It seems the buzzword captivating Americans these days is “affordability.” Yet everywhere you go in California, prices still seem to be increasing. We’re all seeking relief from the high costs of living, with no end in sight.
This trend is already being compounded by a hidden cost driver known as the “tort tax,” which this year totals $2,567 for each Californian. This number represents the hidden tax and the extra burden every Californian pays per year to compensate for California’s overly litigious climate.
Along with high costs, lawsuit abuse also leads to 850,915 jobs lost throughout the state, which notably already has the highest tax and unemployment rates in the nation.
Every day, thousands of small business owners face lawsuits, all based on technical violations, where no one was really harmed. We might not think much of it, but we should.
Consider the case of one restaurant owner: someone who survived the economic hardships of the pandemic and California’s stagnant economy, only to face an unwarranted Americans with Disabilities Act (ADA) lawsuit because the dining room table in her restaurant was 1/16 of an inch too low.
It cost this restaurant owner $11,000 to settle this case, showing just how real and costly lawsuit abuse can be for small business owners.
The question is, who really pays for this? The answer is simple—we all do.
The newly released Citizens Against Lawsuit Abuse Report titled “The Economic Benefits of Tort Reform,” compiled by the Perryman Group, an economic consulting firm, details the results of how lawsuit abuse impacts every person in California through higher costs, lost jobs and less economic activity.
The report highlights how an overly aggressive litigious environment is draining California’s economy, showcased by a significant slowdown in growth and more and more lost jobs. An inadequately balanced civil justice system can be counterproductive, driving up the costs and risks of doing business, disincentivizing innovations and increasing everyday costs.
The total current impact of excessive tort costs on California’s economy includes losses of $101.2 billion in gross product each year, according to the report. Californians lose more than $64.5 billion a year in direct costs related to the production of goods and services.
Business activity generates tax revenue, and the business activity losses due to excessive tort costs reduce receipts to the federal, state and local governments. California’s state government revenue is losing an excess of $5.3 billion annually and local government revenue is down $4.4 billion.
Enacting tort reforms will enhance product innovation, increase productivity and lower overall costs for California citizens. These reforms will also increase the efficiency of the economy, strengthen the competitiveness of the state’s businesses and improve the climate for economic development, helping states win the competition for desirable corporate locations and expansions.
Unfortunately for all Californians, Gov. Gavin Newsom and the legislature continue to turn a blind eye to reforming the civil justice system, even if it means helping small business owners avoid being targets of shakedown ADA lawsuits.
Attempts to reform the abuse of the Americans with Disabilities Act have gone on for more than 25 years. California small business owners had a chance last year to enact productive reform through Senate Bill SB 84, a bipartisan bill authored by Senator Roger Niello, but the Assembly Judiciary Committee refused to assign the bill a hearing date.
In doing so, lawmakers effectively blocked meaningful reform, an act that is anti-democratic and directly undermines economic growth. Even liberal state Senators like Sen. Ben Allen said, “‘let’s fix this problem,” during the Senate hearing covering SB 84.
The legislation would give businesses 120 days to fix the problem or face consequences. SB 84 has a chance to move forward in 2026, giving lawmakers an opportunity to finally deliver balanced, meaningful reform.
Reforming California’s overly litigious system would help give Californians relief from unnecessary costs. Imagine what you could do with a little extra money in your pocket each year. Wouldn’t you like to have an extra $2,567 to spend this year on the things YOU want?
Victor Gomez, Executive Director of Citizens Against Lawsuit Abuse
Former mayor of Hollister
