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California

After reclaiming its spot atop the Judicial Hellholes® list in 2021, California’s fall to number three can only be attributed to the excessive lawsuit abuse occurring in Georgia and Pennsylvania, as opposed to any improvements made by the Golden State.  Courts across the state continue to allow novel theories of liability to proceed and small businesses are bogged down by frivolous lawsuits. Uninjured serial plaintiffs file hundreds of meritless lawsuits targeting businesses, and ultimately, plaintiffs’ lawyers are the only people benefiting from the state’s unbalanced civil justice system.

 

     

PROP-65 LITIGATION CONTINUES TO BOG DOWN ECONOMIC GROWTH

Proposition 65, a well-intentioned law enacted in 1986, has become one of the plaintiffs’ bar’s favorite tools to exploit. Baseless Prop-65 litigation unjustly burdens companies that do business in California.

Under Prop-65, businesses are required to place ominous warning signs on products when tests reveal the presence of even the slightest, non-threatening trace of more than 1,000 chemicals that state environmental regulators deem carcinogenic or otherwise toxic. 110 chemicals (11.5%) were added in the last decade. Failure to comply can cost up to $2,500 per day in fines, and settlements can cost $60,000 to $80,000.

A troublesome part of the law allows private citizens, advocacy groups and attorneys to sue on behalf of the state and collect a portion of the monetary penalties and settlements, creating an incentive for the plaintiffs’ bar to pursue these types of lawsuits. Each year, they send thousands of notices to companies threatening Prop-65 litigation and demanding a settlement. Food and beverage companies are among the prime targets. Over the last decade (2012-2021), what are known as Prop 65 “60-day notice” filings have increased from 908 in 2012 to 3,185 in 2021, a rise of 251%. These notices are often sent by organizations or individuals to companies asserting a Prop 65 violation, threatening suit, and demanding labeling changes and monetary settlement.

Of even more concern, 33 percent of the 20,510 notices filed under Prop-65 in the past decade were filed in 2020 and 2021. As of October 31, 2,613 notices had been filed in 2022.

The California Office of Environmental Health Hazard Assessment (OEHHA), which manages Prop-65, recently considered proposed rule changes for Prop-65 product warnings. Specifically, OEHHA considered removing restrictions on when a short form warning may be used and removing the “known to cause cancer” tagline from warning labels. Unfortunately, the rule making period expired in 2022 and OEHHA intends to re-start the entire process, further delaying any relief.

The money companies spend on compliance and litigation unnecessarily drives up the cost of goods for California consumers. It also harms small businesses that do not have the in-house expertise or means to evaluate the need for mandated warnings or handle litigation.

Serial Plaintiffs

As is often the case with litigation gold mines in California, serial plaintiffs and their attorneys look to profit from Prop-65 litigation abuse. This activity is primarily driven by several new, aggressive bounty hunter plaintiffs who are searching for payouts despite not suffering any injuries.

According to the California Attorney General’s office, businesses settled 673 Prop-65 claims in 2021 totaling $13.9 million, with greater than 86% of that amount – more than $12 million in total – going to plaintiffs’ attorneys. As of October 31, businesses had settled 564 claims and paid out $12.7 million, with plaintiffs’ lawyers receiving 88.1% or $11.2 million in 2022.

Glyphosate

The most infamous Prop-65 case involves Monsanto’s Roundup® products. California added the popular weed killer’s active ingredient, glyphosate, to the Prop-65 listing in July 2017. Roundup® has been the top target of mass tort product liability litigation television advertising since 2015 with an estimated $131 mil- lion spent on more than 625,000 ads that have aired nationally and locally across the United States.

Regulators and scientists worldwide have deemed glyphosate safe, except for the International Agency for Research on Cancer (IARC), whose study was riddled with controversy. The single IARC report stating glyphosate is carcinogenic is in stark contrast to more than 800 studies submitted to the U.S. Environmental Protection Agency (EPA).

 

2021 Serial Plaintiffs                                                           2022 Serial Plaintiffs (Data as of October 31, 2022)

The EPA concluded in a 2016 paper that glyphosate was “not likely” to be a human carcinogen, and in June 2020, it issued a preliminary determination that the 2016 paper would be its final determination on the human health effects of glyphosate.

Following the EPA’s determination, plaintiffs challenged the agency in court. In Rural Coalition v. EPA, the plaintiffs claimed that the EPA’s determination was not supported by the “substantial evidence” neces- sary to survive review. The EPA pushed back that the paper was sound science, and “inconsistencies” found and “limitations” experienced while conducting the study “precluded [the agency] from coming to any firm determination on glyphosate’s” cancer risk to humans.

