Prop 65 Tobacco Litigation

Three major enforcement actions were filed against tobacco manufacturers and retailers by California cities. The first action was filed by the City and County of San Francisco in San Francisco Superior Court. San Francisco v. US Tobacco claims that exposure to smokeless tobacco products requires warnings under Prop 65.

An action filed by Los Angeles City Attorney James Hahn, People v. Philip Morris, commenced in Los Angeles Superior Court on July 14. It was followed by an action filed by San Jose City Attorney Joan Gallo in San Francisco Superior Court on July 28. Gallo filed two cases, People v. Brown & Williamson Tobacco Corp., and People v. General Cigar Co. The cases target alleged violations of Prop 65 by manufacturers and retailers for the claimed failure to warn over exposures to second-hand smoke. Tobacco smoke is listed under Prop 65, as are a number of constituents of tobacco smoke. Both cases include private enforcers seeking to jointly enforce Prop 65 and the Unfair Competition Statutes against the defendants.

On November 2, 1998, the Los Angeles Superior court granted the cigar manufacturers' motion for summary judgment. The defendants argued that an earlier settlement over Prop 65 exposures from cigars stood as res judcata, barring the new claim, even though one claim was directed at primary smoke, and the new claim was directed at second-hand smoke. The court held that Prop 65 created only one primary right of action, and the addition of new chemicals to the list after the earlier settlement did not allow a new lawsuit.

In the Los Angeles action, the defendants attacked the ability of the Preston, Gates firm to represent the City of Los Angeles as a plaintiff. The defendants claimed that the contingency fee agreement between Los Angeles and Preston, Gates violates California Supreme Court precedent which appeared to bar such fee arrangements. On October 20, 1998, the court denied the defendants' motion to disqualify the private law firm.

Meanwhile, a significant dispute has arisen as to the relative rights of the enforcers who have sued over tobacco exposure. Los Angeles City Attorney James Hahn has argued that he has statewide authority to enforce Prop 65. The Attorney General has responded that Hahn has authority in Los Angeles, the San Jose City Attorney has authority over exposures in that City, and that private enforcer Paul Dowhill, who served the inital 60-day notices has authority everywhere else in the state.

Rulings continued to issue from the courts over federal preemption and res judicata.

On October 29, 1998, the San Francisco court overruled the cigarette manufacturers' defendants, holding that they had a duty to provide Prop 65 warnings for knowing and intentional exposures to second-hand smoke. The court also ruled that the Prop 65 claims were not preempted by the Federal Cigarette Labeling and Advertising Act, as they were "neither 'based on smoking and health' nor 'with respect to advertising and promotion.'"

On November 19, 1998, the San Francisco court overruled demurrers filed by the cigar manufacturers, holding that the previous settlement with the State of California did not bar the current lawsuit under Prop 65. The court held that the prior action did not cover violations occurring since that action, and did not cover second-hand smoke.

On November 23, 1998, the Los Angeles court overruled the federal preemption demurrers of the cigarette manufacturers, also concluding that the federal act did not cover second-hand smoke.

The San Jose and Los Angeles actions were coordinated in San Diego County.  In October 1999, the San Diego coordination judge, Ronald S. Prager, issued a ruling holding that the 1988 cigar settlement barred the cities' Prop 65 enforcement actions, even though the new cases are based on environmental exposures (as opposed to exposures to smokers themselves) and included additional chemicals listed under Prop 65 after the state settlement.

Also, the court denied a motion for preliminary injunction in which the cities sought to require the manufacturers to fund a media campaign publicizing the dangers of environmental tobacco smoke.  The court ruled that Prop 65 does not allow a remedy, and even if it did, such a remedy would be the ultimate relief, and not appropriate at the preliminary injunction stage.  It also might infringe the manufacturers' First Amendment rights.  The court also rejected the cities' request for an injunction requiring Prop 65 warnings, because of factual issues to be resolved at trial, including whether there was a duty to warn nonsmokers, are exposures at a level which requires a warning, and whether current warnings provide adequate warnings to nonsmokers.  The court believed that there was no need to require any additional warnings prior to trial, which has been set for February, in part because the public is already knowledgeable about the dangers of secondhand smoke.

