Banks doing business in California are taking the unusual step of endorsing a statewide initiative on the November ballot that they say could help minimize frivolous "shakedown" lawsuits by private lawyers.

The California Bankers Association, along with Bank of America Corp., Wells Fargo & Co., and the Mitsubishi Tokyo Financial Group Inc. affiliate UnionBanCal Corp., have signed petitions supporting Initiative Statute 1016, which was added to the ballot May 17.

It would amend the state's laws on unfair business competition, considered the most pro-consumer in the country by supporters and opponents alike.

Proponents say the initiative - the California secretary of state has yet to assign a proposition number - would curb misuse of the law by private lawyers. Opponents say it would stymie legitimate lawsuits by consumer and environmental advocacy groups.

"The California Bankers Association usually never sponsors a state initiative, but we think this one is too important not to," said Maurine C. Padden, its director of state government relations.

Under the initiative, a company could be sued for unfair business practices only if someone had been injured and suffered financial or property loss as a result.

If a lawyer filed a lawsuit on behalf of others claiming unfair business practices, the claim would have to meet standard class action requirements.

Under California's current laws, private lawyers and public prosecutors can sue companies on behalf of the general public. The law is intended to stop companies that mislead consumers to gain an advantage. But the initiative's proponents say some private lawyers are filing or threatening to file lawsuits over "technical errors" that have misled no one and caused no damage.

Lawyers may file such claims along with other claims, to drive up costs and increase settlement values, proponents say.

For example, last year a law firm threatened to sue a California bank over a newspaper advertisement for car loans. The bank was accused of misleading the public because the interest rate was in smaller type than the rest of the ad, says William L. Stern, a lawyer with Severson & Werson LLP in San Francisco. He represented the bank in the dispute.

No one claimed to have been harmed by ad. But the bank paid several thousand dollars to the law firm so that it would not file the suit, Mr. Stern said.

He added that lawyers often threaten to file similar lawsuits in other jurisdictions throughout the state, increasing the amount a bank may pay. "One large bank has told me that they would save about $1 million to $2 million a year if this initiative passes," Mr. Stern said.

Leland Chan, the bankers association's general counsel, said the demand letters often do not say that anyone has been harmed by the targeted company.

"If an attorney, through the due diligence process, cannot find a single individual who has been harmed, then that lawsuit is pretty frivolous," Mr. Chan said. "They don't even have to prove that a company's actions are unlawful, just unfair."

Under such a broad standard, most companies opt to pay law firms so that they do not have to face a California jury, he added.

James C. Sturdevant, a San Francisco lawyer and the president of Consumer Attorneys of California, is against the initiative. He says it would interfere with consumer and advocacy groups' efforts to stop egregious practices. Sometimes these groups sue on behalf of unnamed victims who prefer to remain anonymous, such as those involved in identity theft.

"This initiative would prevent any actions by individuals who may not want to expose themselves," and who rely on advocacy groups to fight on their behalf, Mr. Sturdevant said.

Sometimes advocacy groups file unfair business practice suits because to file under other laws they would have to show that someone had been severely injured.

For example, in 1985 the Consumers Union of California sued Alta Dena Certified Dairy and its former affiliate Stueve's Natural in Alameda County, near San Francisco, for falsely advertising that its raw milk products were safe and healthier than pasteurized milk.

The nonprofit sued on behalf of the general public, claiming unfair business practices, "because they didn't want to wait until somebody had died or was seriously injured before they brought an injunction on the dairy," Mr. Sturdevant said.

In 1989, a California Superior Court judge imposed heavy fines on Alta Dena and its affiliate and ruled that Alta Dena had to label its raw milk warning consumers about potential harmful effects. (The company no longer sells raw milk.)

Mr. Stern acknowledged that legitimate lawsuits have been filed under the current competition law. But he said that advocacy groups around the country have found ways to stop egregious practices without state laws as broad as California's.

If the initiative is approved, the California attorney general and local officials would still be able to sue for unfair business practices, even in cases where no one had been harmed, Mr. Chan said.

"This initiative would not result in an unreasonable change to the law," he said.

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