In June 2022, the Ninth Circuit ruled that the EPA “cannot reasonably treat its inability to reach a conclusion about [cancer] risk as consistent with a conclusion that glyphosate is ‘not likely’ to cause cancer” and required the EPA to re-evaluate the cancer risk associated with glyphosate. Following this decision, the EPA stated, “EPA’s underlying scientific findings regarding glyphosate, including its finding that glyphosate is not likely to be carcinogenic to humans, remain the same. In accordance with the court’s decision, the Agency intends to revisit and better explain its evaluation of the carcinogenic potential of glyphosate and to consider whether to do so for other aspects of its human health analysis.”

Because of pending litigation brought by the North American Wheat Growers Association seeking an injunction to block California’s attorney general from requiring a cancer warning on glyphosate products, the California Office of Environmental Health Hazard Assessment amended the regulation to no longer require the phrase, “Glyphosate is known to the state of California to cause cancer.” The amended phrasing guidelines still require manufacturers to warn of the risk of glyphosate but allows them to acknowledge that competing studies exist on whether the chemical is linked to cancer.

Personal Injury Cases

California courts’ willingness to rely on junk science has given rise to thousands of baseless personal injury claims against Roundup®. To date, Monsanto has paid out over $11 billion in judgments and settlements across the country. Currently, there are over 30,000 cases pending, including 4,000 in an MDL in the Northern District of California.

In June 2022, the California Supreme Court refused to review another massive verdict in Monsanto v. Pillioid. The plaintiffs sued Monsanto after they both developed cancer allegedly caused by Roundup®. At trial, the jury awarded them over $2 billion, which was later reduced by a superior court to $87 million. The reduced award was later affirmed by an appellate court. Both the California Supreme Court and the U.S. Supreme Court denied review of Pillioid.

The U.S. Supreme Court had another opportunity to restore sanity to the litigation but unfortunately declined to do so in June of 2022. SCOTUS declined to hear Monsanto v. Hardeman, a $25 million verdict involving glyphosate warnings on Roundup®. The Ninth Circuit rejected Monsanto’s argument that fed- eral law preempts the state law claim because the EPA had approved Roundup’s® label. While many states recognize a defense based on compliance with federal standards, California does not. The court held that the EPA’s continued registration of the product and approval of its label does not carry the force of law, a requirement for federal preemption.

In its amicus brief, ATRA argued that “If left uncorrected, [the Ninth Circuit’s decision] will bring disuniformity to federal preemption doctrine, and it will threaten many businesses with billions of dollars of damages liability for failing to take actions that are illegal under federal law.” The Ninth Circuit’s decision will allow lawsuits to severely punish companies for not including cancer warnings on products, even when near-universal scientific and regulatory consensus is that the product does not cause cancer. The responsible federal agency, the EPA, has forbidden such warnings for Roundup’s® active ingredient, glyphosate. The Ninth Circuit’s decision allows a company to be punished under state law for not including a label that is disallowed by federal regulators.

Despite the early major losses mentioned above, Monsanto won the last five consecutive Roundup® trials in Missouri, California, and Oregon after the credibility of the plaintiffs’ expert witnesses and evidence came into question.

Plastics

Another popular Prop-65 target for plaintiffs’ lawyers are phthalates. Ingestion of phthalates has been linked to cancer in rats, but even OEHHA could not link them to cancer in humans, despite adding them to the Prop-65 list. Congress instituted a permanent ban on phthalates in 2008 for use in children’s toys and specifically cited children putting toys in their mouth as reasoning for the ban, but left phthalate use unregulated otherwise. California has a host of phthalates on the Prop-65 list including DEHP, DIDP, DBP and DINP. DEHP is the main source of phthalate litigation. It is commonly used in items such as plastic pack- aging, shower curtains, PVC pipes, tool grips, apparel and footwear.

PHTHALATE SETTLEMENT DATA:

Year # of Settlements (% of all settlements) Total Settlement Payout % of Total Settlement to Lawyers
2021 371 (55%) $7,098,414 88%
2022 (As of Oct. 31) 298 (53%) $5,841,400 91%
Acrylamide

California businesses are fighting back against another Prop-65 labeling requirement for products that contain Acrylamide. Acrylamide is a chemical that can form in some foods during high-temperature cooking processes, such as frying, roasting, and baking. The chemical was added to the Prop-65 list in 1990 as a carcinogen and in 2011 as “causing reproductive and developmental effects.”