On January 5, 2000, the court entered additional rulings, summarized below:

• The court denied a motion for summary judgment on res judicata and collateral estoppel from the earlier tobacco judgment, to the extent that such claims were for non-monetary relief and for conduct which post-dated the earlier judgment.
• The court denied a motion for summary adjudication on the claims for unfair and deceptive business practices, holding that triable issues of fact existed.
• The court granted the defendants' motion for summary adjudication with respect to the claimed failure to warn of exposure to second hand smoke, under both Prop 65 and the Unfair Competition Statute.  The salient portion of the ruling is as follows:

"Pursuant to [Prop 65], the existence of a duty to warn is contingent upon a 'knowing and intentional exposure.'  As used in the conjunctive, the 'knowing and intentional exposure' must be said to require more than a mere knowledge or foreseeability on the part of a consumer product manufacturer that an exposure may at some unknown time, place and circumstance be occasioned by the ultimate consumer's customary use of the product.  In defining a more narrow duty in line with the dual requisite that is both "knowing and intentional", the court is particularly swayed by the findings of the San Francisco Superior Court in the 'Diesel Cases' in which it held that a 'knowing and intentional exposure' within the meaning of [Prop 65] requires also the existence of control over the usage of or release from the consumer product it manufactures and/or distributes that ostensibly occasions the exposure. . . . .  This conclusion finds further support in both the regulations promulgated by the lead regulatory agency entrusted with implementation of the §25249.6 statutory dictate and the historical prosecutorial actions of the chief law enforcement officer of this state primarily entrusted with its enforcement. . . .   Last and perhaps most noteworthy is that the plethora of published appellate cases proferred by the parties all pertain to the imposition of a duty to warn on the manufacturer only in relation to consumers of the manufactured, not non-consumers who may ultimately be exposed to constituents within the product utilized by the consumer outside the control of the manufacturer. . . .  As the evidence proferred is undisputed and establishes Defendants' wholesale lack of control over the exposure of 'second hand smoke' to non-consumers, as a matter of law it must be said that Defendants herein owed Plaintiffs no duty to warn non-consumers of second hand smoke that may have been emitted by the ordinary use by consumers of the tobacco products manufactured and distributed by Defendants."

Final Judgment Entered in Coordinated Tobacco Litigation

On November 20, 2000, final judgment was entered in People and Dowhall v. Brown & Williamson Tobacco Corp. (the Dowhall litigation) and People v. Philip Morris, Inc. (the AESI litigation), pursuant to settlements reached by the parties. In Dowhall, the tobacco companies and plaintiffs agreed to define the terms of the master tobacco settlement agreement to include research on second-hand tobacco smoke, and consistent with the release of claims included in the master settlement agreement, the claims would be dismissed with prejudice.  The companies agreed to pay $500,000 in attorney's fees and costs to the plaintiffs in Dowhall and another $500,000 to AESI. 

Private Tobacco Litigation Dismissed; New Cases Stayed

On August 3, 1999, Judge Mitchell of the Los Angeles Superior Court sustained demurrers to complaints filed by Consumer Advocacy Group and Consumer Cause, represented by Morse Mehrban.   The court held that the notices were deficient, because:

• they failed to allege any sales which allegedly result in consumer product exposures;
• the notices for occupational and environmental exposures failed to identify the actual location of each site, and were not sufficient to refer to all stores or facilities in a chain;
• the notices for occupational and environmental exposures failed to identify the location within the source of the alleged exposure;
• the plaintiffs failed to provide notice to District Attorneys in certain Counties.

