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Commentary: Uber is trying to snow voters with a supposedly pro-consumer ballot initiative. Don’t buy it

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Commentary: Uber is trying to snow voters with a supposedly pro-consumer ballot initiative. Don’t buy it

Uber loves to define itself as a most public-spirited company.

“We’re reimagining how the world moves … to help make transportation more affordable, sustainable, and accessible for all,” as the ride-sharing giant declares on its website.

In 2020, when it spent nearly $100 million to pass Proposition 22, which overturned a state law designating its drivers as employees, gaining them benefits such as a minimum wage and workers compensation coverage, it described the goal of the ballot measure as granting the drivers “the flexibility to decide when, where and how they work.” Never mind that the initiative protected Uber’s business model, which involves sticking its “independent contractor” drivers with the cost of fuel, insurance and wear and tear on their vehicles. The initiative passed.

This would affect every accident in the state. Uber is trying to stop all cases, not just bad cases.

— Jamie Court, Consumer Watchdog

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San Francisco-based Uber is now back in the ballot initiative game, this time with a proposal for a state constitutional amendment capping the fees of plaintiffs’ lawyers representing victims of auto accidents. The proposal, which is in its signature-gathering phase, is aimed at the November ballot.

The initiative text is replete with vituperative language attacking personal injury lawyers as a class. It labels them “self-dealing attorneys” and “billboard attorneys,” and accuses them of deliberately inflating their clients’ medical claims so they can grab a larger fee and engaging in unsavory and perhaps illegal sub-rosa arrangements with complaisant medical providers.

Its putative target is contingency fees, which are typically percentages of the payouts awarded by juries or through negotiations. These are common in personal injury cases, because the clients often don’t have the wherewithal to pay a lawyer’s retainer fee in advance.

The initiative would cap contingency fees at 25% of the award. “Automobile accident victims deserve to keep more of their own recovery,” the initiative says.

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“Capping attorney fees, banning kickbacks, stopping inflated medical billing and putting in place whistleblower protections will protect auto-accident victims and have the additional benefit of reducing costs for consumers,” Nathan Click, a spokesman for the initiative campaign, told me by email. He labeled the initiative a “common-sense” reform.

(Just as an aside, whenever I see a legislative proposal described as a “common-sense reform,” I reach for the nearest vomit bag; the phrase almost always is applied to a measure larded with concealed drawbacks, as is this one.)

Superficially, this looks like it could be a win for accident victims. But it’s not really about them; it’s about Uber, which has been the target of lawsuits stemming from injuries its passengers suffer while traveling with its drivers.

Uber doesn’t say how many lawsuits it has faced from passengers, or the size of its financial exposure. But in its most recent annual report, the company acknowledged it “may be subject to claims of significant liability based on traffic accidents, deaths, injuries, or other incidents that are caused by Drivers, consumers, or third parties while using our platform.”

Uber’s bete noire on this issue is Downtown LA Law Group of Los Angeles, which Uber sued in federal court, accusing the firm of “racketeering” and “fraud.” The firm moved to dismiss the suit, but briefing on that won’t be done until spring at the earliest.

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I asked Click why Uber thought its accusations against Downtown LA Law Group are so egregious that they warrant rewriting the state constitution. He replied that the Downtown LA case is just “the tip of the spear.”

The law group has been the subject of an investigation by my colleague Rebecca Ellis, who has reported that that nine of the firm’s clients who sued over sex abuse in L.A. County facilities said recruiters paid them to file a lawsuit, including four who said they were told to fabricate claims. The L.A. County District Attorney’s Office is conducting a probe into the allegations. (The law firm denied the accusations.)

But nothing in Ellis’ reporting or what’s known about the county investigation validates Uber’s implicit argument that its behavior is generally characteristic of the plaintiffs’ bar.

The Uber initiative is the latest sally in a long war pitting plaintiffs and their lawyers against businesses, with legal fees as the battleground. In this war lawyers invariably are depicted as soulless and grasping ambulance-chasers unconcerned about their clients’ welfare, and businesses as, well, soulless, grasping and unconcerned about their customers. In the past the battle has been waged between lawyers and doctors, but with this initiative campaign nothing has changed other than the identity of the defendants.

