Judge Kerry Bensinger, Case Number: 24STCV09037, Date: 2024-08-13 Tentative Ruling

This is a representative action seeking an injunction requiring a Proposition 65 warning, penalties under Health & Safety Code section 25249.7, subdivision (b), and attorney fees and costs. Plaintiff Healthy California LLC (Plaintiff) alleges that Defendant Shan Foods PVT. LTD (Shan Foods) manufactures and sells twenty-one food products (Subject Products) that expose consumers to lead. As relevant here, Plaintiff alleges that Wal-Mart.Com USA, LLC (Walmart) imported, sold, and/or distributed thirteen of the Subject Products.

On April 10, 2024, Plaintiff filed the Complaint alleging five causes of action for civil penalties and injunctive relief. The fifth cause of action is asserted against Walmart.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.” (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 556.)

Walmart requests judicial notice of seven documents. The unopposed requests are GRANTED. (Evid. Code § 452, subd. (c), (d)(1), (h).)

“Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person, by telephone, or by video conference with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) Defense counsel has complied with the meet and confer requirement. (See Declaration of Gregory S. Berlin.)

Walmart advances three arguments: (1) Plaintiff’s certificate of merit does not comply with Cal. Code Regs., tit. 11, § 3101; (2) the Complaint fails to state facts sufficient to support the fifth cause of action; and (3) Plaintiff’s claim is time-barred. The court addresses each argument in turn.

Proposition 65 prevents businesses for “knowingly and intentionally expos[ing] an individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual . . .” (Health & Saf. Code § 25249.6.) One of these requirements is the certificate of merit.

“‘Reasonable and meritorious case for the private action’ requires not only documentation of exposure to a listed chemical, but a reasonable basis for concluding that the entire action has merit. The certifier must have a basis to conclude that there is merit to each element of the action on which the plaintiff will have the burden of proof.” (11 C.C.R. § 3103(a).) The Certificate of Merit “shall contain all of the following statements”:

1.¿This Certificate of Merit accompanies the attached sixty-day notice(s) in which it is alleged the parties identified in the notices have violated Health and Safety Code section¿25249.6¿by failing to provide clear and reasonable warnings.

3.¿I have consulted with one or more persons with relevant and appropriate experience or expertise who has reviewed facts, studies, or other data regarding the alleged exposure to the listed chemical that is the subject of the action.

4.¿Based on the information obtained through those consultations, and on all other information in my possession, I believe there is a reasonable and meritorious case for the private action. I understand that "reasonable and meritorious case for the private action" means that the information provides a credible basis that all elements of the plaintiffs' case can be established and the information did not prove that the alleged violator will be able to establish any of the affirmative defenses set forth in the statute.

5.¿The copy of this Certificate of Merit served on the Attorney General attaches to it factual information sufficient to establish the basis for this certificate, including the information identified in Health and Safety Code section¿25249.7(h)(2), i.e., (1) the identity of the persons consulted with and relied on by the certifier, and (2) the facts, studies, or other data reviewed by those persons.

“Where a sixty-day notice does not attach a copy of the Certificate of Merit meeting the requirements of subsection 3101(b), the noticing party has no authority to commence an action pursuant to Health and Safety Code section 25249.7(d).” (11 C.C.R. § 3103(a).) “No person shall commence an action to enforce the provisions of the Act ‘in the public interest’ pursuant to Section 25249.7(d) of the Act except in compliance with all requirements of this section.” (27 C.C.R. § 25903(a).)

Here, Walmart argues that Plaintiff failed to strictly comply with Proposition 65’s certificate of merit requirement. Walmart points to the omission of the term “alleged” from the third statement of Plaintiff’s certificate of merit.

3. I have consulted with one or more persons with relevant and appropriate experience or expertise who has reviewed facts, studies, or other data regarding the exposure to the Listed Chemical that is the subject of this action;

Walmart argues the omission is not trivial. In support, Walmart points out that the original draft of the regulation did not include the word “alleged” but was added by Attorney General in response to a public comment requesting that the term be included to clarify that an exposure, at the time the certificate of merit is filed, is still an allegation.” (RJN 3, pp. 48. 49.)

Because Plaintiff’s certificate of merit deviates from the regulation, Walmart contends the defect is fatal to Plaintiff’s action. Walmart cites several cases for this general proposition. (See Demurrer, p. 12.) However, none of the cases address the specific issue presented here: whether the omission of the term “alleged” from a certificate of merit renders it non-compliant with the statute and regulation.[1] Through judicial notice, Walmart has alerted this court that at least one other trial court has found this very defect—the omission of the term “alleged”—is fatal and a basis to sustain a demurrer without leave to amend. (See RJN 4, Ruling on Submitted Matter filed by Kreassive, LLC in Consumer Advocacy Group, Inc. v. Kreassive, Inc., a California Corporation et al, Case No. 22CV024552 (Kreassive).) That case is currently on appeal and pending before the First District Court of Appeal.

Given that an appellate court may resolve whether Plaintiff’s claims in this case survive, the court is inclined to stay this case pending resolution of the appeal. The court has “the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.”¿ (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489; Code Civ. Proc., § 128, subd. (a).)¿

For the sake of completeness, the court will address Walmart’s remaining challenges to the Fifth Cause of Action.

The Complaint alleges that Walmart sells thirteen Subject Products in California without displaying Proposition 65 warnings. (Complaint, ¶¶ 1, 14, 77, 78.) Based on these allegations, Walmart argues that Plaintiff must plead facts to show Walmart is responsible for displaying Proposition 65 warnings as a “seller” of the products.