In March 2021, a California federal court granted a motion for a preliminary injunction barring the Attorney General and anyone else from filing new lawsuits against businesses for not displaying Acrylamide warnings. In California Chamber of Commerce v. Beccerra, U.S. District Judge Kimberly Mueller ruled that the State failed to show that the required cancer warnings are purely factual and uncontroversial. It also failed to show that Prop-65 imposes no undue burden on businesses that would have to provide the warn- ings. The judge said that the acrylamide warning requirement “is controversial because it elevates one side of an unresolved scientific debate” about whether consuming foods and drinks with acrylamide causes cancer.

Following this decision, the Council for Education and Research on Toxins (CERT) appealed the preliminary injunction order and moved for an emergency stay, which the court granted to the extent that it bars any private enforcer from bringing new Prop-65 acrylamide actions.

In an interesting turn of events, Judge Mueller recused herself in September 2021 from the lawsuit at the urging of two advocacy groups that intervened in the case. The documents in the motion remain sealed but seem to argue that Judge Mueller has an interest in the outcome of the case based on her husband’s business interests. While stating that there is nothing requiring her recusal and she has no bias or prejudice, Judge Mueller indicated that she felt pressured by the “uncommonly aggressive, scorched earth efforts” of the advocacy groups, which included extensive personal details about the judge and her husband in their motion that have little relevance to the case. Judge Mueller indicated that she believes the recusal motion was not motivated by a fear of bias, but likely was spurred by the belief that the organizations would have a better chance of success before another judge.

The Ninth Circuit affirmed Judge Mueller’s granting of the preliminary injunction in March of 2022 and denied en banc review of the decision in October; however, that’s not the end of the story. In April 2022, CERT attempted to litigate the issue for a third time in a year and filed a motion to vacate the preliminary injunction order because Judge Mueller did not immediately recuse herself. The case was reassigned to multiple judges and ultimately landed on Judge Ana de Alba’s docket. The case has stalled while Judge de Alba gets up to speed.

New Targets on the Horizon

In early 2022, multiple PFAS were added to California’s Prop-65 list. PFAS are a group of chemicals used in materials such as packaging, textiles and metal piping to make them moisture resistant. Suits involving  PFAS make up a very small portion of current litigation, but producers should be on alert.

NO-INJURY LAWSUITS TARGET BUSINESS ACROSS THE STATE

The “Food Court”

California once again challenged New York for the most “no-injury” consumer class actions targeting the food and beverage industry. These lawsuits often claim that some aspect of a product’s packaging or marketing misleads consumers, even though it is likely to have made no difference in anyone’s decision to buy a product.

In 2021, plaintiffs’ lawyers filed 78 food and beverage class action lawsuits in California, up from 58 in 2020.

Plaintiffs’ lawyers stand to make millions in these class actions, while consumers receive pennies on the dollar.

According to a recent report by Jones Day, lawyers in certified consumer class action cases in 2019 and 2020 received from settlements, on average, 10% more than the class members they represented.

2022 food and beverage class action settlements in California included a $1.5  million settlement with Welch’s over claims that one of its products is heart-healthy when science allegedly showed otherwise. The average payout to class members was $4.94, while the class counsel received $394,657, or 26% of the total settlement.

In January 2022, the Los Angeles County Superior Court gave final approval to a $3.7 million settlement in a class action alleging that Nestle/Ferrara could have fit more candy in its boxes (known as “slack fill”). Class members who bought products ranging from Raisinets to Rainbow Nerds qualify for 50 cents per purchase (maximum of 16) while the court approved the attorneys to receive $1.42 million for their fees and costs (38% of the total amount).

‘Americans With Disabilities Act’ Shakedown Lawsuits Reach Fever Pitch

California continues to be home to more than 50% of the nation’s Americans with Disabilities Act accessibility litigation. In 2021, 5,930 claims were filed in California – more than half of the 11,452 claims filed nationwide. These are federal lawsuits claiming that businesses violated standards under the Americans with Disabilities Act (ADA) that are intended to ensure that public places are accessible to everyone but have been abused by serial plaintiffs and certain attorneys.

Through June 2022, of the 4,914 claims filed nationwide this year, 1,587 claims were filed in California.