Click pointed out that nothing in the proposed measure would prevent accident victims from suing Uber. But that’s hardly the point. Capping contingency fees makes many lawsuits uneconomical for attorneys, who must shoulder litigation costs such as expert testimony until a final judgment is achieved, and are left holding the bag if there is no recovery or the judgment doesn’t cover their costs. So this initiative, if passed, almost inevitably would reduce the tide of lawsuits filed against Uber.

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Indeed, what gives this effort the stench of cynicism and hypocrisy is that we have plenty of experience about what happens when contingency fees are capped: Plaintiffs who have suffered grievous injury (or if they’ve died, their survivors) have trouble even getting through the courtroom door.

The lesson comes from California’s Medical Injury Compensation Reform Act of 1975. MICRA capped the noneconomic recoveries — think pain-and-suffering or reduced quality of life — for plaintiffs in medical malpractice cases at $250,000. It also capped plaintiffs’ attorney’s fees on a sliding scale, to as little as 21% on recoveries of six figures or more.

The idea was that the reduced attorney fees would make up for the reduced judgments, but according to a study by the Rand Corp., that didn’t happen. Plaintiffs’ net recoveries were still about 15% lower than they would have been without MICRA, Rand deduced. The result was “a sea change in the economics of the malpractice plaintiffs’ bar,” Rand found, with cases where the judgment cap would cut too deeply into attorney fees getting short shrift.

Those cases tended to be those with “the severest nonfatal injuries (brain damage, paralysis, or a variety of catastrophic losses)”; the median reduction in those patients’ recoveries was more than $1 million. After years of efforts the legislature finally amended MICRA in 2022, when the cap was raised to at least $350,000, with raises placing it at up to $1 million by 2032, followed by annual adjustments to accommodate inflation.

Uber’s proposal would have a larger blast zone than MICRA. Automobile-related injuries are more common than medical malpractice cases, but the range of injuries would seem comparable, up to and including death.

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“This would affect every accident in the state,” says Jamie Court, the president and chairman of Consumer Watchdog, the California-based consumer advocacy organization. “Uber is trying to stop all cases, not just bad cases.”

It’s hard to reconcile Uber’s solicitude for accident victims with its most recent legislative victory in Sacramento. That was the passage of SB 371, a measure that cut Uber’s legally required insurance coverage when its drivers and passengers are injured in accidents caused by uninsured or underinsured motorists from $1 million per event to a mere $60,000 per person and $300,000 per incident.

In effect, as an Assembly analysis pointed out, the law shifts costs previously covered by premiums paid by Uber and its fellow ride-sharing firms to their drivers, who pay through their own insurance premiums — and even to passengers, if Uber’s insurance doesn’t cover their injuries.

Uber argued, with supreme nerve, that the $1-million policy requirement was what placed it among the “prime targets” of unscrupulous personal injury lawyers, because the prospect of a big judgment was what got the lawyers’ saliva flowing.

SB 371 sailed through both houses of the state legislature without a single vote in opposition and was signed into law by Gov. Gavin Newsom in October. I asked Uber why, given the greased passage of a law it desperately desired, it didn’t take the same route to cutting contingency fees rather than an initiative campaign that will swallow up tens of millions of dollars. Click responded that the law specifically covered only the uninsured and underinsured motorist coverage that only the ride-sharing companies have to carry. The initiative, he said, “is much broader.”

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If the Uber initiative reaches the ballot, spending by its supporters and opponents might well set records. Uber seeded the campaign with a $12-million contribution in October. But that’s probably just an amuse-bouche, launching a full-size meal.

The initiatives’ target, the personal injury bar, has responded in kind. They’ve proposed two counter-initiatives — one to increase the liability of ride-sharing companies for injuries to their passengers, and another giving Californians the constitutional right to contract with any attorney on any agreed-upon terms. Those initiatives are both in the signature-gathering phase.

Consumer Attorneys of California, the bar’s lobbying organization, already assembled a war chest approaching $50 million in contributions from lawyers and law firms.

Fasten your seat belts. Both sides are just getting started.

