California has again secured prime real estate on a legal reform advocacy group's list of America's most notorious lawsuit-friendly court systems.
On Dec. 10, the American Tort Reform Association assigned California the No. 5 spot in its 2024-2025 "Judicial Hellholes" ranking. That is down two spots from last year's report, when the Golden State's state court system ranked No. 3.
ATRA said California landed high on the list yet again this year thanks to its continued role as the "laboratory" for trial lawyers seeking to deploy new legal theories that push the limits on lawsuits with the goal of maximizing their ability to extract payouts from businesses.
The report noted, for instance, that California courts continue to deliver the most so-called "nuclear verdicts" - or verdicts worth at least $10 million - in personal injury and wrongful death lawsuits in the country.
ATRA pointed to a data cited in a report published in May by the U.S. Chamber of Commerce Institute for Legal Reform, which indicated California courts were home to 199 such verdicts worth more than $9 billion collectively.
And those awards impose significant financial risks and costs on businesses and residents of California alike, ATRA said.
Citing data from The Perryman Group, the "Hellholes" report estimated the high lawsuit activity in California's courts cost the state $89.7 billion in economic activity, costing 825,000 jobs and inflicting a so-called "tort tax" of $2,297 per person in indirect costs.
“Excessive litigation obstructs economic growth, stifles innovation and drives away businesses,” said Tiger Joyce, president of ATRA, in a statement accompanying the release of the report. “By exposing lawsuit abuse in Judicial Hellholes, we can hold accountable judges, elected officials, and unscrupulous trial lawyers who take advantage of the system for their own personal profit.”
ATRA compiles and publishes the list each year to draw attention to some of the country's courts that they believe are the most welcoming to lawsuits and most hostile to businesses and employers, when applying and interpreting the law and court rules.
California's courts came in behind four other court jurisdictions on the "Hellholes" list.
ATRA gave the top spot to the Philadelphia Court of Common Pleas and the Pennsylvania Supreme Court.
New York City came in at No. 2, followed by South Carolina's asbestos courts; and the courts of the state of Georgia.
Behind California came Cook County, Illinois, which includes the city of Chicago; the city courts of St. Louis at No. 7; the Michigan Supreme Court; King County, Washington, which includes the city of Seattle; and the state courts of Louisiana, rounding out the Top 10.
Trial lawyers' 'laboratory'
In California, ATRA noted Golden State judges continue to prove receptive to new avenues for lawsuits carved out by trial lawyers.
The report pointed, for instance, to a decision this year from the California Supreme Court in a lawsuit against pharmaceutical maker Gilead, which ATRA said "imposed a new duty to innovate on manufacturers."
"It found that even if a product is not defective or unreasonably dangerous, a company can be held liable it it was researching and developing another product that it 'knew' was 'safer' and did not release that product fast enough," the authors of the "Hellholes" report said.
"... This is the latest example of California's courts serving as a breeding ground for novel legal theories, reinforcing its reputation as a laboratory for plaintiff lawyers."
The "Hellholes" report also faulted California courts for allowing a new wave of "junk science" lawsuits, using allegedly faulty research from the Valisure laboratory, against the makers of acne medication.
And the report criticized California's judges and lawmakers for continuing to allow "predatory" litigation under the state's controversial Private Attorneys General Act (PAGA) to fill the state's courtrooms.
Under PAGA, which ATRA said has come to be known as the "Sue Your Boss" law, workers who believe their employer has violated a provision in California's labor laws can invoke the PAGA law and step into place of the state of California to sue on behalf of all of their coworkers to attempt to win an order making their employers pay.
However, ATRA noted the law historically has generated relatively little benefit for the workers who are doing the suing.
Under the PAGA law, three-quarters of any penalties paid by employers had gone to the state. Of the remaining 25%, however, a third of that remainder, or more, went to the lawyers who filed the action.
ATRA noted the number of PAGA lawsuits targeting employers in the state have doubled since 2017.
This has continued in California, despite a 2022 ruling from the U.S. Supreme Court, which declared that the PAGA law doesn't allow employees to simply ignore employer arbitration agreements, which would otherwise preclude them from suing their employer for allegedly shorting their overtime pay or other, often technical claims under California labor law.
Further, the report specifically faulted the California Supreme Court for rejecting an opportunity to reduce the harm under the law, ruling defendants can't defeat PAGA actions on the grounds that they are so sweeping they are "unmanageable."
"Allowing 'unmanageable' PAGA cases to proceed will unfairly burden defendants and lead to inefficiencies and significant pressure to settle cases because of the overwhelming discovery that plaintiffs will seek," ATRA said.
The report praised California lawmakers for taking steps in 2024 to reform PAGA under the threat of a ballot measure pushed by business groups that voters could have used to undo PAGA altogether.
The reforms increase the penalties employers could be forced to pay, but make it more difficult to bring the lawsuit and give employers more opportunities to address problems identified in PAGA claims.
"While the legislature should be applauded for taking steps to address PAGA abuses, there is cautious optimism as to whether these changes will sufficiently address the problem," ATRA wrote.
And the report further criticized California for permissive laws and court rules which give rise to waves of other lawsuits under the state's so-called "Lemon Law" warranty act and the supposed consumer health protection law, known as Proposition 65.
Under Prop 65, individuals and their lawyers are empowered to bring lawsuits against manufacturers, retailers and others if tests detect even minute "non-threatening" amounts of a long list of hundreds of chemicals that California environmental regulators have declared are known to the state of California to cause cancer.
Since it was enacted in 1986, Prop 65 has become one of the favorite vehicles for lawsuits in the Golden State, becoming only more intense as the years have wore on.
According to the report, for instance, 4,118 notices threatening lawsuits under Prop 65 were filed in the first nine months of 2024, "far exceeding the prior year's total for the same point in the year," ATRA said.
"... The money companies spend on compliance and litigation unnecessarily drives up the cost of goods for California consumers. It also harms small businesses that do not have the in-house expertise or means to evaluate the need for mandated warnings or handle litigation."
The report said state and local governments have also jumped into the litigation game to seek big payouts, targeting business and industries with lawsuits often in partnership with politically allied environmental activists and trial lawyers.
The lawsuits are seeking to make businesses pay for a host of alleged environmental ills, including "plastic pollution," so-called "climate change," and contamination caused by the chemicals known as PFAS.
Often, these actions don't actually allege anyone was particularly harmed by the alleged problems, but rather level claims centered on theories involving failure to warn or nuisance.
And ATRA noted California's courts could become more attractive to plaintiffs bringing lawsuits for asbestos exposure.
Already, asbestos litigation filings increased 17% in 2023 vs 2022.
And ATRA noted the California Supreme Court opted not to review a state appellate court's decision holding a company "strictly liable for 'take-home'" asbestos exposure. In that lawsuit, a man was awarded $2.69 million after he claimed he contracted lung cancer when he was exposed to asbestos when he visited his brother, who had worked in an environment in which asbestos was present.
ATRA warned: "This expansive decision extends a business's duty of care to prevent exposure to individuals who are not even a part of an employee's household, creating potentially limitless liability."