Courts Reviewing Settlements Under SB 471 Review Process

Many in the defense community (myself included), and perhaps some in the environmental community, believed that the reforms enacted by SB 471 would have little impact on the vast majority of Prop 65 enforcement actions. While the reform bill included provisions that required court approval of settlements, including findings related to the propriety of attorney's fees, warnings, and penalty payments, most of the recent settlements preceding had been submitted for court approval, which was routinely granted, without much inquiry on the part of the courts. This process was expected by many to continue with such pro forma approvals, but the courts have surprisingly stepped up to take a much more active role in the approval process. Here are some examples of recent court activities.

Alameda Court Holds that Consent Judgments not Approved Before 12/31/01 Must be Approved by the Court under SB 471.

While the dispute between plaintiff Michael DiPirro and the Attorney General over an allegedly doctored letter from the AG's office was more captivating, the court's ultimate ruling on the settlement in DiPirro v. Virbac (click on link, and then "case summary" and then enter CH219690) was likely more important to other parties. On February 22, Judge Yolanda Northridge of the Alameda Superior Court held that requiring plaintiffs to comply with the settlement approval procedure for any settlements that had not been approved as of January 1, 2002 did not create a retroactive application. She added that it was "absurd to subscribe to the notion that the Legislature desired to postpone application of court review of attorney's fees," as "one of the purposes of the new amendments is to give the court oversight of the reasonableness of attorney's fees sought in these cases." The order also stated that "The fact that DiPirro may be deprived of some attorney's fees that he might have otherwise attempted to procure under the settlement does not amount to a deprivation of a vested right."

San Francisco Court Limits Use of Payments in Prop 65 Settlements

Judge A. James Robertson II caused a stir this spring when he ordered supplemental briefing from the parties, and sought the Attorney General's input over the terms of proposed consent judgments filed by Mateel Environmental Justice Foundation (in lead crystal litigation) and As You Sow (in Chinese herbal medicine litigation). At issue was whether the court could award "restitution" payments under California's Unfair Competition Law. Such awards on behalf of money allegedly taken from absent consumers by means of unfair comptetion have been curtailed by the California Supreme Court. Nearly every Prop 65 enforcement complaint contains an unfair competition claim, and many enforcement cases settle with monetary payments designated as restitution, in order to avoid statutory Prop 65 penalties. Robertson questioned whether he had the authority to approve settlements containing restitutionary payments, when the court was without authority to order such money disgorged from a defendant.

In addition to briefs filed by Mateel and AYS, amicus curiae briefs were filed by a coalition of environmental groups, a coaltion of business interests, and the AG. The briefings elicited a wide range of viewpoints on the validity of restitutionary payments. Both plaintiffs were willing to denominate they payments as ones made "in lieu of civil penalties." AYS stated that this clarification allowed payment of the funds, as the payments to be made to non-profit groups in lieu of penalties were not in violation of public policy. Mateel's brief argued that restitutionary payments were allowed in a consent judgment, even if the court could not award them over a defendant's objections.

The amicus brief filed by the Environmental Law Foundation and other environmental groups argued that the restitutionary payments were valid because the defendants had agreed to their inclusion in the settlement, and could be used for other purposes than restitution. They asserted that such non-restitutionary remedies were a "vital element of Proposition 65 enforcement. "Since damages are not available in these actions, a principal aid to plaintiffs' ability to waive claims for substantial non-monetary monetary relief (or, in the case of Proposition 65) in return for defendants undertaking substantive (and costly) changes in their practices.

The AG's amicus brief pointed to the settlement guidelines contained in his proposed regulations to determine--generally--that payments "in lieu of civil penalties" were not prohibited, and if followed, plaintiffs could not "simply use Proposition 65 enforcement cases to raise funds [f]or their own benefit. Instead, legitimate, effective standards can be fashioned to assure that settlements further the objectives of the statute while allowing compromise and flexibility." The AG stated that he was not prepared to object to the particular settlements before the court, because of "the relative lack of guidance available to the parties at the time they negotiated this settlement." He did state that the terms relating to the purpose of the payments ("for the AYS Proposition 65 Enforcement Fund, which is devoted to reducing exposures to toxic chemicals and to increasing consumer, worker and community awareness of the health hazards posed by toxic chemicals") was "very broad, and raise serious questions as to whether they are sufficiently directed to activities related to the public harm caused by the alleged violation."