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Startup Varda Space Industries snags former Mattel plant in El Segundo

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Startup Varda Space Industries snags former Mattel plant in El Segundo

In an expansion of its business of processing pharmaceuticals in Earth’s orbit, Varda Space Industries is renting a large El Segundo plant where toy manufacturer Mattel used to design Hot Wheels and Barbie dolls.

The plant in El Segundo’s aerospace corridor will be an extension of Varda Space Industries’ headquarters in a much smaller building on nearby Aviation Boulevard.

Varda will occupy a 205,443-square-foot industrial and office campus at 2031 E. Mariposa Ave., which will give it additional capacity to manufacture spacecraft at scale, the company said.

Originally built in the 1940s as an aircraft facility, the complex has a history as part of aerospace and defense industries that have long shaped the South Bay and is near a host of major defense and space contractors. It is also close to Los Angeles Air Force Base, headquarters to the Space Systems Command.

Workers test AstroForge’s Odin asteroid probe, which was lost in space after launch this year.

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(Varda Space Industries)

Varda is one of a new generation of aerospace startups that have flourished in Southern California and the South Bay over the last several years, particularly in El Segundo, often with ties to SpaceX.

Elon Musk’s company, founded in 2002 in El Segundo, has revolutionized the industry with reusable rockets that have radically lowered the cost of lifting payloads into space. Though it has moved its headquarters to Texas, SpaceX retains large-scale operations in Hawthorne.

Varda co-founder and Chief Executive Will Bruey is a former SpaceX avionics engineer, and the company’s spacecraft are launched on SpaceX’s workhorse Falcon 9 rockets from Vandenberg Space Force Base in Santa Barbara County.

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Varda makes automated labs that look like cylindrical desktop speakers, which it sends into orbit in capsules and satellite platforms it also builds. There, in microgravity, the miniature labs grow molecular crystals that are purer than those produced in Earth’s gravity for use in pharmaceuticals.

It has contracts with drug companies and also the military, which tests technology at hypersonic speeds as the capsules return to Earth.

Its fifth capsule was launched in November and returned to Earth in late January; its next mission is set in the coming weeks. Varda has more than 10 missions scheduled on Falcon 9s through 2028.

For the last several decades, the Mariposa Avenue property served as the research and development center for Mattel Toys. El Segundo has also long been a center for the toy industry as companies like to set up shop in the shadow of Mattel.

The Mattel facility “has always been an exceptional property with a legacy tied to aerospace innovation, and leasing to Varda Space Industries feels like a natural continuation of that story,” said Michael Woods, a partner at GPI Cos., which owns the property.

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“We are proud to support a company that is genuinely pushing the boundaries of what’s possible, and are excited to watch Varda grow and thrive here in El Segundo,” Woods said.

As one of the country’s most active hubs of aerospace and defense innovation, El Segundo has seen its industrial property vacancy fall to 3.4% on demand from space companies, government contractors and technology startups, real estate brokerage CBRE said.

Successful startups often have to leave the neighborhood when they want to expand, real estate broker Bob Haley of CBRE said. The 9-acre Mattel facility was big enough to keep Varda in the city.

Last year, Varda subleased about 55,000 square feet of lab space from alternative protein company Beyond Meat at 888 Douglas St. in El Segundo, which it started moving into in June.

Varda will get the keys to its new building in December and spend four to eight months building production and assembly facilities as it ramps up operations. By the end of next year, it expects to have constructed 10 more spacecraft.

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In the future, Varda could consolidate offices there, given its size. Currently, though, the plan is to retain all properties, creating a campus of three buildings within a mile of one another that are served by the company’s transportation services, Chief Operating Officer Jonathan Barr said.

“We already have Varda-branded shuttles running up and down Aviation Boulevard,” he said.

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How Iran War Is Threatening Global Oil and Gas Supplies

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How Iran War Is Threatening Global Oil and Gas Supplies

Ships near the Strait of Hormuz before and after attacks began

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Note: Times shown are in Iran Standard Time. Some ships in the region transmit false positions and others sometimes stop broadcasting their locations, and may not be reflected in the animation. Ships with sparse location data are shown in a lighter shade. Source: Kpler and Spire.

Every day, around 80 oil and gas tankers typically pass through the Strait of Hormuz, the narrow waterway off Iran’s southern coast that carries a fifth of the world’s oil and a significant amount of natural gas.