California also is seeing a jump in website accessibility lawsuits, with 359 filings in 2021, compared to 223 in 2020. In total, website accessibility filings have increased more than 3,000% since 2018. Serial plaintiffs are specifically targeting California hotels, alleging that the accessibility information

provided on reservation websites is not sufficiently detailed for the plaintiffs to decide whether the hotel meets their accessibility needs. Among the details that the lawsuits claim should be included are the dimensions of space under desks and sinks. The Department of Justice, however, has made it clear that, “a reservation system is not intended to be an accessibility survey.”

Businesses argue that on the fly, pandemic-related changes in operations are making ADA compliance more challenging and opportunistic plaintiffs’ lawyers and serial filers are seeking to take advantage of the opportunity.

Serial Plaintiffs

The Potter Handy law firm set up the Center for Disability Access (CDA) and has filed thousands of lawsuits on behalf of just a handful of plaintiffs over the past few years. For example, CDA has helped a quadriplegic plaintiff file over 4,000 ADA claims in California since 2010, which amounts to roughly 1 per day for 11 straight years. The plaintiff filed over 1,000 claims in 2021 alone, forcing businesses, already struggling to recover from the pandemic, to close for good. A federal grand jury indicted the plaintiff for tax fraud in 2019 after failing to pay taxes on his lawsuit income.

CDA filed 560 ADA claims on behalf of another plaintiff in 2021, bringing his grand total to over 1,700  claims filed. Fortunately, Judge Jacqueline Scott Corley caught on to the nature of the plaintiff’s activities, and earlier this year, dismissed one of the lawsuits brought against a Redwood City restaurant. The judge concluded that he “travelled to Redwood City for the purpose of finding establishments to sue” and that he is “not credible” given his history as a serial plaintiff. In a later suit filed by the same plaintiff, federal Judge Vince Chhabria (Northern District) levied a $35,000 sanction against CDA for conspiring to falsify pleadings. “You may not lie in an effort to keep your lawsuit alive. And that is the real problem here,” said Judge Chhabria in his sanction order.

Yet another serial plaintiff represented by CDA has earned well over $5 million in ADA settlements. CDA has filed over 800 complaints on his behalf and obtained more than 500 settlements.

Fortunately, the courts are beginning to see through CDA’s preda- tory lawsuits; over 90 CDA cases have been dismissed to date.

Fighting Back

In April 2022, the San Francisco and Los Angeles district attorneys filed a joint suit against Potter Handy for “unlawfully circumventing” California state procedural requirements by “filing thousands of boilerplate, cut-and-paste federal court lawsuits that falsely assert its clients have standing under the [ADA].” The DAs’ action alleged that the sheer number of claims made it “literally impossible for the Serial Filers to have personally encountered each listed barrier, let alone intend to return to hundreds of businesses located hundreds of miles away from their homes.”

The DAs’ action further alleged that these ADA shakedown lawsuits have extracted tens of millions of dollars from California businesses. Plaintiffs demand between $10,000 to $20,000 to settle, and most businesses have no choice but to pay because litigating a case can cost $50,000 or more even if the business wins. The opportu- nistic plaintiffs’ lawyers target mom-and-pop shops with little financial resources, especially owners who speak English as a second language. The lawsuit asked that CDA return all settlement money to California business owners.

Unfortunately, in August 2022, San Francisco Superior Court Judge Curtis Karnow dismissed the lawsuit. He found that Potter Handy’s filings were covered under the state’s “litigation privilege.” This bars a third-party litigant from using client communications and lawsuit filings as evidence against the firm. The judge found it applies “irrespective of the communication’s maliciousness or untruthfulness.”

The cities appealed the dismissal in October. The Los Angeles DA dubbed the appeal “the best course of action” to guard against more “frivolous boilerplate lawsuits.” Meanwhile, the San Francisco DA said she was appealing “to protect business from predatory law firms that are abusing disability protections by filing these fraudulent lawsuits.”

SEA CHANGE MAY BE COMING FOR FRIVOLOUS ‘PRIVATE ATTORNEYS GENERAL ACT’ LITIGATION

Enacted in 2004, California’s Private Attorneys General Act (PAGA) has become known as the “Sue Your Boss” law. While its initial purpose was to protect workers, it has done little to help them. The plaintiffs’ bar has been the true beneficiary. “PAGA lawsuits have made it more difficult for family-owned businesses like mine to be flexible with employees,” says Ken Monroe, chairman of the Family Business Association of California and president of Holt of California.

