Opinion: Plaintiff lawyers are abusing a California privacy law to shake down small businesses

Sacramento Business Journal posted here

By Jaime Huff

Imagine having a private conversation with a friend over the phone.

Now imagine that same so-called friend secretly recorded the call and shared it with others. Most people would agree that should be illegal.

And in California, it is. More than 50 years ago, lawmakers passed the California Invasion of Privacy Act to stop wiretapping and protect people from having private telephone conversations recorded without their consent.

But now, a small group of plaintiffs’ lawyers are trying to stretch that anti-wiretapping law far beyond its original intent in order to unethically score big paydays. Instead of targeting actual secret recordings, they are using CIPA to sue businesses, nonprofits and public agencies over routine website tools like cookies.

In these cases, no private phone calls were recorded. No hidden wiretaps occurred. But demand letters were sent and shakedown lawsuits were filed anyway.

That is not consumer protection. It is a profit model built on lawsuits, with a handful of plaintiffs’ attorneys making an enormous amount of money largely on the backs of local, self made organizations.

In just the past two years, more than 3,000 businesses across California have been sued under these theories and tens of thousands more have received demand letters threatening legal action. Many businesses agree to settlements in the tens of thousands of dollars because it is cheaper to pay than fight, even though they have done nothing wrong.

The abuse is concentrated and obvious. Seventy-two percent of these lawsuits come from just five law firms. The same plaintiffs show up over and over again, filing dozens — sometimes hundreds — of nearly identical claims. The system is no longer focused on remedying harm. It is being used to create leverage and extract payouts.

The targets are not just big corporations with armies of lawyers. They are small businesses, community nonprofits, schools, healthcare providers and local governments. When they get dragged into expensive legal fights over technical website configurations, the costs do not disappear into thin air. They are passed along to consumers and employees.

For a small business, that can mean higher prices, delayed hiring, fewer employee raises or postponed expansion. For a nonprofit, it can mean fewer services for the people who need help most. For a school district or local government, it can mean public dollars going to settlements and attorneys’ fees instead of classrooms, public safety or community programs.

This is happening at the worst possible time. Californians are already dealing with a relentless cost-of-living crisis. Employers are struggling with inflation, higher operating costs and a difficult business climate. Local government budgets are stretched thin, trying to provide critical services with fewer resources.

The last thing this state needs is another wave of litigation that drains money from productive uses and sends it into the hands of a small circle of repeat filers.

That is why lawmakers should step in and restore common sense. A 1967 criminal law written to stop secret recordings shouldn’t give plaintiffs’ attorneys carte blanche to shake down small businesses over common website technologies. Justice is supposed to protect the public.

Injustice should not serve as a business model.

Jaime Huff is President and CEO of the Civil Justice Association of California