Judge: Theresa M. Traber, Case: 20STCV20651, Date: 2022-07-28 Tentative Ruling
Case Number: 20STCV20651 Hearing Date: July 28, 2022 Dept: 47
Tentative Ruling
Judge Theresa M. Traber, Department 47
HEARING DATE: July
28, 2022 TRIAL
DATE: NONE SET
CASE: Shefa
LMV, Inc v. Elam’s Hallmark et al.
CASE NO.: 20STCV20651
MOTION
TO APPROVE AND ENTER CONSENT JUDGMENT
MOVING PARTY: Plaintiff Shefa LMV, Inc.,
RESPONDING PARTY(S): No opposition on eCourt as of June 24, 2022.
STATEMENT
OF MATERIAL FACTS AND/OR PROCEEDINGS:
Plaintiff filed this action on
June 1, 2020 alleging that Defendants have violated Proposition 65 by selling
consumer products containing toxic chemicals.
The operative First Amended Complaint was filed on October 14,
2020.
Plaintiff
moves to approve and enter a consent judgment between Plaintiff and Defendant Odin
Fashion, Inc.
TENTATIVE RULING:
Plaintiff’s motion to approve and
enter consent judgment between Plaintiff Consumer Advocacy Group, Inc. and
Defendant Odin Fashion, Inc. is GRANTED.
DISCUSSION:
Motion for Approval of Prop 65 Proposed Consent
Judgment
Plaintiff moves for an order
approving the proposed consent judgment between it and Defendant Odin Fashion,
Inc. under Proposition 65, the California Safe Drinking Water and Toxic
Enforcement Act, Health & Safety Code §§ 25249.5, et seq.
California
Health & Safety Code § 25249.7(f)(4) provides:
If there is
a settlement of an action brought by a person in the public interest under
subdivision (d), the plaintiff shall submit the settlement, other than a voluntary dismissal in which no
consideration is received from the defendant, to the court for approval
upon noticed motion, and the court may approve the settlement only if the court
makes all of the following findings:
(A) Any warning that is required by the settlement complies
with this chapter.
(B) Any award of attorney's fees is reasonable under
(C) Any penalty amount is reasonable based on the criteria
set forth in paragraph (2) of subdivision (b).
(Health
& Safety Code § 25249.7(f)(4).)
Adequacy
of Warning
Whenever a clear and reasonable warning
is required under Section 25249.6 of the Act, the method employed to transmit
the warning must be reasonably calculated, considering the alternative methods
available under the circumstances, to make the warning message available to the
individual prior to exposure. The message must clearly communicate that the
chemical in question is known to the state to cause cancer, or birth defects or
other reproductive harm. Nothing in this section shall be construed to preclude
a person from providing warnings other than those specified in this article
that satisfy the requirements of this article, or to require that warnings be
provided separately to each exposed individual.
(222 CCR § 25601.)
Here,
Section 2 .2 of the Proposed Consent Judgment provides that any Clutches and Fanny
Packs that Defendant sells, distributes, or ships into California after the
effective date will have warnings provided on the products that comply with
Proposition 65 unless they meet the reformulation standards set forth in
section 2.1. Under section 2.1, Defendant “shall not manufacture for
sale in California any Clutches unless the Clutches contain DEHP in
concentrations less than or equal to 1000 parts per million,” and “shall not
manufacture for sale in California any Fanny packs unless the Fanny packs
contain DINP in concentrations less than or equal to 1000 parts per million. The warnings for noncompliant products are to be “provided in a conspicuous
and prominent manner such that they will be likely to be read or seen by the
consumer prior to or at the time of the sale or purchase.”
Regulations
now require the following warning language, in relevant part:
(1)
The word “WARNING:” in
all capital letters and bold print.
. . .
(4) For
exposures to a chemical that is listed as both a carcinogen and a reproductive
toxicant, the words, “This product can expose you to chemicals including [name
of one or more chemicals], which is [are] known to the State of California to
cause cancer and birth defects or other reproductive harm. For more information
go to www.Prop65Warnings.ca.gov/.”
(27 CCR § 25603(a).)
A
warning compliant with this regulation satisfies the requirement of a clear and
reasonable warning. Here, this requirement is satisfied.
Reasonableness
of Attorney’s Fees
Under
the Proposed Consent Judgment, Plaintiff is to recover $12,000 for fees and
costs incurred in prosecuting this action. (¶ 3.2.2.) Plaintiff represents that
this amount is less than the lodestar calculation of $14,236.23 and is
reasonable given the duration and complexity of this litigation. (Declaration
of Daniel N. Greenbaum ¶¶ 40-41.)