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On Monday, just two oil and gas tankers appear to have crossed the strait, according to a New York Times analysis of shipping activity from Kpler, an industry data firm. Since then, one tanker passed through.

“It’s a de facto closure,” said Dan Pickering, chief investment officer of Pickering Energy Partners, a Houston financial services firm. “You’ve got a significant number of vessels on either side of the strait but no one is willing to go through.”

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Tankers have been staying away from Hormuz since the U.S.-Israeli attacks on Iran that began on Saturday. A prolonged conflict could ripple broadly across the global economy, threatening the energy supplies of countries halfway around the world and stoking inflation.

International oil prices have climbed 12 percent since the fighting began, trading Tuesday around $81 a barrel, and natural gas prices have surged in Europe and in Asia.

A senior Iranian military official threatened on Monday to “set on fire” any ships traveling through the Strait of Hormuz. Vessels in the region have already come under attack. Several oil and gas facilities have also been struck or affected by nearby shelling, though the damage did not initially appear to be catastrophic.

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Where ships and energy facilities have been damaged

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Note: Damage as of 2 p.m. Eastern time Tuesday. Source: Kpler, Kuwait National Petroleum Company, Saudi Arabian Ministry of Energy, Planet Labs, QatarEnergy, United Kingdom Maritime Trade Operations and Vanguard Tech.

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A fire broke out Tuesday at a major energy hub in Fujairah, United Arab Emirates, from the falling debris of a downed drone, the authorities said. On Monday, Qatar halted production of liquefied natural gas, or fuel that has been cooled so that it can be transported on ships, after attacks on its facilities.

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Facilities at Ras Tanura oil refinery in Saudi Arabia were on fire on Monday after two Iranian drones were intercepted, according to Saudi Arabia’s Ministry of Energy, causing fragments to fall. Vantor

The sharp reduction in tanker traffic is reducing the supply of oil and gas to world markets, pushing up prices for both commodities. And the longer that ships stay away from the Strait of Hormuz, the less oil and gas get out to the world, which could raise prices even more.

Shipping companies have paused their tankers to protect their crew and cargo, and because insurance companies are charging significantly more to cover vessels in the conflict area.

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On Tuesday, President Trump said that “if necessary,” the U.S. Navy would begin escorting tankers through the strait. He also said a U.S. government agency would begin offering “political risk insurance” to shipping lines in the area.

In addition to tankers, other large vessels regularly go through the strait, including car carriers and container ships. In normal conditions, nearly 160 make the trip each day.

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Some ships in the region turn off the devices that broadcast their positions, while others transmit false locations — making it hard to give a full picture of the traffic in the strait.

The Shiva is a small oil tanker that has repeatedly faked its location, according to TankerTrackers.com, which tracks global oil shipments. It is suspected of carrying sanctioned Iranian oil, according to Kpler. The Shiva was one of the two tankers that crossed the strait on Monday.

The oil and gas that typically move through the strait come from big producing countries like Saudi Arabia, Iraq, Iran and United Arab Emirates, and are exported around the world.

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Where tankers moving through the Strait have traveled

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Note: Tanker paths are since Jan. 1 and include all tankers and gas carriers. Source: Kpler and Spire.

In 2024, more than 80 percent of the oil and gas transported through the Strait of Hormuz went to Asia. China, India, Japan and South Korea were the top importers, according to the U.S. Energy Information Administration.

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Countries have energy stockpiles that could last them into the coming months, but a continued shutdown of the strait could damage their economies.

Several big disruptions have roiled supply chains in recent years, but the tanker standstill in the Strait of Hormuz could have an outsize impact.

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Paramount credit downgraded to ‘junk’ status over debt worries

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Paramount credit downgraded to ‘junk’ status over debt worries

Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:

Call it the deal-debt hangover.

Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.

Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.

S&P Global Ratings took similar action.

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To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.

“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.

Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.

Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.

Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.

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Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.

Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.

Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.

(Evan Agostini / Invision / AP)

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Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.

Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.

Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.

Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.

Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.

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During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.

Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”

It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.

Workers are scattered throughout the region.

HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.

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“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”

David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.

Ellison has not announced what the combined company will be called.

Paramount shares closed down more than 6% Tuesday to $12.45.

Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.

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