California Court of Appeal Affirms Trial Court’s Grant of Summary Judgment to Defendants in Motion 65 Coffee Case | Pillsbury Winthrop Shaw Pittman LLP

After 12 years of litigation, coffee producers, distributors and retailers are one step closer to closing the door on Proposition 65’s coffee warning.

TAKEWAYS

  • As to claims for attorney’s fees under Proposition 65, “the enforcement of the law does not necessarily entail a significant benefit to the public.”
  • Section 998 offers in Proposition 65 cases cannot contain extensive releases of claims beyond the scope of litigation.
  • Proposition 65 plaintiffs cannot “cast a wide net, identify broad product categories in hopes of catching something to support infringement, and adjust their claims as the litigation evolves.”

Coffee generally does not require a Proposition 65 warning — even after a California appeals court upheld a trial court’s grant of summary judgment for dozens of coffee producers, distributors and retailers.

In 2010, the Plaintiff Council on Education and Research on Toxic Substances sued more than 50 defendants, alleging they violated Proposition 65 for failing to provide warnings about the presence of the chemical acrylamide in coffee (created during the roasting process) above the state of California’s threshold. The defendants lost the trial in the liability phase in 2016 and the case proceeded to the compensation phase.

Meanwhile, the Office of Environmental Health Hazard Assessment, the agency responsible for implementing Proposition 65 and setting Proposition 65 standards, began rulemaking in 2018 to exempt coffee from the scope of Proposition 65. The new regulation, which took effect in October 2019, provided that “[e]Exposure to chemicals in coffee that are listed on or before March 15, 2019, that are known to the state to cause cancer, that are created and are part of the coffee bean roasting or coffee brewing processes, do not pose a significant cancer risk.” [Cal. Code Regs., tit. 27, § 25704.]

Defendants asserted the new amendment as an affirmative defense and filed a motion for summary judgment and a motion for summary judgment. Plaintiff filed eight motions for summary judgment, each seeking to invalidate the new ordinance. The plaintiff also argued that regardless of the regulation, contentious issues regarding the presence of acrylamide originating from ingredients (plant roots, nuts and seeds) in some coffee products remain that are not addressed by the regulation. In August 2020, the court denied all of the plaintiff’s motions, granted the defendants’ motion for summary judgment, and entered the defendants’ motion for judgment on the pleadings. Under the new arrangement, the defendants are entitled to a full defense of the plaintiff’s claims. The trial court also concluded that the additive claims were outside the scope of the litigation.

In November 2020, the plaintiff filed an appeal. Oral argument was held in September 2022, and on October 26, 2022, the Court of Appeals filed its opinion, which was certified for publication. The Court of Appeal concluded that the ordinance was validly adopted and that the coffee additive claims were beyond the scope of the plaintiff’s claims.

Below are the key findings for Proposition 65.

A Catalyst Theory for Attorneys’ Fees

Code of Civil Procedure section 1021.5 codifies the private attorney general doctrine upon which the 65 plaintiffs’ motion to collect attorney’s fees rests. § 1021.5 gives the trial court “discretion to award fees to the successful party if (1) its action resulted in the enforcement of an important public right, (2) the general public or a large group of persons received a significant benefit, (3) the burden of private enforcement is disproportionate to the party’s personal interest dispute and (4) it is unfair to compel a successful plaintiff to pay the fees 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 proceeded to recover attorneys’ fees from certain defendants on the basis that its litigation efforts catalyzed those defendants to voluntarily provide Proposition 65 warnings while the litigation was pending . The trial court denied plaintiff’s motion, concluding that it was ineligible for fees because the suit lost on the merits and did not result in any significant benefit to the public.

On appeal, the plaintiff reiterated its position that it was entitled to fees based on the voluntary notices provided by the respective defendants. The Court of Appeal agreed with the trial court that, in view of the new regulation stating that the warnings were unnecessary and misleading in relation to the cancer risk caused by coffee, the temporary warnings had been shown to be unnecessary and therefore provided no significant benefit to the public, the plaintiff has entitlement to fees.