PAGA authorizes “aggrieved” employees to file lawsuits seeking civil penalties on behalf of themselves, other employees, and the State of California for labor code violations. Many PAGA lawsuits revolve around technical nitpicks, such as an employer’s failure to print its address on employees’ pay stubs, even though the address was printed on the paychecks themselves.

Three quarters of the penalties paid by non-compliant employers go to the state’s Labor and Workforce Development Agency while only 25 percent go to the “aggrieved employees” and their lawyers who take a third or so of that. In some cases, the plaintiffs’ lawyers receive even more.

In June 2022, the U.S. Supreme Court issued a decision in Viking River Cruises v. Moriana that will impact plaintiffs’ lawyers’ ability to circumvent arbitration agreements. In this case, the plaintiff brought a PAGA claim after leaving Viking Cruises. He claimed he did not receive final pay within 72 hours as required by California labor law and then included various other labor code violations on behalf of other employees at the company. Viking Cruises sought to enforce the employment contract’s arbitration clause and dismiss the other representative claims for lack of standing. California lower courts denied the validity of the arbitration clause and allowed the PAGA claims to move forward.

The U.S. Supreme Court held that the Federal Arbitration Act prohibits California courts from not enforcing employment arbitration agreements as it violates each litigant’s right to bilaterally agree to arbitration. Therefore, the Court ruled the individual dispute between the plaintiff and Viking Cruises is severable and should be enforced in arbitration as provided by the agreement. As a result, the representative claims should be dismissed, as the plaintiff no longer has standing to bring them.

As a result of the U.S. Supreme Court’s ruling, the California Supreme Court agreed to hear Adolph v. Uber, recognizing that the lower court’s decision may conflict with the Viking Cruises decision. In Adolph, an Uber driver sued the company in state court for misclassifying him as an independent contractor. Despite signing an arbitration clause in his employment contract with Uber, he sought statutory damages under PAGA. Uber filed a motion to compel arbitration of the individual claim and dismiss the representative claims. Nevertheless, both the trial court and appellate court dismissed the motion and allowed both the individual and representative claims to move forward.

Questions Remain about Standard for Manageability of PAGA Claims

In December 2021, a California appellate court held that “courts have inherent authority to ensure that PAGA claims can be fairly and efficiently tried and, if necessary, may strike claims that cannot be rendered manageable.” The California Supreme Court denied review in December of 2021.

Despite this ruling, in March 2022, a California appellate court reached the opposite conclusion in Estrada v. Royalty Carpet Mills. The court held that “allowing dismissal of unmanageable PAGA claims would effectively graft a class action requirement onto PAGA claims, undermining a core principle” of PAGA. The panel did note however that trial courts are not “powerless when facing unwieldy PAGA claims” – the judge may limit discovery if “plaintiffs are unable to show widespread violations in an efficient and reasonable manner.” Recognizing the need to resolve the circuit split, in June, the California Supreme Court agreed to review the case.

Ballot Initiative

California voters will consider the Fair Pay and Employer Accountability Act in November 2024. The Act would address abusive litigation by replacing PAGA with a complaint system through the Labor Commissioner who would enforce the law by conducting investigations and arbitrating the suit. The only legal challenges would be appeals and 100% of monetary awards would go straight to the employee, rather than the state and plaintiffs’ attorneys.

LEMON LAW ABUSE

Lawsuit abuse under California’s Song-Beverly Consumer Warranty Act, otherwise known as the California lemon law, continues to flood the court system. Between 2018 and 2021, 34,397 lemon law lawsuits were filed in state court. This equates to one lawsuit for every 324 automobiles sold in the state.

While automobiles have become more reliable and the frequency of problems with them have generally decreased over the past decade, lawsuits under California’s Song-Beverly Consumer Warranty Act have actually increased.

The Song-Beverly Consumer Warranty Act clearly defines the obligations of consumer goods manufacturers. Under the law, a manufacturer guarantees that a product is in order when sold. Should a product fail in utility or performance, the manufacturer must repair or replace the product or make restitution to the buyer in the form of a purchase refund. The Act also limits punitive damages to no more than twice the amount of actual damages.

The intent of the law was to ensure manufacturers would repair, replace, or repurchase a consumer’s defective vehicle as quickly as possible. However, plaintiffs’ lawyers have learned to exploit loopholes in the law and create windfalls for themselves at the expense of a fair resolution for consumers. The law provides an incentive for attorneys to pursue litigation even when companies make a reasonable offer and consumers may be inclined to settle. This draws out the process for consumers and delays the time it takes to reach a fair resolution. The costly litigation also drives up the price of vehicles in the state. The true winners of the prolonged litigation are the plaintiffs’ lawyers. By dragging out a case, they run up hefty legal fees on top of the statutory lemon law fee entitlement.

