California Must Break Its Regulatory-Litigation Cycle

California’s deteriorating business climate is the result of several distinct problems, but excessive regulation and an out-of-control litigation system are two of its most significant causes. Sacramento passes onerous new rules governing nearly every aspect of doing business. Each new mandate creates additional grounds for litigation, while high-profile lawsuits generate political pressure for still more regulation. The result is a self-reinforcing cycle that makes California an increasingly difficult—and sometimes impossible—place for businesses to operate.

Allowing private lawyers to enforce parts of California’s regulatory code compounds the problem. Proposition 65, for example, has produced a thriving industry of private enforcement actions over warning requirements. Meanwhile, the Private Attorneys General Act turned alleged Labor Code violations into representative lawsuits until the system became so costly and contentious that even Governor Gavin Newsom agreed reforms were needed to reduce and streamline litigation.

The consequences of such policy choices are visible across the state. A Hoover Institution study documented 352 headquarters relocations from California between 2018 and 2021, including Tesla, Oracle and Hewlett Packard Enterprise. In 2024, Chevron announced that it would move its headquarters from San Ramon to Houston. Taken together, these relocations amount to a vote of no confidence in California’s ability to provide a predictable environment for long-term investment.

None of these facts means that reasonable regulations and legitimate lawsuits don’t both serve important purposes. But the problem is that California has created a system in which a business attempting to navigate thousands of complicated requirements can face government enforcement, private litigation and demands for additional regulation arising from the same alleged violation. Even prevailing can be prohibitively expensive.

The danger becomes especially apparent when this cycle threatens businesses that provide services Californians cannot do without. Phillips 66 has idled its Los Angeles refinery, while Valero has idled refining operations in Benicia. It is bad enough when a corporate headquarters relocates, but a refinery, power plant or water-treatment facility cannot move to Texas while continuing to efficiently serve California customers.

The controversy surrounding the Chiquita Canyon Landfill in Los Angeles County is another concerning example.

Before it stopped accepting waste on January 1, 2025, Chiquita Canyon handled more than 6,000 tons of material each day—nearly a quarter of the waste generated in Los Angeles County. The landfill did not simply decide to abandon that business. The day before it ceased operation, the company that operates the landfill announced its abrupt closure “due to the current regulatory environment.”

The primary constraints, as they put it, had to do with the county reneging on a 2022 agreement to keep the landfill open and the imposition of administrative hurdles that made it impossible to continue operations. In practical terms, the rules of the game changed—or remained unresolved—until continued operation was no longer economically viable.

Admittedly, there has been an ongoing rare Elevated Temperature Landfill (ETLF) event impacting the communities surrounding Chiquita Canyon with noxious odors that may have given regulators pause in moving forward with the necessary approvals. But the property is under extensive state and federal environmental oversight, and the EPA has not determined that regulatory noncompliance caused the event. It is also happening in a part of the landfill that was not active when operations were still ongoing, and its operator has implemented extensive measures to mitigate the situation both within the landfill and for the surrounding communities.

Despite these realities, the possibility of a large legal recovery has since attracted thousands of claims and resulted in increasingly aggressive efforts to recruit plaintiffs. A recent Los Angeles Times investigation reported allegations of paid client solicitation known as “capping”—a practice prohibited by California law. Residents described being offered cash, gift cards, food and even a cellphone in connection with signing documents. Some said they thought they were signing petitions, only to discover that lawsuits had been filed in their names.

California’s already generous litigation system apparently was not enough. The reported tactics suggest that some attorneys may have crossed legal and ethical lines to manufacture still more claims. If substantiated, that development would add another layer of legal aggressiveness confronting businesses already attempting to satisfy overlapping government demands.

An equitable resolution at Chiquita Canyon would show that California can protect public health without sacrificing essential services, while signaling that the state is serious about restoring the stable and predictable environment businesses need to operate and invest. California’s leaders should take the initiative by working with President Trump’s Environmental Protection Agency (EPA) to bring order to the fragmented response and establish a single, workable path forward.

The agency demonstrated during the Los Angeles wildfire cleanup that clear federal leadership can cut through bureaucratic delays and produce results on an urgent timetable. EPA is already overseeing key mitigation work at Chiquita Canyon. California should build on that involvement by supporting a unified multi-agency response with transparent benchmarks, a clear chain of command and a realistic timetable. Such an approach would protect neighboring communities while providing the certainty needed to resolve the crisis.

California has an opportunity to demonstrate that regulation can protect the public without becoming a moving target, and that its courts can provide justice without rewarding litigation abuse. A fair resolution at Chiquita Canyon would send a message to every employer—not only essential-service providers—that California is finally prepared to break the regulatory-litigation cycle and begin restoring the California Dream.