The amicus brief filed by the California Chamber of Commerce and other business groups agreed with the other briefs that payments in lieu of penalties were an appropriate and necessary remedy in Prop 65 settlements, but asserted that restitution would be improper because it was unauthorized, and the plaintiff had no right to obtain payments on behalf of absent parties. The business amicus brief argued that the court should use a number of factors to judge the propriety of monetary payments. These factors were drawn from the EPA's Supplemental Environmental Projects Policy, and were consistent with, but more stringent than, the Attorney General's proposed regulations. The business groups argued in the brief and at oral argument that plaintiffs should not directly receive monetary payments, the specific projects be identified in the settlement documents, and that no monies should go to fund litigation activities.

At the May 11 hearing, Judge Robertson held that he would approve the proposed consent judgments, modified to remove any references to "restitutionary" payments, and the defendants were required to agree that the settlements would not bar subsequent claims by individuals for restitution. Judge Robertson also expressly held that the monies could not be used for funding litigation activities, and he would only approve such terms in the future if they were supported by the parties' briefing in support of the settlement. He also requested that the plaintiffs report back to the court and partieswith the actual use to which the funds were put.

Los Angeles Court Rejects Settlement with Payments to Plaintiff

Two rulings in LA Superior Court cases involving Consumer Cause have come to different results on approval of identical settlement terms.

Consumer Cause v. Pep Boys

This case (no. BC258794) which was related to Michaud v. Pep Boys (case no. 01K19050), concerned exposures to chemicals in Pep Boys service areas. A March 20, 1992 letter from the AG's office to Judge Alan Buckner objected to the terms of a proposed consent judgment, and asked the court to either disapprove it, or require the parties to provide more information to substantiate the settlement.

The letter took no issue with the proposed $10,000 in civil penalties. It asserted that the $75,000 payments to Consumer Cause should not be approved for two reasons. First, the AG took issue with the proposed use of the funds for " 'continuing public interest activities in petitioning the judicial and executive branches of California to enforce Proposition 65 against violators thereof' is so vague that it raises serious issues concerning the ability to assure that in fact the funds are used in an appropriate manner." The letter also noted that Consumer Cause is a for-profit corporation, and "we are concerned that the 'discretionary' use of the funds could result in profits inuring to the benefit of private individuals." The letter indicated that the attorney's fees did not appear to be sufficiently documented, and were not deserving of any multiplier.

Despite this strong criticism, Judge Buckner approved the proposed consent judgment on March 28, 2002.

Consumer Cause v. Bausch & Lomb

This case(no. BC254680) involved alleged exposures to mercury from contact lens solutions. A March 12 letter regarding the settlement was sent by the AG's office, but this time only to to parties' attorneys. The letter raised identical issues to the proposed settlement as the letter in Pep Boys, but was not sent directly to the court. In Bausch & Lomb, the settlement called for penalty payments of $5000, $52,500 to Consumer Cause for future enforcement of Prop 65, and attorney's fees of $20,000, based on a "lodestar" of $12,604.50.

At the March 21 hearing, the court inquired of the Attorney General's viewpoints, and ultimately entered an order requesting that the parties submit additional briefing on whether the court could approve a consent judgment that contained "a substantial sum for 'discretionary uses' in future enforcement of Proposition 65," and whether plaintiff was entitled to a multiplier for his attorney's fees. Plaintiff's supplemental brief noted that the consent judgment had been revised by the parties to require the future enforcement payments be made into a court-supervised trust account that would require court approval of all proposed uses of the funds.