The demurrers were sustained without leave to amend, and plaintiffs have appealed.   Meanwhile, Judge Kough of the Los Angeles Superior Court stayed all pending and future related tobacco litigation which was related to these cases, on the ground that "if the appeal results in a reversal of the dismissal, these cases should all be heard together."  The court also noted that the matter should be stayed because the validity of plaintiffs' request for restitution on behalf of the general public under Business & Professions Code § 17200 was currently pending before the Supreme Court.

Dismissal Based on Insufficient Notices Upheld by Appellate Court

On April 25, 2001, the Second Appellate District, Division Four, upheld the dismissal of a number of Consumer Cause lawsuits against hotels, restaurants, and other business, over exposure to tobacco smoke in Yeroushalmi v. Sheraton Miramar.  The court found that all of the notices served by plaintiff were insufficient to establish a Prop 65 violation and allow a suit to proceed:

"The Westin and Miramar notices describe the consumer exposure as exposure to "tobacco smoke and cigars." Appellants contend that the phrase is a reasonably clear description of the alleged violation, and provides adequate information from which to allow the recipient to assess the nature of the violation. (See Cal. Code Regs., tit. 22, § 12903(b)(2).) We disagree.

"Like the Arco notice, the Westin and Miramar notices do not even give enough information to discern just what the violation was. The notice names the harmful substances, and alleges exposure through "inhalation, ingestion, and dermal contact," in nearly the exact words of the regulation. (Cal. Code Regs., supra, § 12601(d).) Thus, the notices suggest that the violation consisted of contact, but state no facts describing how the contact occurred, and neither the dates of exposure (a period of years) or the description of persons exposed (every general class of employee respondents might have) provide any clarification."

The court relied on federal authorities construing similar citizen suit provisions, which it found  were the basis for Prop 65's citizen suit provision:

"[T]he purpose of the notice provision is to encourage public enforcement, thereby avoiding the need for a private lawsuit altogether, and to encourage resolution of disputes outside the courts.

"It is likely that the framers of Proposition 65 were aware of the analogous federal authorities, and intended the same construction to placed upon the provisions similar to those found in the federal Clean Air Act and Clean Water Act. We thus conclude that the framers of the initiative intended that the notice contain sufficient facts to facilitate and encourage the alleged polluter to comply with the law, and to encourage the public attorney charged with enforcement to undertake its duty." 

Ultimately, the court held that:

"Neither settlement nor an official investigation is likely to result from a pro forma notice that the citizen intends to sue in 60 days for any violation relating to tobacco smoke or cigars which discovery might turn up. Appellants' notices, which simply regurgitate the language of the regulation, without stating the most basic facts to describe the nature of the violation, cannot be said to provide adequate information to allow the assessment of the nature of the alleged violation."

Download the opinion [Word/pdf].

Court Holds Additional Notices Insufficient

In an order issued on March 21, 2002, Judge Kough held that several notices served by plaintiffs were not sufficient. Her broad ruling encompassed a number of issues presented by the moving defendants, including the following findings:

• the description of the products as "cigars," and in some cases, describing the exposure as occurring after consumers lit, smoked, and inhaled cigar smoke, consituted a valid description for consumer products exposures
• the description of exposures occurring to all employees in various locations of hotels as insufficient description of occupational exposures
• the description of exposures occurring in lobbies, smoking rooms, and guest rooms as insufficient description of environmental exposures
• plaintiff failed to properly serve some local prosecutors, rendering its notice invalid for those defendants
• all causes of action for unfair competition were based on the underlying Prop 65 claims, so the court granted judgment on the pleadings in favor of the defendants due to the order granting the motions on the underlying Prop 65 claims.
• the statute of limitations on the Prop 65 claims was one year, but the unfair competition claims was subject to a four-year statute.

Smokeless Tobacco Litigation Settlement Reached

A December 18, 2001 press release from San Francisco City Attorney Louise Renne announced that a settlement had been reached between the City and manufacturers of smokeless tobacco and snuff. The companies will pay $2.75 million; $1 million is earmarked for legal fees for the counsel for the private enforcer, and the remaining $1.75 million will be spent anti-tobacco education. Over 30,000 warning signs will be distributed throughout the State of California and posted by retailer defendants.

