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In 2010, plaintiff Council for Education and Research on Toxics sued more than 50 defendants, alleging they violated Proposition 65 due to their failure to provide warnings about the chemical acrylamide in coffee (created during the roasting process) beyond the state of California’s Threshold. The defendants lost the liability phase trial in 2016 and the case moved on to a damages phase.
In the meantime, the Office of Environmental Health Hazard Assessment, the agency responsible for implementing Proposition 65 and setting Proposition 65 standards, began developing rules in 2018 to exempt coffee from the scope of Proposition 65. The new regulations, which became final in October 2019, provided that “[e]Exposures to chemicals in coffee, listed on or before March 15, 2019, known to the state to cause cancer, which are created by and inherent in the processes of roasting coffee beans or brewing coffee, do not no significant risk of cancer.
[Cal. Code Regs., tit. 27, § 25704.]
The defendants argued the new settlement as an affirmative defense and filed a motion for summary judgment and a motion for judgment on the pleadings. The plaintiff filed eight motions for summary arbitration, each seeking to strike down the new settlement. The plaintiff also argued that regardless of the settlement, justiciable questions remained regarding the presence of acrylamide resulting from additives (plant roots, nuts and seeds) in certain coffee products, which the settlement did not address. In August 2020, the court denied all of plaintiff’s motions, granted defendants’ motion for summary judgment and raised defendants’ motion for judgment on the pleadings. Defendants are entitled to a full defense against Plaintiff’s claims based on the new settlement. The trial court also found that the additive claims were not within the scope of the litigation.
In November 2020, the plaintiff filed a notice of appeal. Oral arguments were heard in September 2022, and on October 26, 2022, the Court of Appeal filed its opinion, which has been certified for publication. The Court of Appeal concluded that the settlement was validly enacted and that the claims regarding the coffee additives were beyond the scope of the plaintiff’s actions.
Below are the key takeaways from Proposition 65.
Catalyst theory for attorney fees
Section 1021.5 of the Code of Civil Procedure codifies the private attorney general doctrine that Proposition 65 plaintiffs rely on to collect attorneys’ fees. Section 1021.5 gives the trial court “the discretion to award fees to a prevailing party if (1) his or her action resulted in the enforcement of an important public right, (2) the general public or a broad class of people has received a significant benefit, (3) the burden of private enforcement is disproportionate to the litigant’s self-interest, and (4) it is unfair to charge a successful plaintiff the costs of any recovery.” [Concerned Citizens of La
Habra v. City of La Habra (2005) 131 Cal.App.4th 329,
334.]
After the trial court entered judgment for the defendants, the plaintiff sought to recover attorneys’ fees from some of the defendants on the grounds that his legal efforts caused those defendants to voluntarily provide warnings under the Proposition 65 while litigation was pending. The trial court denied the plaintiff’s motion, finding that she was not eligible for costs because she lost her case on the merits and conferred no significant benefit to the public.
On appeal, the plaintiff reiterated its position that it was entitled to fees based on the voluntary warnings provided by the affected defendants. The Court of Appeal agreed with the trial court that in light of the new regulation, which establishes that these warnings were unnecessary and misleading as to the risk of coffee-related cancer, the temporary warnings were found to be unnecessary and did not therefore conferred no significant benefit to the public, rendering the plaintiff ineligible for costs.
Notably, the Court of Appeal stated that “the application of the law does not necessarily confer a significant benefit on the public”. Although the public always has a great interest in seeing the laws enforced,
the wording of the statute (“significant benefit”) and prior case law indicate, however, that the legislature did not intend to authorize the awarding of attorneys’ fees in every case involving a violation of the statute. [Rather,] the legislature envisioned that in adjudicating a claim for attorneys’ fees under Section 1021.5, a trial court would determine the magnitude of the benefit, as well as the size of the class benefiting from the benefit. benefit, based on a realistic assessment, in light of all relevant circumstances, of the gains that have resulted in a particular case.
[Woodland Hills Residents Assn., Inc. v. City Council
(1979) 23 Cal.3d 917, 939-940.]
This should make it harder for Proposition 65 plaintiffs to collect attorneys’ fees claiming they provided a significant benefit by simply enforcing the law. Courts approving Proposition 65 settlements (which include attorneys’ fees) will need to take a closer look at the claimed magnitude of the benefit.
