High-tech businesses rejoiced in the defeat of Proposition 211 and promised another fierce fight if the proposal's supporters revive efforts to make it easier to sue companies for securities fraud.
"We expect them to come back again, maybe not in California, maybe somewhere else. They'll have learned from their defeat," said Tom Proulx, chairman of the Alliance to Revitalize California, which led the campaign that defeated Proposition 211 by a 3-1 margin Tuesday."But we'll be ready for them. We'll jump on them and organize as quickly as we did this time," said Proulx, the founder of software company Intuit Corp.
Proposition 211, which prompted the costliest campaign ever over a California ballot measure, was losing 74 percent to 26 percent with 82 percent of the vote counted.
The measure would have eased obscure rules enabling shareholders to sue companies for fraud, letting investors sue on their own rather than as a group, relaxing standards for alleging fraud and extending liability. It also would have made moot a federal "safe harbor" that protected companies predictions of future performance.
Silicon Valley companies, often in highly volatile businesses, say they are frequent targets of such suits when their stock price drops. They contended that Prop. 211 would make California a magnet for baseless class-action suits forbidden in federal court and drive businesses out of state.
But supporters of Prop. 211 - including securities lawyers, labor and retirees' groups - argued the measure would ensure individuals' ability to sue, which they said had been harmed by a federal law passed last year.
Prop. 211 supporters also promised Tuesday night not to give up their struggle, which they see as protecting shareholders' investments from dishonest businesses.
"Our opponents claim California has adequate protection from fraud under current law. So if they try to strip investors' protections in the future, we will fight them tooth and nail," said Sean Crowley, spokesman for the pro-Prop. 211 campaign.
Voters also rejected Proposition 207, a lawyer-sponsored measure to forbid restrictions on the right to negotiate attorneys' fees. With 81 percent of the vote counted, Prop. 207 was losing 66 percent to 34 percent.
Proposition 211 was watched closely by the legal and business communities nationwide. Opponents argued - and supporters denied - that the measure would have applied to any company with a single shareholder in California.
Both sides accused the other of misleading the public and being a front for rich, special interests. The pro-211 side spent about $9 million by the end of October but was outstripped by the opposition, which spent about $32 million.
Business leaders opposed to Prop. 211 said the measure awakened them politically.
"The technology industry has in the past thought that politics and government didn't affect us - it didn't matter," said Proulx. "That's changed, and that's a permanent change."