OEHHA Issues Fact Sheet for Tenants

In response to confusion generated by mass posting of Prop 65 warnings by landlords either subject to or seeking to avoid Prop 65 enforcement actions, on September 10, 2002 OEHHA issued a Proposition 65 fact sheet for tenants. [html/pdf] The fact sheet notes:

"A growing trend among rental property owners and other businesses is to provide warnings for chemicals on the list, such as tobacco smoke or motor vehicle exhaust, which are regularly released into the environment in or near rental housing. In some cases, however, owners and managers are providing warnings to avoid potential violations and lawsuits, even though exposure to chemicals on the Proposition 65 list has not been verified. You should discuss the warning with the owner or manager to learn why it was provided so that you and your family can make informed decisions about exposure to any of these chemicals and your health."

Enforcer Sued by Defendant

A June 18, 2002 complaint seeks to hold Consumer Defense Group liable for malicious prosecution of a second hand tobacco smoke matter. In the case, Beacon Property Management v. Consumer Defense Group, filed in Orange County Superior Court, the plaintiff property management companies allege that they were sued for alleged Prop 65 violations in Orange County, but none had done any business in Orange County. The defendant (plaintiff in the enforcement action) had refused to agree to change venue of the case, and refused to respond to discovery. Just prior to a scheduled deposition, the defendants dismissed their enforcement action.

The malicious prosecution action states that "It is now time for the frivolous lawsuits of the Consumer Defense Group and its counsel to come to an unceremonious end. Defendants have filed hundreds of extortionate lawsuits against honest corporations in the 'public interest' that attempt to scare the targets into settlement with the threat of a huge jury verdict." The suit seeks the cost of defending the underlying lawsuit and punitive damages, and contains causes of action for malicious prosecution and abuse of process.

And the Enforcer SLAPPs back

According to a letter sent by Anthony Graham to Prop 65 News, Beacon's malicious prosecution suit was dismissed as an improper SLAPP lawsuit by Orange County Superior Court judge, and the underlying suit was never, in fact, dismissed. Graham's letter laid out the following chronology:

