You would hope that, if it's true that this business was compliant with letter and spirit of the State law, the California States Attorney would make a polite request to their Federal counterpart asking that the case be dropped as not in the public interest. If they don't, it seems like the State is hanging him out to dry.
That sounds so far from the realm of being in anyway necessary, and not just outright racketeering that you/your friend should contact local media, the DOJ or both.
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