The Court
finds that the amount of attorney’s fees and costs is reasonable under the
circumstances. Accordingly, this requirement is satisfied.
Reasonableness
of Penalty
In assessing the reasonableness of
a civil penalty for a Prop 65 violation, the Court must consider all of the
following:
(A) The nature and extent of the violation.
(B) The number of, and severity of, the violations.
(C) The economic effect of the penalty on the
violator.
(D) Whether the violator took good faith measures to
comply with this chapter and the time these measures were taken.
(E) The willfulness of the violator's misconduct.
(F) The deterrent effect that the imposition of the
penalty would have on both the violator and the regulated community as a whole.
(G) Any
other factor that justice may require.
(Health
& Safety Code § 25249.7(b)(2).)
Under the Act, the amount of the
penalty is not compensatory and is not based on any harm suffered by consumers.
Rather, it is designed to deter misconduct and harm:
The Act is informational and
preventative rather than compensatory in its nature and function. The statutory damages available under the
Act in the nature of civil penalties do not grow out of a claim for moneys due
and owing or for personal harm or property damages that have resulted from
discharge of pollutants or other toxic chemicals, which are actions triable
by a jury at common law. . . . Rather, Proposition
65 is distinguishable in its fundamentally equitable purpose and remedy: to
facilitate the notification of the
public of potentially harmful substances, so informed decisions may
be made by consumers on the basis of disclosure. “Citizens bringing
[Proposition 65] suits need not plead a private injury and instead are deemed
to sue ‘in the public interest.’ [Citation.]” . . . An award of civil penalties under the Act is a statutory punitive
exaction determined on the basis of equitable principles, designed to deter
misconduct and harm, not to compensate the plaintiff for actual damages
sustained. (Citations omitted.) The primary right to bring an action
for civil penalties pursuant to the Act is also given to the state rather than
individuals seeking compensation. (§ 25249.7, subd. (c).) Moreover, the Act
does not have a standing requirement; a plaintiff need not allege or prove
damages to maintain an action under Proposition 65. As such, the statutory
remedies afforded by the Act, including civil penalties, are not damages at
law, but instead constitute equitable relief appropriate and incidental to enforcement
of the Act, which do not entitle the plaintiff to a jury trial. (Citations
omitted.) The “incidental award of monetary damages by a court in the exercise
of its equitable jurisdiction does not convert the proceeding into a legal
action.”
(DiPirro
v. Bondo Corp. (2007) 153 Cal.App.4th 150, 182-184, bold emphasis and
underlining added). Thus, the purpose of the civil
penalty is to deter misconduct and harm in the future. The amount of the penalty should be aimed at
serving these purposes based on equitable principles.
Here, under the Proposed Consent
Judgment, Defendant will pay a total civil penalty of $1,000 to be apportioned
in accordance with Health and Safety Code § 25249.12(c), with 75% ($750.00)
paid to the State of California Office of Environmental Health Hazard
Assessment (“OEHHA”) and the remaining 25% ($250.00) paid to Plaintiff.
a. Nature
and extent of the violation.
Pursuant to the Court’s June 28,
2022 Order, Plaintiff filed a supplemental declaration of Plaintiff’s counsel
in order to address the Court’s remaining concerns. Plaintiff’s counsel’s
supplemental declaration states that the purses contained 220,000 parts per
million of DEHP, the clutches contained 190,000 ppm of DEHP, and the fanny
packs contained 120,000 ppm of DINP. (Supplemental Declaration of Daniel
Greenbaum ISO Mot. ¶ 9.) Plaintiff’s counsel also states that where the level
of exposure is less than 100,000 ppm, they “typically do not prosecute that
matter because the ultimate exposure to users will fall below the safe harbor
levels established by the Office of Environmental Health Hazard Assessment.” (Id.
¶ 10.) Plaintiff’s counsel states that the exception to that rule varies
depending on multiple factors, but that the respective amounts here are “significant.”
(Id. ¶¶ 11-12.)
Plaintiff’s counsel does not
directly state that the risk of exposure to DEHP and DINP was foreseeable, but
states that the products are designed to be touched with bare hands multiple
times per day. (Greenbaum Supp. Decl. ¶ 12.)
b. The
number of, and severity of, the violations.
Plaintiff’s
supplemental declaration, as stated above, has addressed the severity of the
violations, stating that the level of exposure to DEHP and DINP is
“significant” given the nature of the products. Plaintiff’s
counsel states that Defendant sold a total of 72 units of the covered products
in California, accounting for a total of $252. (Greenbaum Supp. Decl. ¶¶
16-17.) Thus, the penalty would be 396% of the gross sales of the products.
c. The
economic effect of the penalty on the violator.