• On March 21, 2002, CDG filed its complaint.
• In early May, 2002, Graham was approached by counsel representing the CAA, on behalf of their membership, comprising the majority of the California apartment industry. After three weeks of negotiations a “global” settlement proposal was agreed between the parties. Pursuant to that agreement, CDG agreed to dismiss without prejudice all current defendants involved in Proposition 65 cases relating to the apartment industry in order to give all such parties (including the Defendants) a reasonable opportunity in which to evaluate the proposed settlement.
• On May 24, 2002, Graham informed Mr. Ferrell (attorney for Beacon) in writing of the proposed settlement, and specifically informed Mr. Ferrell that CDG would be dismissing his clients solely in order to allow them a period of time in which to review and evaluate the terms of the proposed global settlement. Graham also informed Mr. Ferrell that, should his clients choose not to enter into the settlement the underlying lawsuit would be re-filed, and that a full and appropriate investigation of their facilities had been accomplished both prior to the service of the sixty day notice.
• At the same time, Graham provided this information to all other defendants in the six remaining actions. A number of these defendants, having reviewed the CAA proposed settlement, requested that CDG not dismiss them from the pending actions but rather enter into individual settlements with those defendants. CDG agreed to do so since its proposed settlement with CAA did not preclude such settlements.
• On June 6, 2002, Mr. Ferrell wrote to Graham requesting a copy of the Request for Dismissal. That same day Graham contacted counsel for Defendants to inform him of the responses received from other defendants and to offer them the opportunity to consider an individual settlement. The individual offer was to remain open until June 10, 2002, at which time, if his clients had not accepted the individual settlement offer, CDG would proceed with the dismissal pursuant to the CAA agreement.
• On June 10, 2002, having received no response of any kind from Mr. Ferrell, Graham filed requests for dismissal relating to the underlying lawsuit. On June 12, 2002, Graham confirmed that the requests for dismissal had been filed, attached copies of the requests and noted that Graham would serve Mr. Ferrell with a Notice of Dismissal once he received an executed copy of the dismissal from the clerk.
• On June 18, 2002, prior to entry of dismissal, Mr. Ferrell sent Graham a letter, attaching a copy of the SLAPP complaint filed that day. The letter goes on to state the following:
  • By now you know that my clients have both the means and the inclination to pursue this case to trial, and that we intend to obtain a substantial judgment against the Consumer Defense Group, Graham & Martin, and you personally. Nevertheless, if you would like to resolve this dispute without further litigation, my clients would be willing to settle their claims against you and the other defendants for: (1) complete reimbursement of their legal fees in this action and the underlying lawsuit; (2) payment of $100,000 from each defendant; and (3) an appropriate covenant not to institute any future proceedings against any of my clients. If you or the other defendants are interested in this scenario, please feel free to contact me.
• Graham did not respond to this letter. On June 25, 2002, he received notice from the Court that the request for dismissal as to the Defendants had not been entered due to an administrative error.
• On July 5, 2002, Graham filed a Special Motion to Strike pursuant under the anti-SLAPP statute. Mr. Ferrell then immediately moved ex parte in the underlying lawsuit to demand that the dismissal be entered by Judge Jameson pursuant to the terms of the CAA settlement, while at the very same time moved ex parte before Judge Gallivan for additional time to prepare an opposition to the Special Motion because he needed time to, in his words, gather “substantive evidence” to support his complaint. Judge Jameson denied the ex parte application.
• On August 12, 2002, prior to the hearing on the Special Motion, Mr. Ferrell dismissed his SLAPP suit, without filing an opposition. Graham then filed a motion for attorneys’ fees and costs.
• Mr. Ferrell then filed a demurrer to the underlying complaint, asserting that the form of 60-Day Notice used was insufficient. On September 18, 2002, Judge Jameson denied the demurrer.
• On the same day, Judge Gallivan, in ruling on the motion for attorneys fees and costs, found that the malicious prosecution action filed by Mr. Ferrell was a SLAPP suit.

AG Opposes Industry-Wide Settlement

An October 23, 2002 letter from Supervising Deputy Attorney General Ed Weil to Anthony Graham took issue with several aspects of a proposed settlement between Consumer Defense Group and (1) Hotel Sofitel and Accor North America, Inc., (2) Kintetsu Enterprises Company of America, (3) Wyndham International, Inc. and Patriot American Hospitality, (4) Hilton Hotels Corporation (and related entities), (5) Pacifica Hotel Company, and (6) LaQuinta Corporation (and related entities), finding that they "contain numerous provisions that do not comply with the law." The AG's letter made the following comments (many of which have potential application to other facilities, commenting upon the adequacy of warnings, payments to plaintiffs, and sufficiency of 60-day notices:

