Cal Biz Lit

Not Such A Good Way to Defend A Prop 65 Case

Under Proposition 65 (Health and Safety Code Section 25249.5 and following), a private party enforcer (or bounty hunter) can sue any employer of ten or more persons who has exposed persons to carcinogens or reproductive toxicants on the governor’s lists.  I’ve blogged about this here, and have a white paper on the subject here.

Anyway, before filing suit, the bounty hunter has to give sixty days notification to the potential defendant and the attorney general under section 29249.7(d)(1).  That’s what the bounty hunter did in CKE Restaurants, Inc. v. Alicia Moore (January 24, 2008) ___ Cal.App.4th ___ (Fourth Dist., 2nd Civil No. B197077).

CKE, which owns a bunch of Carl’s Junior Restaurants, responded by suing Moore for declaratory relief that its restaurants were in fact in compliance with Proposition 65.  CKE contended it was basing its suit on the declaratory relief mechanism authorized by the Court of Appeal in Baxter v. Denton (2004) 120 Cal.App.4th 333.  (Full disclosure: CalBizLit’s alter ego, Bruce Nye, was co-lead counsel in the Baxter trial and lead appellate counsel.)  Unfortunately, the evidence in support of its contention consisted of test results from one set of fried food products from one restaurant in the chain.

Ms. Moore filed a special motion to strike against CKE under California’s anti-SLAPP (“strategic lawsuit against public participation”) statute, Code of Civil Procedure section 425.16.  The court held that the filing of a Proposition 65 notice is a protected activity in furtherance of her right of petition or free speech (something previously decided by the Supreme Court in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68.  Thus, the defendant, CKE, had the burden of showing a probability it would prevail on the merits, or its complaint would be stricken.

The problem is, CKE had done its testing on the cheap: instead of conducting an in depth survey of all of its restaurant, sampling on different times, different places, under different conditions, CKE had its attorney go to one store, and buy orders on one occasion of a small amount of food from that single restaurant.   It then had a lab test the food and offer evidence that those samples didn’t contain enough of the chemical in question (naphthalene) to exceed the “no significant risk level.”  Since the sampling was inadequate, and Plaintiff’s own testing showed quantities of napthalene well in excess of the NSRL, the court held that CKE had not met its burden, and its complaint was properly stricken.

California’s anti-SLAPP statute is a really interesting subject for businesses, and I'm going to try to post a white paper on the subject some day soon.

Off-topic post:

Here's some great Count Basie for your Friday:

Cal Supremes Dismiss Potential Major Case Re: Science and the Law

In early 2005, the California's Court of Appeal for the Second District issued a fascinating (and highly favorable for defendants) decision in the toxic tort, solvent-exposure case Lockheed Litigation Cases, B166347.  In a case involving the admissibility of the opinions of the notorious and well-traveled  Dr. Daniel Teitelbaum , the Court of Appeal held that California Evidence Code section 801(b) allowed the trial court to act as a gate-keeper -- much as in Federal Court under Daubert --and excluded Teitelbaum's opinions because they were based on epidemiological studies of multiple solvent exposures, with no indication that there was a risk posed by the specific solvents involved in this case.  The Court also found no error in excluding expert opinion based on case reports, animal studies and toxic registries.  In short, the decision answered all kinds of frequently encountered toxic tort evidentiary questions, moved California a bit closer to Daubert, and contained much anti-junk science ammunition for defendants in these cases.

The California Supremes granted review a couple of months later, and under California law, this made the decision unciteable, and not authority for anything.  But it did look as though we would see some really useful evidentiary authority from the Supreme Court once the case was briefed and argued at that level.

No such luck.  Last week, the Supremes dismissed the review under very unusual circumstances:  that a majority of the members of the seven-justice court had been required to recuse themselves.  This despite the fact that rules of court (and common practice) provide for appointment of "pro tem' justices when members are disqualified, and on at least two past instances -- none recently -- all seven justices have been recused and replaced by pro tems.

So the current situation is that the Lockheed decision has no effect on anyone but the immediate parties, and the law on admissibility of expert testimony remains as wide-open as ever. 

(N.B.:  For more on expert testimony in a world without Daubert, see the Adams Nye white paper on product liability law starting at page 9, or my post here.)

(More N.B.:  The link to Dr. Teitelbaum above is to news about another California case where he testified, a case where the plaintiffs -- his clients -- lost.)

Attorneys' Fee Awards: Big City Lawyers In Small Towns

A good deal of the litigation our firm defends involves the risk – or even the certainty – that one side or the other is going to be awarded attorneys' fees at the end of the proverbial day. 

• Much of our firm’s contract litigation involves contracts providing that fees go to the prevailing party.  Under Civil Code section 1717, even if the contractual provision only goes in one direction (e.g., the contract provides for fees to the company if it successfully defends suit), California law makes the provision reciprocal, allowing fees to the prevailing party on either side.
• Much of our firm’s consumer litigation is brought under the Consumer Legal Remedies Act or Song Beverly Consumer Warranty Act, both of which specifically provide for attorneys’ fees for a successful plaintiff.
• In our dealership work, the Automobile Sales Finance Act provides for fees for the successful plaintiff, while the Automobile Leasing Act provides for fees for the prevailing party, plaintiff or defendant.
• And then there is California’s private attorney general act, Code of Civil Procedure section 1021.5, which provides for attorneys’ fees for a successful party in a case which “has resulted in the enforcement of an important right affecting the public interest” under certain circumstances.  This statute is just about always in play in Proposition 65 matters and Unfair Competition Law cases.

All of this means that, in many cases, the attorney fee award is like the bomb that gets dropped at the end of the case:  the plaintiff or plaintiff class is awarded (or settles for) a modest amount of money.  Then comes the attorneys’ fee petition, seeking for the attorneys many multiples of what the plaintiff (or the plaintiff class) received.  And, on top of everything else, the plaintiff attorneys are likely entitled to their fees incurred in obtaining fees.