California Code of Regulations, title 27, section 25600.2 enumerates five circumstances where the “warning” obligation may be imposed on a seller. They include:

(1) The retail seller is selling the product under a brand or trademark that is owned or licensed by the retail seller or an affiliated entity;

(2) The retail seller has knowingly introduced a listed chemical into the product, or knowingly caused a listed chemical to be created in the product;

(3) The retail seller has covered, obscured or altered a warning label that has been affixed to the product pursuant to subsection (b);

(4) The retail seller has received a notice and warning materials for the exposure pursuant to subsections (b) and (c) and the retail seller has sold the product without conspicuously posting or displaying the warning; or

(5) The retail seller has actual knowledge of the potential consumer product exposure requiring the warning, and there is no manufacturer, producer, packager, importer, supplier, or distributor of the product who:

(A) Is a "person in the course of doing business" under Section 25249.11(b)[2] of the Act, and

(B) Has designated an agent for service of process in California, or has a place of business in California.

Here, the Complaint does not state facts showing any of the five circumstances. Plaintiff does not allege that Walmart owned or licensed any of the Subject Products (subdivision (e)(1)). Plaintiff does not allege that Walmart specifically introduced any Proposition 65-listed chemical into the product (subdivision (e)(2)). Plaintiff does not allege that Walmart covered, obscured, or altered any warning labels affixed to the Subject Products (subdivision (e)(3)). Plaintiff does not allege that Walmart received notice from any manufacturer, producer, packager, importer, supplier or distributor of the Subject Products about the alleged exposures to lead (subdivision (e)(4)). And finally, Plaintiff does not allege that Walmart has actual knowledge of the alleged exposure and there is no manufacturer, producer, packager, importer, supplier, or distributor of the Subject Products with less than ten employees and who does not have a registered agent for service of process or place of business in California (subdivision (e)(5)).

Plaintiff contends otherwise. Referring simply to the allegations at paragraphs 75-88 (the Fifth Cause of Action) and in particular paragraph 81, Plaintiff states that Walmart is “on notice of what is being alleged against it.” (Opp., p. 4:24.) There is little argument and no citation to authority. However, as detailed above, there are no allegations at paragraphs 75-88 which show any of the five circumstances apply to Walmart. The Fifth Cause of Action is deficient and subject to demurrer.

Leave to amend is granted. However, given the court’s inclination to stay this case, the court will revisit the time for Plaintiff to file an amended pleading pending the appeal in Kreassive.

The statute of limitations for an “action upon a statute for a penalty or forfeiture” is one year. (Code Civ. Proc., § 340, subd. (a); Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 978 [Code of Civil Procedure section 340, subd. (a) applies to Proposition 65 claims for civil penalties because the claim is based upon a statute for a penalty which has been given to individuals as well as to the state].) The statute of limitations for injunctive relief is three years. (Code Civ. Proc., § 338, subd. (a).)

Walmart’s argues the Fifth Cause of Action is time-barred because this action should have been filed no later than February 11, 2023. To arrive at this date, Walmart points purchase receipts and laboratory results for the Subject Products that Plaintiff attached to the Complaint. Specifically, Plaintiff received the laboratory reports for the thirteen Subject Products on February 4, 2022 and February 11, 2022. (See Complaint, pp. 22, 36, 44, 52, 60,68, 75, 82, 90, 97, 104.) In other words, Plaintiff knew by February 11, 2022 whether it had a Proposition 65 claim against Walmart but waited more than two years to file this action.

Walmart is incorrect.[4] For statute of limitations purposes, time is measured from the time of the last alleged violation. (Consumer Advocacy, Group, Inc. v. Kintetsu Enterprises of America (2007) 150 Cal.App.4th 953, 981.) Here, Plaintiff alleges the Proposition 65 violations are ongoing. (See Complaint, ¶¶ 77, 84.) The claim for civil penalties is not time-barred. The injunctive relief claim, which Walmart does not address, likewise does not fail on this ground.

Based on the foregoing, the court will stay this action pending the Court of Appeal’s ruling in Kreassive.

[1] Plaintiff’s opposition does not help its cause. Indeed, Plaintiff’s opposition suggests it omitted the term intentionally and specifically choose to deviate from the statutory language. (Opp., p. 3:27-28.) .

[2] (b) “Person in the course of doing business” does not include any person employing fewer than 10 employees in his or her business; any city, county, or district or any department or agency thereof or the state or any department or agency thereof or the federal government or any department or agency thereof; or any entity in its operation of a public water system as defined in Section 116275. (Health & Saf. Code, § 25249.11, subd. (b).)

[3] (f) For purposes of subsection (e)(5):

(1) “Actual knowledge” means the retail seller receives information from any reliable source that allows it to identify the specific product or products that cause the consumer product exposure. Such knowledge must be received by the retail seller, its authorized agent or a person whose knowledge can be imputed to the retail seller.

(2) Where the source of a retail seller's knowledge is a notice pursuant to Section 25249.7(d)(1) of the Act, the retail seller shall not be deemed to have actual knowledge of any consumer product exposure alleged in the notice until five business days after the retail seller receives the notice. The notice must provide sufficient specificity for the retail seller to readily identify the product or products subject to the notice, in accordance with Article 9, section 25903(b)(2)(D).

[4] A private enforcer may file suit only if, after the 60-day notice period, no public prosecutor has commenced an enforcement action on the claim identified in the notice. (Health & Saf. Code, § 25249.7, subd. (d).) Plaintiff contends that a Proposition 65 claim must be filed within a year after the 60-day pre-suit notice period ends. However, Plaintiff does not cite any authority in support of that proposition.