• The use of the “generic” environmental warning sign, “WARNING: This Facility Contains Chemicals Known to the State of California to Cause Cancer and Birth Defects or Other Reproductive Harm” is troubling because of the extent to which it is being used to provide warnings for a variety of possible exposures. . . . Depending on the size, appearance, and exact location of the sign, it may meet the “likely to be seen” test, but as applied to many of these exposures, it is not “reasonably associated with the source and location of the exposure.” Where the sign is posted near a room where smoking is allowed, or near a parking garage where auto exhaust is present, the warning may be reasonably associated with the exposure, because a reader might infer that it relates to chemicals present in the ambient air in that area. That sign, however, is not in any respect associated with the wide variety of exposures purportedly covered by these settlements, including food, cleaning supplies, alcoholic beverages, and pesticides. The sign would provide that additional information is “available at the Registration Desk,” but the settlement provides no requirements for that information. Proposition 65 has never been construed to authorize warning methods for which the consumer actually has to request the relevant information.
• The general sign proposed by Hilton, in which it is stated that some products in the store “may contain” listed chemicals, has been proposed by industry as a solution since the statute was adopted, and rejected by the lead agency and the Attorney General whenever it has been raised. The somewhat different sign proposed in the other settlements does not identify the products to which it refers, and if it is posted in a store as a general warning about unidentified products in the store, would be inadequate. Moreover, because all of the settlements assert that compliance with their terms satisfies all duties to warn for the chemicals contained in the notices, they actually purport to extinguish the duty of the hotels to provide warnings for other exposures for which the duty to warn has been clearly established–alcoholic beverages, lead in tableware or crystal (if they are used), smokeless tobacco, or other items.
• We cannot determine whether the payment [to the plaintiff as specified in the settlements] is a civil penalty or another payment to be retained by the plaintiffs. If the payment is specified as a civil penalty, it would be permissible, subject to the required showing that the amount is reasonable based on the penalty factors set forth in the statute. If these payments are to be retained by the plaintiffs, they do not appear to be appropriate. As you may know, the Attorney General recently proposed regulations establishing settlement guidelines under which such payments would be analyzed as payments in lieu of penalties. While these guidelines have not yet been adopted, they would require that “the funded activities have a nexus to the basis for the litigation, i.e., the funds should address the same public harm as that allegedly caused by the defendant(s) in the particular case.” (Proposed 11 CCR § 3202(b)(1).) They also would require that the entity receiving the funds be able “to demonstrate how the funds will be spent and can assure that the funds are being spent for the proper, designated purpose.” (11 CCR § 3203(b)(2).)
• In this instance, simply noting that the plaintiff is “formed for the purpose of furthering environmental causes,” does not even purport to restrict the use of the funds in any way. The following paragraph, 5.2, then recites the purposes of the plaintiff organizations somewhat more specifically, but again does not purport to restrict the use of the funds. Moreover, so far as we know, the plaintiffs are not registered as not-for-profit corporations, nor o we have any other description of their status that would enable us to conclude that they are an appropriate, accountable recipient of such funds. Some of the settlements provide for certain contributions to the American Cancer Society. Even for these contributions, some limitation on the use of the funds should be provided.
• In reviewing the notices, it appears that the identification of tobacco smoke and auto exhaust exposures may be sufficient. The remaining categories are composed of a paragraphlong recitation of every conceivable type of exposure that might occur within a given category–“soaps, shampoos, conditioners and mouthwash,” “paints and solvents,” “mineralbased fiber boards,” “organic fuel sources,” “fertilizers and soil amendments,” and literally any kind of food or beverage. For each category, the notice recites a number of Proposition 65 listed chemicals that may be involved in the exposures. (A total of 52 listed chemicals are identified in a separate attachment.) No specific brand-name products are identified. With the possible exception of the allegations of exposure to tobacco smoke and auto exhaust, the notices are patently inadequate. The other alleged exposures are not adequately defined. While the notices here are longer and more detailed than those in Yeroushalmi, they cover so many possible exposures that few, if any, are identified with sufficient detail to allow any reasonable assessment of the claim. The notice appears to be an effort to describe every imaginable exposure within the scope of Proposition 65 and include it in the notice, without regard to whether the noticing party has any actual basis for making the allegation. In addition, while the notices in question attach a Certificate of Merit, they included no supporting factual information. Proposition 65, as amended by SB 471, requires that the certificate attach “[f]actual information sufficient to establish the basis of the certificate of merit,” including “the identity of the persons consulted with and relied on by the certifier, and the facts, studies, or other data reviewed by those persons[.]” (Health and Safety Code §§ 25249.7(d)(1), (h)(2).)

The AG's letter promsed that if these settlements "are submitted to the court for approval as currently drafted, we will appear in court and oppose their approval." The settlements were submitted, the AG filed an opposition to the settlement, and the court's November 21, 2002 tentative ruling proposed to disapprove the setlement on the grounds asserted by the AG. The court requested that the parties modifiy the settlement to address those concerns.

This page last updated Sunday, February 23, 2003