Opinion
G054112
08-20-2018
RONALD HENDRY, Plaintiff and Appellant, v. BUSHNELL OUTDOOR PRODUCTS, INC. et al., Defendants and Respondents.
Larsen Willis & Woodard and Geoffrey K. Willis for Plaintiff and Appellant. Weintraub Tobin Law, David R. Gabor and Darrell P. White for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2015-00805957) OPINION Appeal from a judgment of the Superior Court of Orange County, Theodore R. Howard, Judge. Affirmed. Larsen Willis & Woodard and Geoffrey K. Willis for Plaintiff and Appellant. Weintraub Tobin Law, David R. Gabor and Darrell P. White for Defendants and Respondents.
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Plaintiff and appellant Ronald Hendry sued defendants under Proposition 65, the California Safe Drinking Water and Toxic Enforcement Act of 1986. (Health & Saf. Code, § 25249.5 et seq. (Prop. 65); all further undesignated statutory references are to this code.)
After some initially named defendants were dismissed and one defendant changed its name, the defendants who litigated the action were Bushnell Outdoor Products, Inc. (Bushnell), Bushnell Holdings, Inc., Primos, Inc., Vista Outdoor, Inc., Vista Outdoor Operations, LLC, Vista Outdoor Sales, LLC, and Orbital ATK, Inc. (collectively defendants).
The court granted defendants' motion for judgment on the pleadings (Code Civ. Proc., § 438), concluding plaintiff had no standing to prosecute an action under Prop. 65, which allows enforcement actions to be brought by "a person in the public interest." (§ 25249.7, subd. (d).) The court found plaintiff was a Kansas citizen with no connection to California who had never purchased defendants' products. Plaintiff also failed to demonstrate his case was pursued in the public interest but instead the case was prosecuted for his personal pecuniary gain.
Plaintiff appealed, arguing he had standing to file the action because he was "a person" as defined by the statute and his financial motivation was not relevant.
We conclude plaintiff lacked standing because the record establishes he did not pursue the action "in the public interest" and affirm the judgment solely on that basis. We do not reach citizenship or any other issues.
FACTS AND PROCEDURAL HISTORY
In August 2015, plaintiff filed a complaint for civil penalties and injunctive relief under Prop. 65. He alleged defendants knowingly manufactured, distributed, and sold game calls that contained several known carcinogenic chemicals, which exposed product users to carcinogens through ingestion, inhalation, or dermal absorption.
Defendants filed a general denial, raising a number of affirmative defenses, including a challenge to plaintiff's standing on the grounds he was not a California citizen or resident and he had not filed the suit in the public interest.
Defendants alleged plaintiff was a Kansas resident who had worked as a quality assurance manager and compliance engineer for Bushnell in Kansas. Between 2006 and his layoff in May 2014, plaintiff had led a project team responsible for ensuring defendants' compliance with Prop. 65. Defendants further alleged in May 2014, a dispute arose regarding plaintiff's layoff and severance package. In a September 2014 demand letter (Demand Letter), plaintiff told his former employer he had internal data, documentation, and third party test reports that showed defendants were "knowingly and willingly" distributing products that violated Prop. 65 in California.
The answer further alleged plaintiff offered to take a $12.5 million, one-time payment with an "iron clad nondisclosure agreement" for the return of defendants' documents and his silence. As part of the proposed agreement, Bushnell also was to donate $55 million to the nonprofit of plaintiff's choice. Plaintiff gave defendants 30 days to pay him, or he would release their internal documents to the public.
Plaintiff filed a motion to strike the allegations as irrelevant to the complaint. In their opposition, defendants argued the Demand Letter showed plaintiff had no standing to pursue the action "and [was] otherwise equitably estopped from bringing a claim." Defendants further asserted the Demand Letter demonstrated the action was not to support the public interest but for plaintiff's own financial interest.
In his reply, plaintiff argued his "financial motivations" were not relevant as to whether he could act in the public interest.
Thereafter, defendants filed a self-styled, "Motion to Disqualify the Plaintiff and for Terminating Sanctions" (Motion). The Motion listed several reasons plaintiff lacked standing to prosecute a Prop. 65 action, including that plaintiff was pursuing the claim for his own pecuniary gain, as evidenced by the Demand Letter.
