California 17200: Its Nature, Function, and Limits – Remarks by Shaun Martin

California 17200: Its Nature, Function, and Limits

The change in 2004 with Proposition 64 was a microcosm of what was going on in the nation. Prop 64 codified that you cannot sue unless you lost money and property. Absent this, there was no standing. How we approach standing has changed in the last twenty years and Prop 64 illustrates this.

In the 1960’s and 1970’s, the Supreme Court was expanding standing, letting more people sue, whereas the current Supreme Court is cutting back on standing. I think Prop 64 is a part of that. A lot of Prop 64 falls on whether or not it is the right way to approach a problem to deprive people of standing and say: “Look, there might be a legal problem here, but you cannot sue, and no one can sue.” Prop 64 says that you cannot sue if you have not individually lost money or property or at least cannot find a class representative. That makes sense from our traditional tort understanding, but there are lots of doctrines where we do not have that same principle at work. This is not the universal rule. We have entire bodies of remedies law, like unjust enrichment and disgorgement, where we give people standing to sue even if they have not been injured. If you ever want to sue for an Establishment Clause violation, just try to find someone who lost money or property and has standing on that basis. If you imposed the same standing requirement in this area as Prop 64 does, it would be very hard, and the government might be able to establish the Episcopal Church of America and it would be very hard to find someone with standing. We could impeach the official who created such a state-sponsored church, but you would have no judicial relief. There are lots of areas where we do not have these or similar standing requirements.

The real debate is: Is the right way to attack a problem, if there is a problem, to take away standing? There are examples of social problems that been largely remediated, albeit not entirely, because we do not have a strict standing requirement, such as in residential racial discrimination. What makes a landlord not discriminate against a minority applicant? One may say, “Oh, the fact that no one in America is racist.” Perhaps, though I doubt it. The other reason might be the laws against residential discrimination, which is undoubtedly the case, but those laws are very difficult to enforce. If you are a minority applicant and you get turned down, very rarely will you know it is because of your race. Usually, the landlord can very easily come up with some other reason, which makes it very hard to sue. What has been a huge stake in the heart of the residential racial discrimination? Private testers. Law firms that go out and get two identically-situated people to apply for an apartment—one a minority applicant and one a white applicant—and then the minority applicant is told, “Sorry, we are all filled up,” and the white applicant is told, “How soon can you sign?” Now, the applicants were not real applicants. They did not actually want to rent that property. They were testers. They did not lose money and property. If those people could not sue, this way of enforcing the law would be pitched out the window. But, the Supreme Court said, “You’ve got standing,” and that is a legitimate way to attack the problem. This has a major beneficial impact.

The same is true for Prop 64, at least in certain cases. Imagine there is a particular ARCO that sells tons of cigarettes to 14- and 15-year-olds. Well, who’s got standing to sue for that? The 14- and 15-year-olds got exactly what they wanted. As a result of Prop 64, you would have a strong argument that no one could sue for that. I think that is disadvantageous. I think it is advantageous to have a 14-year-old tester go up there and buy cigarettes and then sue for disgorgement for all the cigarettes ARCO sold to 14-year-olds. That would be a socially beneficial practice, and it is potentially stopped by Prop 64.

Moreover, not only does Prop 64 prevent some beneficial ways of enforcing laws, but it also changes the method of enforcement in a way that might be socially deleterious. Prop 64 does not apply to governments. We do not require that the government have standing. Governments can sue even if they have not lost money or property. Prop 64 basically shifts enforcement from private individuals to the government. When you restrict standing to the government, your belief has to be the government is in a better position to do this than private enterprise. But there are some downsides to the government enforcing these laws rather than private individuals. For one, you may get discriminatory enforcement. You also get occasional over-enforcement, especially since in these cases the government can still criminally prosecute individuals for violating these laws, and arguably that over-deters. What 17200 did in the old days was to essentially turn over enforcement of a wide variety of statutes to private litigators, to lawyers. The good thing about lawyers is they are not discriminatory. If you have done something wrong and they can get money, they will get it from you. Private lawyers may occasionally have too much of an incentive to enforce, so we may want to reign them in a little bit, but depriving them entirely of standing seems to me not necessarily the right way to do it. Shifting enforcement to the government is not really a cure-all for these things.

Moreover, it may result in a race to the bottom. Imagine that you run a liquor store somewhere and you can sell beer and cigarettes sell to 14-year-olds or not. Now if there is vigorous enforcement by private anti-beer and cigarette lawyers, which was allowed pre-Prop 64, you are likely to comply with the law. That will put you on the same footing as the other store owners who comply with the law voluntarily, who also don’t sell beer and cigarettes to 14-year-olds. I think that’s a good idea. But after Prop 64 deprives private individuals of standing, you may have a race to the bottom; the sleazy liquor store that illegally sells cigarettes and liquor to minors may make more money than the other stores and dominate the marketplace. The advantage of having broad citizen enforcement of laws is that it puts everyone on the same footing, as there is a greater incentive to comply with the law. So I think that there is some advantage both systematically as well as individual cases to allow individuals to have standing, even if they have not lost money or property. This may occasionally create over-enforcement, but the best way to solve this problem is not to enact a wholesale deprivation of standing, but rather to enact targeted procedural remedies. For example, I think Jeremy is right. It shouldn’t be that if someone does one tiny thing, they get faced with ten billion dollars of liability. One thing that we could have done in Prop 64 is to have limited restitution, or could have gone to a loser pays system, or could have enacted a variety of procedural mechanisms that would have actually not only made 17200 cases more just, but that would have made non-17200 cases more just as well. But we did not do that. Instead, we pulled away standing. I think that when you are trying to solve a problem, the better way to solve a problem, rather than make it procedurally more difficult, is to directly target the problem. If you do not like various substantive laws because you think they’re driving businesses out of California, then repeal those laws. I think in some ways the worst possible of all worlds is having governmental enforcement on a sporadic basis and leaving to the marketplace the consequences of that sporadic law enforcement. So, I would have liked to have seen Proposition 64 do something other than tinker with standing. I think that is the worst way to deal with those problems and it overlooks the real problems. So, I think you are right that Prop 64 reflects a microcosm of a larger debate, but I think that debate is whether you solve things through the procedure, in particular standing, or solve them on the merits of the substance.

I have no doubt that if more was at stake we are more willing to relax the standing requirements. Think of something like a guy who has built a shed unbeknownst to him on the wrong side of the property line. In that case we created common law remedies that relax standing. So if you accidentally improve someone else’s property, we might let you go back and trespass on their property and get back the materials or we may require them to disgorge the benefits. We do that in high-impact cases, but I think we also do that in low-impact cases as well. And I think that we do it in cases where we think that to enforce a standing requirement leaves the law without a very good remedy. If 7-11 started illegally selling candy cigarettes and someone wants to sue and say, “You know what, give back all the money from your candy cigarettes,” I just do not think that that would relax the standing requirement too much.