Another common maneuver aimed at maximizing legal fees involves the practice of adding multiple layers of lawyers and law firms into a lemon law case. Given the simple, fact-centric nature of the litigation, this layering serves only to drive up attorneys’ fees. The U.S. District Court for the Central District of California recognized the obvious wastefulness of this practice: “[A]s a result of having twelve attorneys

from two firms billing on this matter, the billing records are riddled with duplicative inter-office communications and entries reviewing prior filings and case materials.”

In 2019, plaintiffs-side consumer law firms filed two suits in Los Angeles County against their high- profile former co-counsel, Knight Law Group. Knight Law Group describes itself as one of the “leading law firms in California practicing in the area [of] consumer litigation.” Docket data certainly supports their claim: Knight has filed more than 4,560 lemon law cases in the last five years, though it often associates with others to take them to trial.

The lawsuits – Hackler Daghighian Martino & Novak PC v. Knight Law Group, and Law Offices of Michael H. Rosenstein LC v. Knight Law Group LLP – spotlight client-sharing arrangements and fee-split- ting practices employed in the world of high-volume lemon law cases.

The image painted by the other law firms in their suits is deeply troubling. They describe a fee-generating arrangement applied to hundreds of cases, in which Knight “focused on marketing and operations” while tapping other firms to perform most case development and trial tasks. Disturbingly, this alleged system promotes inefficiency and makes pursuit of fees the centerpiece of this “consumer” litigation.

The cases settled in early 2022 with the Knight Law Firm paying an undisclosed amount to the other firms. Following this litigation, the law firms are no longer aligned, and the Knight Group has established a new relationship with Greenberg Gross, a boutique firm in Orange County.

In July 2022, Judge Barbara Meiers chastised the behavior of Knight Law Group in a run-of-the-mill lemon law case. In Ramirez v. Ford, the plaintiff purchased a lemon car from Ford and contacted the company to fix the problem. Ford offered to replace the car or repay its value in full (about $30,000). The plaintiff retained Knight Law Group before responding to Ford, and after obtaining counsel, they ceased contact with Ford and filed a lawsuit.

Despite the significantly lower value of the car, plaintiff’s counsel repeatedly refused to settle for any- thing less than $70,000 plus fees. In July 2022, the defendant submitted evidence proving that the company substantially complied with the Song-Beverly Act and that both plaintiff and the Knight Law Group made knowingly false allegations of willful misconduct by Ford. Following this revelation, the plaintiff quickly settled for $30,000 – Ford’s initial offer.

Following the settlement, Judge Meiers awarded limited fees to Knight Law Group. Despite the law firm requesting over $20,000 in fees and costs, she awarded $8,800. Judge Meiers, in denying all other

fees and cost requests, stated, “What this plaintiff’s counsel should have done, and arguably was even duty bound to have done, both in the interests of the consumer and well as required by the policies underlying the Act, was to as quickly as possible sit down with Ford and work out the details of a car return or refund.” She continued, “There was no perceivable justification whatsoever … for the filing of any lawsuit.”

Does a Used Car Count as a ‘New Vehicle’?

In July 2022, the California Supreme Court agreed to decide whether a used car should be considered a “new vehicle” under the state’s lemon law. In Rodriguez v. FCA, plaintiffs filed a lemon law claim after experiencing issues with a used vehicle they purchased from a car dealership with two years and 55,000 miles of road wear that was still under a manufacturer’s limited warranty.

The trial court granted summary judgment for the manufacturer, holding that a used vehicle cannot qualify as “new,” regardless of its warranty status. The appellate court affirmed the decision and noted that the plaintiff’s position (that any car under a limited warranty still qualifies as “new”) would lead to “problems,” inconsistencies and absurd results.

“[P]erhaps the wrong issue is now before the court and the issue ought to be whether or not sanctions should be being ordered against the plaintiff and for how much, and not how much the Knight firm should be awarded, or more aptly be rewarded, for its conduct of this ostensibly bad faith case.”
Judge Barbara Meiers

CALIFORNIA AT THE FOREFRONT OF CLIMATE CHANGE LITIGATION BATTLE

California municipalities and their outside counsel have been at the forefront of meritless litigation seeking to hold the oil and gas industry liable for the effects of global climate change.