In Plaintiff’s initial moving
papers, Plaintiff’s counsel stated that “Settling Defendant is a prominent
member of the retail industry and Plaintiff contends that the amount of the
penalty is sufficient to remind Settling Defendant that it must remain aware of
and consistently attend to implementing the requirements of Proposition 65.”
(Greenbaum Decl. ¶ 34.) In connection with this factor,
Plaintiff indicated that “[e]ngaging in warning labeling and/or
reformulation efforts, negotiation, and settlement without trial weighed
heavily in favor of a reduced amount of civil penalty. (Id. ¶ 35.) The Court requested supplemental information
regarding the gross sales of the covered products to better assess this factor.
Having been provided this information, the Court observes that this penalty is
396% of the total gross sales of the covered products, not accounting for
attorney’s fees. Such a penalty will certainly have a deterrent effect on
Defendant, sufficient to ensure that Defendant complies with its Proposition 65
obligations going forward. Plaintiff has satisfied the Court’s concerns in this
respect.
d. Whether the violator took good faith measures to
comply with this chapter and the time these measures were taken.
In the initial moving papers, Plaintiff
points to Defendant’s agreement not to sell any products in California containing
more than the permissible amount of the chemicals at issue. (Greenbaum Decl. ¶¶
34-35.) The Court requested additional information regarding whether Defendant
took any steps, after receiving Plaintiff’s notices of intent to sue and
through the current date to stop selling the covered products in California.
Plaintiff’s counsel states that he “was informed that . . . Settling Defendants
immediately ceased selling the Covered Products upon receiving notice of the
allegations that the Covered Products contained high levels of DEHP and DINP.”
(Greenbaum Supp. Decl. ¶ 22.) Plaintiff has satisfied the Court’s concerns in
this respect.
e. The
willfulness of the violator's misconduct.
The declaration of Plaintiff’s
counsel indicates that Defendant’s “[e]ngaging in warning labeling
and/or reformulation efforts, negotiation, and settlement without trial weighed
heavily in favor of a reduced amount of civil penalty.” (Greenbaum
Decl. ¶ 35.)
f. The deterrent effect that the imposition of the
penalty would have on both the violator and the regulated community as a whole.
Although the absolute effect of a
$1,000 penalty may be small, it is the Court’s view that a penalty that is
almost four times the gross sales of the covered product, as it is here, would
be a significant deterrent to any violator.
g. Any other factor that justice may require.
The
following factors are considered “[other factors] that justice may require”
within the meaning of Health and Safety Code § 25249.7(b)(2)(G):
(a) A settlement with little or no
penalty may be entirely appropriate or not, based on the facts or circumstances
of a particular case.
(b) Recovery of civil penalties
(75% of which must be provided to the Office of Environmental Health Hazard
Assessment) serves the purpose and intent of Proposition 65. Accordingly, civil
penalties shall not be “traded” for payments of attorney's fees.
(c) Where a settlement provides
that certain civil penalties are assessed, but may be waived in exchange for
certain conduct by the defendant, such as, for example, reformulating products
to reduce or eliminate the listed chemical, the conduct must be related to the
purposes of the litigation, provide environmental and public health benefits
within California, and provide a clear mechanism for verification that the
qualifying conditions have been satisfied.
(d) Where a settlement requires
the alleged violator to make any Additional Settlement Payments to the
plaintiff or to a third party, such Additional Settlement Payments are viewed
as an “offset” to the civil penalty. The plaintiff must demonstrate to the
satisfaction of the court that it is in the public interest to offset the civil
penalty required by statute.
(11 CCR § 3203.)
Here,
as noted above this penalty is small in absolute terms, but relative to the
sales of the covered products, this penalty is extremely large, at 396% of the
total sales.
The Court
has not found evidence of “trading” penalties for attorney’s fees, as would be
relevant under subdivision (b). Here, Defendant is to pay a penalty of $1,000,
in addition to $12,000 in attorney’s fees to Plaintiff’s counsel. The proposed
judgment also includes both reformulation standards and imposes requirements
for serious warnings on non-compliant covered products, beyond the monetary
penalty. Furthermore, the Court finds that $12,000 in attorney’s fees is
reasonable in the context of a Proposition 65 action at this stage of
litigation.
The
proposed consent judgment does not provide for waiver of penalties, so
subdivision (c) is not applicable, nor is there any additional payment to
Plaintiff to which subdivision (d) would be applicable.
Conclusion as to reasonableness
of penalty. Based on the information
provided by Plaintiff, the Court concludes that the penalty is reasonable.
