Argument in Favor of Proposition 201

Proposition 201 stops unscrupulous lawyers from filing frivolous lawsuits against the companies generating the most new jobs for California. Along with Proposition 200 and Proposition 202, it'll stop runaway lawsuits from further damaging California's economy.

Proposition 201 only affects a very specific kind of lawsuit: class-action lawsuits filed by shareholders against their own companies. It does not affect lawsuits individuals bring against companies that have cheated or discriminated against them. It does not affect lawsuits over dangerous products.

Here's the ``shareholder class action'' scam. When a company's stock drops, a lawsuit is filed claiming that management was ``fraudulently'' optimistic. Demands of $100 million or more are common. Of course, some such suits are justified. But most are brought by lawyers seeking a fast buck. These lawyers use a handful of ``professional plaintiffs'' claiming to represent all the shareholders. One of these ``plaintiffs'' showed up in 38 different lawsuits.

Unfortunately, with so much at risk, even innocent businessmen can't afford to put the survival of their companies in the hands of unpredictable juries. Often, they are forced to settle, in which case lawyers walk away with millions while shareholders get a few cents for each share they own. Frequently, the company's stock is forced down even more, hurting current shareholders.

The leading computer, high technology and biotech companies that hold the greatest promise for generating new jobs get hit the hardest. Why? Because as they develop new products, their stock prices fluctuate. The downturns set them up as easy targets for these shakedowns.

In a single year, one lawyer took almost $250 million out of the California economy. It may be hard to believe, but 63% of the major high tech companies in Silicon Valley have been subjected to these lawsuits. Lawyers would have you believe 63% of our best companies are fraudulently run. That's nonsense.

Why should you care? Because small investors and pension plans lose dividends. Because research and development budgets that generate new jobs and keep California competitive are cut back.

Proposition 201 stops these phony lawsuits. Here's how:

• Proposition 201 requires that losers or their lawyers in ``shareholder class action'' lawsuits pay the winner's legal fees. Lawyers won't file phony cases if they know they've got to pay the companies' legal expenses if they lose.
• If the case is legitimate, and some clearly are, investors will not only recover their money but get their legal expenses paid, too.
• Lawyers filing phony cases with ``professional plaintiffs'' will have to post bonds equal to the other side's legal expenses.
• If a legitimate ``shareholder class action'' is filed, those filing the suit can easily be excused from the bond if they own 5% or more of the company's stock.
• If a judge rules that it would be unjust to make a loser pay the winner's legal expenses, he can excuse them from payment.

We can save jobs and prevent small investors and pension funds from losing money. UNDER PROPOSITION 201, THE ONLY LOSERS ARE THE LAWYERS.

CHARLES SCHWAB
CEO, Charles Schwab & Co.

KIRK WEST
President, California Chamber of Commerce

LEWIS K. UHLER
President, National Tax Limitation Committee