Following consideration of the supplemental briefing, the court issued an order on April 9 that it would only approve part of the request, and no future enforcement funds, as follows:

• $12,604.50 in attorney's fees (the lodestar amount)
• $5,000 in civil penalties, as supported by the factors in H&S Code 25249.7(b)(2)

Court Approves Settlement over Objection of Different Enforcer

Despite objections from As You Sow, who had named the same defendant in another enforcement action, on June 25, 2002, Judge A. James Robertson of the San Francisco Superior Court approved a settlement between the Environmental Law Foundation and a defendant in ELF v. Matco-Norca, San Francisco Superior Court no. 308832.

ELF's case concerned lead in valves. According to a motion filed in connection with the settlement approval, sometime after ELF and Nibco reached agreement on a settlement, AYS served its own 60-day notice. The consent judgment was then revised to accomodate some issues raised by AYS, and the plaintiff and defendant moved for entry of consent judgment. A week before the hearing, AYS filed an opposition to the settlement. The opposition alleged that the plaintiffs lacked jurisdiction over all of the claims settled in the lawsuit, that the consent judgment improperly released Nibco from liability in AYS's case, and that the warning provisions were inappropriate. The settling parties, on the other hand, moved to strike AYS's opposition, as AYS had never moved to intervene, that the opposition was filed too late, and that AYS's arguments were without merit.

The June 25 order referenced AYS's opposition, but entered the consent judgment as requested by the parties.

SF Court Approves Settlement of Bleach Litigation Despite Negative Comments from Attorney General

On July 17, 2002, Judge John Stewart of the San Francisco Superior Court approved the entry of a consent judgment in CISC v. The Clorox Co., San Francisco Superior Court no. 315127. The consent judgment resolved CISC's claims that the defendants were responsible for providing warnings for exposures to a host of Prop 65 listed chemicals that were allegedly created when bleach products were used.

A June 26, 2002 letter from Ed Weil took exception to the then-proposed settlement. The letter agreed that warnings would be required when the use of the products caused exposure to chemicals, even though the chemicals were not contained within the products. The letter questioned whether attorney's fees were justified, because the moving papers did not contain any information as to whether any of the defendants' products would actually require a warning, and the AG's own research led him to believe that there were no such products. The letter also questioned the validity of exempting from the warning provisions those bleaches that are registered under FIFRA, since that federal law did not preempt Prop 65. Weil questioned the support for the proposed attorney fee award of $150,000, noting that there was no documentary support for that award, other than a reference to "countless hours" having been spent on the case. The letter also raised a concern that the criteria for the use of $50,000 in payments in lieu of penalties were "too vague to assure that the funds are used in a manner that has an appropriate nexus to the violations at issue here, or for which the plaintiff could be held accountable."

Court Rejects Settlement Because of Overreaching Attorney's Fee Award

On January 7, 2003, Judge James McBride of the San Francisco Superior Court entered an order denying a proposed settlement between Michael DiPirro and a manufacturer of painted glassware, over claims that the paint exposed users to lead. DiPirro v. Dansk International, San Francisco Superior Court no. 406220. Judge McBride did not take issue with the terms of the settlement that addressed the lead content and exposure measurements, and did not reject the up to $100,000 in civil penalties that were required under the consent judgment (only $10,00 were payable immediately, with the remainder paid at various dates if the defendant is able to reformulate its products. He did, however, take issue with the $34,000 in attorney's fees, which apparently included a multiplier, finding that the factors that would justify the application of a multiplier were not present. The settlement also required the defendant to reimburse plaintiff for fees incurred in seeking approval of the consent judgment, but the court's order disapproved of the request for $3,600 for responding to the court's questions and $2,500 in responding to the Attorney General's comments.

Court Rejects Proposed Industry-Wide Hotel Settlement

Numerous objections to a proposed settlement, ranging from insufficient warnings, to improper payments, to inadequate 60-day notices led the AG to object to a proposed settlement in the secondhand smoke litigation, and the court to adopt the objections, sending the parties back to square one. The story is reported in our tobacco litigation page.

This page last updated 2/24/03