Job Killer No. 20 Stalls on Assembly Floor

JopKillerA day after being added to the California Chamber of Commerce job killer list, a bill dealing with release clauses fell short of votes needed to pass the Assembly.

AB 2748 (Gatto; D-Glendale) is deemed a job killer because it would eliminate incentives to settle lawsuits and would instead expose businesses to multiple rounds of litigation by creating statutory prohibitions on “release” clauses in settlements pertaining to “environmental disasters.”

AB 2748 is the 20th bill on the job killer list. It received just 30 votes (versus 32 against) on May 5. The author can bring the bill up for reconsideration until June 3.

California’s public policy has long been to encourage settlement over litigation in the interest of efficiency and economy for the courts and for the parties involved. AB 2748, however, would instead require that otherwise resolvable claims be fully litigated at great expense to the parties, the courts and the public.

According to CalChamber’s letter of opposition, AB 2748 impedes the ability of litigants to reach a settlement related to environmental disasters and, in turn, encourages disputes to be fully litigated by statutorily prohibiting parties’ ability to waive Civil Code Section 1542 in settlement agreements. Civil Code Section 1542 is a general release clause and the ability to waive it is one of the primary incentives for defendants to settle disputes and avoid prolonged expensive litigation.

CalChamber believes that parties should be permitted to enter into a mutually agreeable settlement to avoid prolonged litigation and thus promote the long-held California policy to encourage settlement over litigation; however, AB 2748 attempts to dictate contractual provisions and, in doing so, will guarantee an influx of litigation.

Indeed, when a business settles a claim with a party, the business should have certainty that the same party will not sue the business a day after a settlement is reached regarding a claim that could have been raised at the time of settlement. Yet, AB 2748 would essentially assure such an outcome, thereby eliminating the incentive to settle.

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Staff Contact: Anthony Samson