Under California’s leading case of Ketchum v. Moses (2001) 24 Cal. 4th 1122, an attorneys’ fee award is to be based, in part, on the hours reasonably spent times the prevailing hourly rates for attorneys in the same community conducting noncontingent work of the same type.  The resulting figure (the “lodestar”) may then be adjusted upward or, occasionally, downward, based on a variety of factors which have been developed by the courts.  Serrano v. Priest (1977) 20 Cal.3d 25;  Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128.

What happens, though, when a firm charging big city rates comes to the small town?  Under Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, the out of town firm may receive the out of town rate if it demonstrates that the plaintiff could not have received adequate representation using local counsel.

Now a new case fleshes out the limit of this rule.  In Nichols v. City of Taft (October 2, 2007), ___ Cal.App.4th ___, F051477, Morrison & Foerster (a San Francisco based AmLaw 100 firm universally known as “MoFo”) brought a case in Kern County under California’s Fair Employment and Housing Act, which provides for attorneys’ fees for successful plaintiffs.  On the eve of trial, the parties settled the case for $175,000, reserving to MoFo the right to move for attorneys’ fees. 

And move MoFo did, claiming some $507,000 at hourly rates as high as $550 (again demonstrating that CalBizLit and his partners are woefully underpaid).  The City challenged the rates, demonstrating that the highest hourly rate charged in the community was $250.

The trial court agreed, reducing the hourly rates accordingly.  But what the trial court took away with one hand, it gave with the other.  It concluded that it was required to use a “multiplier,” (i.e., an upward enhancement) to compensate MoFo for the fee reduction. It then applied a multiplier of 33 1/3%, bouncing the fee award back up to more than $470,000.

No dice, said the court of appeal.  The trial court was right in using local rates.  But it was wrong in using the multiplier (which MoFo had not even requested) to repair the damage.  Not only was the trial court not required to use a multiplier to compensate for a rate reduction, it was prohibited from using the multiplier for this purpose.  So the case was remanded to see if there was any other basis for applying a multiplier, or if MoFo would have to just struggle along with an award based on local rates – a mere $302,000.

As a side note, the defendant also argued that the $302,000 was too high because it was out of proportion to the result obtained.  But that argument fell flat.  The court added to the legion of other opinions holding that the defendant can’t drive the plaintiff’s hours off the chart with an aggressive defense and then argue that the lawyers spent too much time on the case.  A similar holding is in a case issued just yesterday, Cruz v. Ayromloo (October 3, 2007) ___ Cal.App.4th ___ (B190159), in which the court also stated clearly (albeit in dictum) that the lodestar should not be reduced just because the attorneys took the case “pro bono.”

DePirro v. Bondo Corporation

I commented in the last post about the jury issue in DePirro -- no right to a jury trial in Proposition 65 matters, period.  But there's much more, and it's all of interest to, and mostly favorable to, companies defending Proposition 65 matters.

More after the jump.

Proposition 65 Breaking News -- No Jury Trial Right

This just in:  California courts have repeatedly held that the California Constitution provides for the right to jury trial only in cases that were cognizable "at law" in 1850, when the state was admitted.  This extends to cases of the same "class" or "nature" as those existing in 1850.

We've long taken the position that this means no right to a jury trial in Proposition 65 matters.  And now, the First District Court of Appeal says we are right in DiPirro v. Bondo Corporation, A110913.

This is a fifty page decision with all kinds of other interesting stuff, almost all favorable for companies defending this litigation, and I'll try to blog more on it later today or tomorrow.

Update:  The link to the Bondo decision has been fixed.  Thanks to the reader who alerted me to the error.

White Papers Available

I'm introducing something new today.  Bearing in mind that this site is designed for companies, in-house and outside counsel whose involvement in California litigation is infrequent, but painful, and bearing in mind that the blogging format doesn't really lend itself to lengthy, detailed exposition, I'm adding a feature.  From time to time, our firm generates "white papers," detailed, non-technical and somewhat irreverent discussions of California law that may be of interest to our firm's clients and our out-of-state co-counsel.  Beginning today, I'm going to start making some of these available on CalBizLit.com.  Over on the side bar is a new list, where I've included links to our Proposition 65 white paper (which has been available from a couple of earlier posts) and a new Product Liability white paper.  Both are downloadable pdfs, and I hope they are helpful.  I'll be adding more in the coming months.

Proposition 65 Primer: Three Views

I’ve been wanting to write an extensive post about California’s Proposition 65 ever since starting this blog, and so far have not been able to sufficiently check my cynicism at the door or find the time. But I’m going to give it a try now. Please remember, this blog is designed for businesses, and their lawyers, who aren’t so fortunate as to be involved in California litigation every day—i.e., readers for whom our mysterious litigation ways are a rare and strange adventure. So if you’re located in this state, or practice law here, your reaction to what comes next may be “so what?” or, if you favor the consumer side of things “so what’s wrong with that?”  If you’re part of the Proposition 65 Bar, on either side, you’ll not hear or learn anything new here.

For the rest of you, come with me for a tour on one of the strangest environmental protection schemes ever devised.

More after the jump

Proposition 65 -- The Madness Continues

I'll be writing a more detailed post on Proposition 65 early in the new year.  And if you want our firm's perspective in detail, you can read all about it in an Adams Nye White Paper. 

But Kevin Underhill writes today at Overlawyered about the Physicians Committee for Responsible Medicine's recent suit against McDonald's, Burger King and Outback Steak House seeking injunctive relief and penalties because those restaurant chains failed to warn consumers that they cooked meat.  Right.