The onslaught of litigation began in 2017 with municipalities filing suits in state courts against energy companies claiming “extraction, refining, and/or formulation of fossil fuel products … is a substantial factor in causing the increase in global mean temperature and consequent increase in global mean sea surface height.”

Among the legal claims behind these cases, the plaintiffs allege that the oil and gas industry is liable for creating a public nuisance. Historically, public nuisance law involved instances in which a property owner’s activities unreasonably interfered with a right that is common to the public, usually affecting land use.

Typical cases include blocking a public road or waterway or permitting illicit drug dealing on one’s property.

Now, plaintiffs’ lawyers, on behalf of municipalities and other local government entities, are seeking to dramatically expand this legal theory to address broad public policy issues. In addition to climate change, similar litigation has been filed in the context of vaping, opioids, and the disposal of plastic waste.

The County of San Mateo v. Chevron Corp. and The City of Oakland v. BP P.L.C. are the leading cases working their way through the California courts. Sher Edling, the plaintiffs’ firm spearheading climate change litigation across the country, represents the municipalities. While much of the litigation to date has focused on whether the cases belong in state or federal court, the expansion of public nuisance law has been at the forefront of the arguments.

Both cases were originally filed in California state courts and the defendants attempted to remove them to federal court. San Mateo was immediately sent back to state court; however, in February 2018, Senior

U.S. District Judge William Alsup for the U.S. District Court for the Northern District of California denied City of Oakland plaintiffs’ motion to remand the case back to state court. In his order, Judge Alsup described climate change as a “worldwide predicament” that “demands the most comprehensive view available…;” “If ever a problem cried out for a uniform and comprehensive solution, it is the geophysical problem described by the complaints.”

The United States government laid out a similar concern in its amicus brief before the Ninth Circuit. It highlighted the essential nature of fossil fuels and argued that the issues with applying California state law to out-of-state sources “are magnified here, where the sources of emissions alleged to have contributed to climate change span the globe.”

Unfortunately, the Ninth Circuit had an opportunity to uphold this position and push back on activist attorneys’ attempts to improperly expand the law but failed to do so. In a pair of opinions released in May 2020 and April 2022, the Ninth Circuit held that, regardless of the “novel and sweeping causes of action” at issue, the energy companies did not satisfy the necessary requirements for federal jurisdiction.

In 2021, the U.S. Supreme Court declined to hear City of Oakland and the Ninth Circuit denied a peti- tion for rehearing en banc of County of San Mateo in June 2022. Defendants argued that its decision was in direct conflict with an earlier Second Circuit decision, which found it was inappropriate to use state laws and the courts to address costs attributed to greenhouse gases.

CALIFORNIA SUPREME COURT REFUSES TO REVIEW EXPANSIVE CONSUMER PROTECTION RULING

In 2016, the California Attorney General filed an enforcement action against Ethicon, a subsidiary of Johnson & Johnson, alleging that it violated California’s Unfair Competition Law (UCL) and False Advertising Law (FAL) by distributing untrue or misleading communications about its pelvic mesh products.

At trial, California surgeon-witnesses who implanted mesh explained they knew about the relevant risks and that the statements were not deceptive. The trial court nevertheless held that Ethicon’s pelvic mesh marketing materials and disclosures directed at pelvic surgeons were UCL and FAL violations. It found that the materials contained false and misleading statements that did not disclose the full scope and severity of mesh-specific risks. The court concluded that this was likely to deceive doctors. It relied principally on testimony from doctors who never implanted mesh, or who did so outside the state of California.

The trial court then purported to determine how many times Ethicon violated the UCL and FAL. Neither statute defines what constitutes a single violation or offers any guidance as to how a court should make that decision. Further, violation counting does not require any showing of harm to individual consumers. As the trial court acknowledged, it is simply “up to the [c]ourt to determine what constitutes a violation for the purpose of calculating penalties.”

Here, the trial court counted each printed piece of marketing that it estimated was ordered to California, and each brochure requested to be sent to California – regardless of whether such materials were actually delivered, read, relied-upon, or resulted in harm. For example, the court found 52,176 UCL and FAL violations based on a forensic accountant’s “estimate” of print marketing materials shipped into the state from 2008 to 2011. The accountant simply extrapolated one sales representative’s ordering patterns to all other California sales representatives (26 in total), assuming that all representatives ordered materials at the same monthly pace. The court also determined that Ethicon shipped 8,108 print marketing materials to California between January 2012 and February 2017, based on Ethicon’s discovery responses. It concluded that every single piece of material constituted both a UCL violation and an FAL violation – regardless of whether the marketing materials were read by consumers or had even reached their destinations.

