California Court of Appeal Affirms Trial Court’s Grant of Summary Judgment to Defendants in Proposition 65 Coffee Case

In 2010, plaintiff Council for Education and Research on Toxics sued over 50 defendants, alleging they violated Proposition 65 due to their failure to provide warnings of the presence of the chemical acrylamide in coffee (created during the roasting process) in excess of the State of California’s threshold. Defendants lost the liability phase trial in 2016, and the case continued toward a damages phase.

In the interim, the Office of Environmental Health Hazard Assessment, the agency responsible for implementing Proposition 65 and setting Proposition 65 standards, initiated rulemaking in 2018 to exempt coffee from the purview of Proposition 65. The new regulation, which became final in October 2019, provided that “[e]xposures to chemicals in coffee, listed on or before March 15, 2019, as known to the state to cause cancer, that are created by and inherent in the processes of roasting coffee beans or brewing coffee do not pose a significant risk of cancer.” [Cal. Code Regs., tit. 27, § 25704.]

Defendants asserted the new regulation as an affirmative defense and filed a motion for summary judgment and motion for judgment on the pleadings. The plaintiff filed eight motions for summary adjudication, each seeking to invalidate the new regulation. The plaintiff also contended that regardless of the regulation, triable issues remained regarding the presence of acrylamide resulting from additives (plant roots, nuts and seeds) in some coffee products, which the regulation did not address. In August 2020, the court denied all of the plaintiff’s motions, granted defendants’ motion for summary judgment, and mooted defendants’ motion for judgment on the pleadings. Defendants are entitled to a complete defense to the plaintiff’s claims based on the new regulation. The trial court also concluded claims regarding additives were outside the scope of the litigation.

In November 2020, the plaintiff filed a notice of appeal. Oral argument was 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 the regulation was validly adopted, and that claims regarding coffee additives are beyond the scope of the plaintiff’s actions.

Below are key takeaways for Proposition 65.

Catalyst Theory for Attorneys’ Fees

Code of Civil Procedure section 1021.5 codifies the private attorney general doctrine relied upon by Proposition 65 plaintiffs to collect attorneys’ fees. Section 1021.5 gives the trial court “discretion to award fees to a successful party if (1) its action has resulted in the enforcement of an important public right, (2) the general public or a large class of persons has received a significant benefit, (3) the burden of private enforcement is disproportionate to the litigant’s personal interest, and (4) it is unfair to make a successful plaintiff pay the fees out 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 defendants, the plaintiff moved to recover attorneys’ fees from some of the defendants on the ground that its litigation efforts catalyzed those defendants to provide Proposition 65 warnings voluntarily while the litigation was pending. The trial court denied the plaintiff’s motion, concluding it was ineligible for fees because it had lost its case on the merits and conferred no significant benefit on the public.

On appeal, the plaintiff reiterated its position that it was entitled to fees based on the voluntary warnings provided by the relevant defendants. The Court of Appeal agreed with the trial court that in light of the new regulation, which establishes that those warnings were unnecessary and misleading regarding the risk of cancer from coffee, the temporary warnings proved unnecessary and therefore conferred no significant benefit on the public, rendering the plaintiff ineligible for fees.

Notably, the Court of Appeal stated that “enforcement of the law does not necessarily confer a significant benefit on the public.” Although the public always has a significant interest in seeing laws enforced,

the statutory language (‘significant benefit’) and prior case law, however, indicate that the Legislature did not intend to authorize an award of attorney fees in every case involving a statutory violation. [Rather,] the Legislature contemplated that in adjudicating a motion for attorney fees under section 1021.5, a trial court would determine the significance of the benefit, as well as the size of the class receiving benefit, from a realistic assessment, in light of all the pertinent circumstances, of the gains which 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 more difficult for Proposition 65 plaintiffs to collect attorneys’ fees by claiming they provided a significant benefit by simply enforcing the law. Courts approving Proposition 65 settlements (which include attorneys’ fees) will need to more closely analyze the claimed significance of the benefit.

Section 998 Offers

Under section 998, “any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time.” [§ 998, subd. (b).] “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment,” the plaintiff must “pay the defendant’s costs from the time of the offer,” and the court has discretion to “require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses ... .” [§ 998, subd. (c)(1).] Because section 998 requires a determination whether the offer’s terms were more favorable than the judgment, the offer must 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 Code of Civil Procedure section 998, based on compromise offers rejected by the plaintiff during the litigation. Under the terms of the offers, the plaintiff was to provide two kinds of releases: (1) a public release by the plaintiff suing “in the public interest”; and (2) a general release by the plaintiff in “its individual capacity”. The plaintiff moved to tax costs, contending the offers were invalid because they were conditioned on court approval (as required by Proposition 65), and because the releases they included were overbroad. The trial court denied the motion to tax costs and awarded the relevant defendants almost $700,000 in post-offer costs.

The Court of Appeal agreed the releases in the section 998 offers were overbroad 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 Appeal did not wholesale invalidate section 998 offers in Proposition 65 cases. However, any such offers cannot contain broad releases of claims beyond the scope of the actions.

Scope of Notice of Violation

Before bringing a Proposition 65 action in the public interest, a private plaintiff must provide a pre-suit notice containing sufficient information about the claim to (1) the Attorney General and other public prosecutors, to allow them to adequately investigate the claim’s basis, and (2) the alleged violator, to allow it an opportunity to cure the violation. [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 pre-suit notice must describe, among other things, “the specific type of consumer product ... with sufficient specificity to inform the recipients of the nature of the items allegedly sold in violation of the law and to distinguish those products ... from others sold ... .” [Cal. Code Regs., tit. 27, § 25903, subd. (b)(2)(D).] Failure to comply with pre-suit notice requirements is grounds for dismissal, and deficiencies cannot be cured after the complaint is filed. [See Physicians Committee for Responsible Medicine v. KFC Corp. (2014) 224 Cal.App.4th 166, 181.]

The plaintiff’s claims regarding acrylamide-containing additives—which are not addressed by the regulation—exceeded the scope of its actions, as delineated by its pre-suit notices. Its pre-suit notices failed to distinguish regular coffee from a subset of coffee with additives and made no mention of acrylamide from such additives as the basis of any violation. The plaintiff alleged “[e]xposures to acrylamide unavoidably occurred via ingestion whenever a consumer purchased and thereafter consumed” the alleged violators’ “coffee” or “ready-to-drink coffee.” This description provided no notice that the plaintiff’s claim targeted a subset of products containing coffee additives—to which consumers were not exposed “whenever” they purchased respondents’ coffee. The plaintiff argued that whether or not acrylamide-containing additives were mentioned in its pre-suit notices, additives “became relevant … because [the] regulation does not exempt from liability companies that expose Californians to acrylamide-containing additives.” According to the plaintiff, “to obtain summary judgment on their new defense, [defendants] were obliged to prove that the defense applied to their products,” and thus, “had to offer evidence that their coffee products did not contain any acrylamide-containing flavorings or other additives.” 

The Court of Appeal rejected the plaintiff’s proposed approach, as it ignores a plaintiff’s pre-suit notice obligation. Private Proposition 65 plaintiffs must sufficiently identify the products they claim are at issue. The opinion reminds plaintiffs that they are not allowed to “cast a wide net, identifying vast categories of products in hopes of catching something that would support a violation, and adjusting their claims according to developments in the litigation.”

Conclusion

It is likely the plaintiff will appeal to the California Supreme Court. However, if and until the California Supreme Court agrees to hear the matter, the California Court of Appeal opinion contains findings both insightful and favorable to businesses subject to Proposition 65.