Release
Provisions
The Court must also consider
whether the release provision in the proposed consent judgment is appropriately
limited such that it will not deter future public litigation.
CDG purports to act on behalf of
the public and the settlement potentially has broad implications as CDG
describes it as a “standard for the industry as a whole.” More significantly,
unlike in a settlement between two parties, the Legislature expressly required
judicial review of a Proposition 65 settlement brought by a private
plaintiff in order to safeguard the rights of the public. The parties' agreement
to a mutually beneficial set of terms does not ensure that the policies
underlying Proposition 65 or the public's interest in the litigation were
considered. In contrast to Neary, where the court made clear that
“[c]ollateral estoppel [was] not an issue … .” ( Neary, supra, 3 Cal.4th
at p. 284), respondents seek to use the doctrine of collateral estoppel and
refer to it expressly in each consent judgment.
Where the rights of the public are
implicated, the additional safeguard of judicial review, though more cumbersome
to the settlement process, serves a salutatory purpose. It reminds the parties that, in addition to their own interests, the
public interest is also relevant. It also reinforces the rule that the
“strong public policy favoring the settlement of litigation … does not excuse a
contractual clause that is otherwise illegal or unjust.” (Timney v. Lin
(2003) 106 Cal.App.4th 1121, 1127 [131
D. Application of the Correct
Test Compels Reversal
Some of the provisions of each
judgment are so contrary to the public interest that standing alone, they
require the reversal of the judgments. The broad release purports to preclude the public from future litigation
of both known claims and additionally
discovered ones. Under the terms of the release, any member of the public loses the right to pursue a claim regardless
of whether CDG had knowledge of the claim and regardless of whether relevant
scientific knowledge has changed. The judgments determine that “[t]he
provision of said warnings shall be deemed to satisfy any and all obligations
under Proposition 65 by any and all person(s) or entity(ies) with respect to
any and all environmental and occupational exposures to Noticed Chemicals” and
therefore do not cover only past conduct
as respondents argue. The provision allowing defendants to unilaterally opt
out arguably renders each judgment illusory. Similarly, the no force and
effect provision not only grants the parties unusual powers to, on their own,
invalidate a judgment, but it also renders precarious any benefit received by
the public from the judgment. Because these provisions require reversal,
we need not evaluate each provision in the six judgments. Our silence regarding
the remaining provisions should not be interpreted as approval of them.
(Consumer
Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal.App.4th
46, 63-65, bold emphasis added).
Here, the release provision pertains
to claims for Proposition 65 violations for alleged exposures up to the
effective date of the consent judgment. (¶¶ 4.1, 4.2.) The Court finds that
this release is appropriately limited so as to not preclude the public from
future litigation.
Accordingly, the release provision
is permissible.
Consent Judgment Must Serve The
Public Interest
Although the “fair, reasonable,
and adequate” test does not apply, the prerequisites for approving a
Proposition 65 consent judgment are similar. To stamp a consent agreement with the judicial imprimatur, the court
must determine the proposed settlement is just. Respondents' contrary view
ignores the general rule that a trial court should not approve an agreement
contrary to law or to public policy. . . .
* * *
n11 In contexts similar to
Proposition 65 litigation, where judicial review is required, the trial court
is required to ensure that its judgment is fair. . . .
In the context of Proposition 65 litigation,
necessarily brought to vindicate the public interest, the trial court also must
ensure that its judgment serves the public interest. Health and Safety Code section 25249.7, subdivision
(f)(4) provides: “If there is a settlement of an action brought by a person in
the public interest under subdivision (d), the plaintiff shall submit the
settlement … to the court for approval … and the court may approve the
settlement only if the court makes all of the following findings: [¶] (A) Any
warning that is required by the settlement complies with this chapter. [¶] (B)
Any award of attorney's fees is reasonable under
(Kintetsu,
supra, 141 Cal.App.4th at 61-62, bold emphasis added.)
Here, based
on the information provided above, the Court concludes that the proposed
consent judgment confers a direct benefit that serves the public interest.
CONCLUSION:
Accordingly, the motion to approve
the Proposition 65 Consent Judgment is GRANTED.
Moving party to give notice, unless waived.
IT IS SO ORDERED.
Dated: July 28, 2022 ___________________________________
Theresa
M. Traber
Judge
of the Superior Court
Any party may submit on the
tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day
before the hearing. All interested parties must be copied on the
email. It should be noted that if you submit on a tentative ruling
the court will still conduct a hearing if any party appears. By submitting on
the tentative you have, in essence, waived your right to be present at the
hearing, and you should be aware that the court may not adopt the tentative,
and may issue an order which modifies the tentative ruling in whole or in part.