In total, the court found that Ethicon committed 153,351 UCL violations and 121,844 FAL violations. As for the penalty per violation, the court recognized that it had wide discretion under California law to impose a penalty “up to $2,500.” Reasoning that a significant penalty was appropriate, the trial court judge imposed a penalty of $1,250 for each violation – with no differentiation among the type or severity of violations. The trial court thus imposed $343,993,750 in civil penalties against Ethicon.

The trial court denied plaintiffs’ request for injunctive relief. It highlighted a letter from over 70 physicians lauding defendants’ mesh products

and stating their grounds for supporting the right to access them and expressed concern that an injunction might prompt Ethicon to withdraw its products from California.

On appeal in April 2022, the California Court of Appeals largely affirmed the trial court’s decision. It concluded, however, that the trial court erred in finding Ethicon liable for certain oral marketing communications when there was insufficient evidence regarding such communications. Accordingly, the Court of Appeal revised the total violations to 134,386 UCL violations and 107,244 FAL violations, and a corresponding $302,037,500 in civil penalties.

In a disappointing order issued in July, the California Supreme Court denied Ethicon’s petition for review. Ethicon is appealing the decision to the U.S. Supreme Court and filed its petition in mid-November.

The trial court denied plaintiffs’ request for injunctive relief. It highlighted a letter from over 70 physicians lauding defendants’ mesh products and stating their grounds for supporting the right to access them and expressed concern that an injunction might prompt Ethicon to withdraw its products from California.

CALIFORNIA LOWER COURTS EMBRACE NOVEL THEORY OF COVID-19 LIABILITY

In June, the California Supreme Court agreed to decide whether businesses can be held liable for injuries and deaths related to an employee’s COVID-19 exposure on their premises.

The state high court’s decision to address this question came after it declined to consider the issue in a similar case. In the earlier case, the Los Angeles Superior Court ruled that See’s Candies could be held liable for the death of an employee’s husband following contraction of COVID-19. The employee allegedly contracted the virus at the candy factory and exposed her husband. An intermediate appellate court affirmed, and the California Supreme Court declined review.

The more recent appeal involves a woman who sued her husband’s employer after contracting COVID-19. The complaint alleges that the plaintiff, who was at high risk due to her age and health, contracted the virus after her husband, who was employed by a furniture company, was exposed at a construction site. In that instance, a federal district court dismissed the suit.

The Ninth Circuit certified two questions to the California Supreme Court including whether the state’s workers’ compensation precludes suits by the spouse of an employee and whether California law extends a duty of care to prevent COVID beyond employee to members of an employee’s household.

CHANGE IN COURT COMPOSITION

California Supreme Court Chief Justice Tani Cantil-Sakauye will retire at the end of the year. Following her announcement, Governor Gavin Newsom elevated Justice Patricia Guerrero to Chief Justice and appointed Judge Kelli Evans of the Alameda Superior Court to the state’s high court.

Justice Cantil-Sakauye authored the much-maligned Dynamex opinion in which California adopted the “ABC test” for determining employee/independent contractor status and set off the ensuing A.B. 5 and Prop-22 battles that have been covered extensively in previous Judicial Hellholes reports.

Justice Guerrero was appointed to the Supreme Court by Governor Newsom in March of this year and was elevated to Chief Justice after just six months on the bench. While sitting as a judge in the appellate division, Justice Guerrero authored the Bolger decision which held that Amazon is subject to strict liability for defective products sold by independent third-party vendors on its website.

Justice Evans has little judicial history, as she only served for a year in the Alameda Superior Court. Prior to joining the bench, she worked for Governor Newsom for several years and was part of his inner circle.

END NOTES

This year, the California legislature passed A.B. 35, which raises the $250,000 cap on noneconomic dam- ages in medical liability cases established by the Medical Injury Compensation Reform Act (“MICRA”) in 1975. While it is good news that a limit remains in place, noneconomic damages in medical liability cases will rise each year for the foreseeable future. For wrongful death claims, the noneconomic damages cap will jump to $500,000 in 2023 and rise $50,000 each year until the cap hits $1 million. Medical liability claims that do not involve a death will start with a $350,000 limit on noneconomic damages. The cap will con- tinue to increase by $40,000 each year until it reaches $750,000. After a decade, when the caps reach these levels, the maximum award for noneconomic damages in medical liability cases will continue to rise indefinitely in California by two percent each year.

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