In particular, the Court of Appeals stated that “enforcement of the law need not necessarily provide a significant benefit to the public.” Although the public always has a strong interest in seeing laws enforced,

however, the statutory language (“substantial benefit”) and prior case law indicate that the Legislature did not intend to authorize the award of attorney’s fees in every case where the statute has been violated. [Rather,] the legislature contemplated that when deciding on a motion for attorney’s fees pursuant to section 1021.5, the trial court would determine the significance of the benefit, as well as the size of the group receiving the benefit, from a realistic assessment, taking into account all relevant circumstances, of the profits that 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 recover attorneys’ fees by claiming that they provided a significant benefit by simply enforcing the law. Courts approving Proposition 65 settlements (which include attorneys’ fees) will need to analyze more closely the claimed meaning of the benefit.

Section 998 Offers

Under section 998, “any party may serve on any other party to the action a written offer to allow judgment or award to be entered in accordance with such terms as may be for the time being”. [§ 998, subd. (b).] “If the offer made by the defendant is not accepted and the plaintiff does not obtain a more favorable judgment,” the plaintiff must “pay the defendant’s costs from the time of the offer,” and the court may, in its discretion, “require the plaintiff to pay a reasonable amount to cover the additional costs of 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 may not include a release of claims other than 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 pursuant to Section 998 of the Code of Civil Procedure based on compromise offers that the plaintiff rejected during the litigation. Under the terms of the offers, the plaintiff was to provide two types of release: (1) a public release by the plaintiff plaintiff “in the public interest”; and (2) general discharge by plaintiff in “his individual capacity.” Plaintiff moved to tax costs, arguing that the offers were invalid because they were conditioned on court approval (as required by Proposition 65) and because the disclosures they included were too broad. The trial court denied the motion for tax costs and awarded the respective defendants nearly $700,000 in post-offer costs.

The Court of Appeals agreed that the section 998 bid disclosures were overbroad, thereby rendering the bids invalid, and reversed the trial court’s denial of the plaintiff’s motion for tax costs.

Notably, the Court of Appeals did not invalidate Section 998 offers in Proposition 65 cases. However, no such offers may contain extensive releases of claims beyond the scope of the actions.

Breach notification scope

Before filing a Proposition 65 public interest lawsuit, a private plaintiff must provide a preliminary notice containing sufficient information about the claim (1) to the Attorney General and other prosecutors to properly investigate the cause of the claim and (2) to the alleged infringer to have an opportunity to remedy 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, among other things, describe “the particular type of consumer product . . . with sufficient detail to inform the recipient 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 advance notice requirements is grounds for dismissal and deficiencies cannot be remedied after filing a complaint. [See Physicians Committee for Responsible Medicine v. KFC Corp. (2014) 224 Cal.App.4th 166, 181.]

Plaintiff’s claims regarding acrylamide-containing ingredients—not addressed by the regulation—exceeded the scope of its claims as defined in its pre-suit notices. Its pre-suit notice failed to distinguish regular coffee from a subset of additive coffee and did not mention acrylamide from those additives as the basis of any infringement. The plaintiff claimed that “[e]Exposure to acrylamide inevitably occurred through ingestion whenever a consumer purchased and subsequently consumed the alleged offenders’ “coffee” or “ready-to-drink coffee.” This description contained no notice that the claim was directed at a subset of products containing coffee additives—to which consumers were not exposed “whenever” they purchased respondents’ coffee. Plaintiff argued that regardless of whether acrylamide-containing ingredients were mentioned in its pre-suit notices, the ingredients “became relevant . . . because [the] regulation does not absolve companies that expose California residents to additives containing acrylamide.” According to the plaintiff, “to obtain summary judgment on its new defense, [defendants] they were required to demonstrate that the defense applied to their products’ and therefore ‘had to offer evidence that their coffee products did not contain any flavorings containing acrylamide or other additives’.

The Court of Appeal rejected the plaintiff’s proposed procedure, as it ignores the obligation to notify the plaintiff in advance. 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, identify broad product categories in the hope of catching something to support infringement, and adjust their claims as litigation evolves.”

Conclusion

The plaintiff is likely to appeal to the California Supreme Court. If and until the California Supreme Court agrees to hear the matter, the California Court of Appeals opinion will contain findings that are both insider and favorable to businesses subject to Proposition 65.

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