A team of experienced class action lawyers is taking on California's red light camera industry, and photo enforcement companies are expressing unease. Last month, the law firm of Pearson Simon Warshaw and Penny, LLP filed suit in San Mateo County Superior Court arguing that tickets issued throughout the Golden State since January 1, 2004 should be refunded where the photo enforcement contracts violated a state law mandating flat-rate compensation to companies like Redflex Traffic Systems. Redflex referred to the case as a particular business risk in an August 25 filing with the Australian Securities Exchange.

"The level of litigation industry‐wide has continued to be widespread with the majority of suits testing the constitutionality or administrative legitimacy of road safety enforcement programs," Redflex explained. "A number of class action lawsuits involving others in our industry and Redflex have been filed challenging the pricing models used in several states alleging violation of cost neutrality laws as well as the admissibility of business records in court. We continue to aggressively defend against these claims."

An aggressive defense will not come cheap. The firm spent $4.3 million to fend off a lawsuit filed by competitor American Traffic Solutions (ATS), even though the Australian firm won the case. Should this class action make it to trial, Redflex and co-defendant ATS could end up financially responsible for contracts in the fifty-nine jurisdictions identified as having the questionable language.

In the city of San Mateo, for example, Redflex is paid $120 for each $446 ticket issued at each red light camera intersection up to a monthly cap of $6030 per intersection. This so-called cost neutrality arrangement allows the city to have a guarantee that the cameras will never under any circumstances lose money. The class action suit argues that such clauses violate a state law prohibiting per-ticket compensation arrangements for automated ticketing contracts.

"Through their employees and agents, RTS, ATS and the Doe defendants, as defined below, entered into illegal contracts with public entities in California, operated automated traffic enforcement equipment in California and caused tickets to be issued to plaintiff and class members throughout California," attorneys Bruce L. Simon and William J. Newsom wrote in the court filing.

The suit does not ask that existing convictions be overturned, but that Redflex and ATS pay damages for the amount of revenue the companies have collected from their unlawful business practices. The appellate divisions of both Orange County (view ruling) and San Mateo County (view decision) courts have already ruled "cost neutral" contract provisions are illegal, but the decisions have not been published. Only a handful of cities like San Mateo and San Carlos have dropped the cost neutral provisions. Contractors in these cities would still be sued for the amount of revenue generated prior to the contract revisions.

The lawsuit asks the court to declare all cost neutral contracts illegal and issue an injunction against all programs operating under such arrangements. It also asks for a full refund of all fines paid, plus appropriate punitive damages.