal system.

George Coles is the owner of Coles Fine Flooring in San Diego.

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