Arthur Levy,
Consumer Attorney

There’s an ongoing debate in America about the value of consumers having their day in court. Recently, Congress restricted class action lawsuits. Also, a ballot measure that California voters passed in 2004 appeared to go after bad lawsuits, but it was written by corporate interests to diminish the rights of Californians to take legitimate legal action.

Here, Steve Blackledge speaks with San Francisco consumer attorney Arthur Levy about consumer litigation, a tool that CALPIRG has also used to hold corporate wrongdoers accountable.

As a consumer attorney, how have your cases had a positive impact?

My most positive experience has been in the auto insurance field. When Prop. 103 passed in 1988, for the first time, consumers had the Department of Insurance looking over the shoulders of auto insurance companies to make sure their premiums were fair and reasonable. Mercury Insurance Company tried to get around Prop. 103 by re-classifying their sales people as brokers and then allowing them to charge a broker fee, which could add another $50-$150 to premiums.

These sales reps were holding themselves out as representing the consumers’ best interests in shopping the market and getting the best buy, when in fact they were doing the bidding of Mercury.

So in 2000, we filed a suit against Mercury. We challenged these broker fees on the grounds that they were in violation of the insurance code, because these sales reps were really just Mercury sales people and Mercury was trying to increase the cost of insurance above and beyond what the Department of Insurance legally allowed.

Mercury sells about $1.5 billion annually in auto insurance in California alone. It was a David and Goliath-type situation. And yet we won. The judge started out skeptical about our case. He listened very closely to the evidence and then he ruled in our favor—in favor of California consumers.

It sounds like this is a case where there was no way a consumer could have known about this scheme.

Not only did consumers not know, they were misled. It was extremely difficult for consumers to exercise any sort of personal responsibility with respect to protecting themselves. These sales reps were claiming to be independent but were beholden to Mercury.

This case was litigated to make a change in the company’s business practice. It’s among the few cases that make long-term change in business practices. I’m not saying that it doesn’t happen in other cases, but many cases are settled in dollars for past misconduct.

In this case we changed an unfair business practice going forward, and in so doing, we protected millions of California consumers.

Also, not only was this case good for consumers, it was good for other insurance companies. Our focus was the welfare of the consumer; that was what we were primarily aiming for. But it also served the purpose of improving competition, because Mercury was doing something that unfairly gave it a leg up on its competitors.

Some argue that we should leave these cases to the Attorney General or local district attorneys. Is it important to also give individuals the right to bring these suits?

I think the best answer was given by Herschel Elkins of the Attorney General’s office. During the 2004 election, Mr. Elkins made it clear that his office and the offices of other public prosecutors do not have the resources to bring about every worthy case.

Public prosecutors are already stretched to the limit. They don’t have the time, energy or resources to protect all consumers. Class actions and consumer litigation might not be ideal for protecting consumer rights in every situation, but until we are willing to spend a lot more money on public prosecutors—and I mean a lot—private litigation is the best way to make sure that big companies aren’t trampling on the rights of ordinary consumers.