Item 998 Deals
Under Section 998, “any party may serve a written offer on any other party to the action to permit judgment to be given or award to be made on the terms and conditions stated at that time. .” [§ 998, subd. (b).] “If an offer made by a defendant is not accepted and the plaintiff does not obtain a more favorable judgment”, the plaintiff must “pay the costs of the defendant from the time of the offer”, and the court has the discretion to “require the applicant to pay a reasonable amount to cover post-procurement costs for expert witness services….” [§ 998, subd.
(c)(1).] Because Section 998 requires a determination of whether the terms of the offer were more favorable than the judgment, the offer should not include a release of claims beyond those involved in the litigation. [Ignacio v. Caracciolo (2016) 2 Cal.App.5th
81, 86-87.]
A number of defendants sought an award of costs under Article 998 of the Code of Civil Procedure, based on offers of compromise rejected by the plaintiff during the litigation. Under the terms of the offers, the plaintiff was required to provide two types of releases: (1) a public release by the plaintiff suing “in the public interest”; and (2) a general release by the applicant in “his individual capacity”. The plaintiff moved on to tax charges, saying the offers were invalid because they were conditional on court approval (as required by Proposition 65) and because the releases they included were too broad. The trial court denied the motion to tax costs and awarded the affected defendants nearly $700,000 in post-offer costs.
The Court of Appeal agreed that the releases in the Section 998 offers were too broad and thus rendered the offers invalid, and reversed the trial court’s denial of the plaintiff’s motion to tax costs.
Notably, the Court of Appeals did not completely strike down the Section 998 offers in the Proposition 65 cases. However, such offers cannot contain broad waivers of claims beyond the scope of the actions. .
Scope of Notice of Infringement
Before bringing an action under Proposition 65 in the public interest, a private plaintiff must provide a pre-trial notice containing sufficient information about the claim (1) to the Attorney General and other attorneys, to allow them to adequately investigate the basis of the claim, and (2) the alleged infringer, to give him or her an opportunity to remedy the breach. [See Health
& Saf. Code, § 25249.7, subd. (d); Consumer Advocacy
Group, Inc. v. Kintetsu Enterprises of America (2007) 150
Cal.App.4th 953, 960-961.] The prior notice must describe, among other things, “the specific type of consumer product…with sufficient precision to inform recipients of the nature of the items allegedly being sold in violation of the law and to distinguish such products…d ‘ others sold… .” [Cal. Code Regs.,
tit. 27, § 25903, subd. (b)(2)(D).] Failure to comply with pretrial notification requirements is grounds for dismissal, and deficiencies cannot be corrected after the complaint is filed. [See
Physicians Committee for Responsible Medicine v. KFC Corp.
(2014) 224 Cal.App.4th 166, 181.]
Plaintiff’s claims regarding acrylamide-containing additives — which are not covered by the settlement — were beyond the scope of its actions, as delimited by its pre-suit notices. Its pre-trial notices failed to distinguish regular coffee from a subset of coffee with additives and made no mention of acrylamide from those additives as the basis for any violation. The plaintiff alleged “[e]acrylamide exposures inevitably occurred through ingestion whenever a consumer purchased and subsequently consumed “the ‘coffee’ or ‘ready-to-drink coffee’ of the alleged offenders. This description provided no advice that Complainant’s claim was for a subset of products containing coffee additives – to which consumers were not exposed “every time” they purchased Respondents’ coffee. Plaintiff argued that, that additives containing whether or not acrylamide was mentioned in his pre-trial notices, the additives “became relevant … because
[the] The settlement does not absolve companies that expose Californians to acrylamide-containing additives from liability.” According to the plaintiff, “to obtain an interim judgment on their new defense, [defendants] were required to show that the defense applied to their products”, and therefore, “had to show that their coffee products did not contain any flavorings or other additives containing acrylamide”.
The Court of Appeal rejected the plaintiff’s proposed approach because it ignores the plaintiff’s pre-trial notice requirement. Private Proposition 65 claimants must sufficiently identify the products they claim to be implicated. The notice reminds plaintiffs that they are not allowed to “weave a wide net, identifying broad categories of products in the hope of catching something that would warrant infringement, and adjusting their claims based on the ‘development of the dispute’.
Conclusion
It is likely that the plaintiff will appeal to the Supreme Court of California. However, if and until the California Supreme Court agrees to hear the case, the California Court of Appeals’ opinion contains findings that are both insightful and favorable to the companies subject to Proposition 65.