Defendants also cited to a letter plaintiff's lawyer sent shortly after plaintiff's termination wherein he sought a better severance package (Attorney Letter). The Attorney Letter pointed to examples of defendants' products that plaintiff claimed contained "'unsafe contaminants.'" The Attorney Letter demanded Bushnell pay plaintiff $400,000 in return for its trade secrets and other confidential information as to certain game calls or plaintiff would reveal the information. Specifically, the Attorney Letter stated that if Bushnell did not accede to the demands it would face "'significant regulatory fines,'" "'costly civil suits,'" and "'criminal prosecution.'" Plaintiff offered an "'airtight mutual privacy and confidentiality clause.'"
Defendants also highlighted plaintiff's Demand Letter in which plaintiff claimed he had test results and documentation to show defendants "'covered up over 60 violations'" of Prop. 65. Plaintiff sought $67.5 million in exchange for an "'ironclad nondisclosure agreement.'" Plaintiff required a response within 30 days or he would disclose the documents to consumer protection agencies, environmental organizations, class action attorneys and others. When defendants did not pay, plaintiff released the documents and subsequently filed the action.
In opposition, to the Motion plaintiff argued, in part, his "alleged personal financial motivations" did not invalidate his standing. Rather, relying on a nonpublished case, he asserted the penalties under Prop. 65 were "'a financial incentive to private plaintiffs to pursue claims in the public interest.'" He contended the purpose and language of Prop. 65 showed his financial motivations had no bearing on standing.
The court construed the Motion to be a motion for judgment on the pleadings. In its original ruling on the Motion the court found, among other things, plaintiff's demand for $67.5 million and an "'ironclad nondisclosure agreement'" showed plaintiff had "no genuine interest in protecting the rights of California citizens (for whom Prop. 65 was enacted)." Relying on section 25249.7, subdivision (f), the court commented a nondisclosure agreement "would presumably bar the required reporting to the Attorney [G]eneral of any resolution." Further a court-approved settlement of a Prop. 65 action requires "corrective action" (§ 25249.7, subd. (f)(4)), which was not part of plaintiff's Demand Letter.
The court found not only did plaintiff's demand not make any corrections, "it was just the opposite." It was a "quid pro quo: you pay me, I go away quietly." Under those circumstances, California citizens would not receive any benefit. And worse, such a "secret settlement" would probably be a bar to any future action to remedy the alleged violation. "This would turn the concept of citizens' enforcement on its head."
On the basis of those facts, citing California Department of Consumer Affairs v. Superior Court (2016) 245 Cal.App.4th 256, the court found plaintiff failed to plead sufficient facts to show he had standing to sue in the public interest under Prop. 65. The court gave plaintiff the opportunity to file additional briefs or to amend if he could show another person had standing, and continued the matter.
In a supplemental declaration plaintiff admitted both the Attorney Letter and the Demand Letter were sent. He noted his dissatisfaction with the severance package defendants had offered.
At the subsequent hearing, with the parties' consent the court considered ballot materials for Prop. 65, the statutory language, and dicta from published cases discussing Prop. 65. In addition, it relied on plaintiff's admission in his supplemental declaration that he sent the Demand Letter to facilitate a better severance package. The court also granted plaintiff's request to take judicial notice of a 2013 press release from the Governor's office about proposed changes to Prop. 65.
In the written decision, as to the Demand Letter and Attorney Letter the court concluded "the whole Prop. 65 concern was principally a ruse to leverage a better severance package for himself - which is entirely consistent with his later extortion letter." In explaining the press release did "little to aid in the analysis," the court found interesting its statement that Prop. 65 had been "abused by some lawyers, who bring nuisance lawsuits to extract settlement from businesses with little or no benefit to the public or the environment." "Given plaintiff's desire to extort $65 million from defendants in secret with no reciprocal benefit to the peoples of California, it would seem that the Governor's office would also agree that plaintiff is not a proper party."
The press release also stated Prop. 65 was being revised to end "frivolous 'shake-down' lawsuits."
The court concluded, "Turning a blind eye to plaintiff's self-interest and allowing him to represent the interests of all Californians residents flies in the face of equity and good jurisprudence. . . . [¶] Since plaintiff is not a California citizen and has demonstrated no genuine interest in protecting the rights of California citizens (for whom Prop. 65 was enacted), standing is not appropriate here."
The court then granted the Motion without leave to amend and entered judgment for defendants.
DISCUSSION
1. Standard of Review
A judgment on the pleadings in favor of the defendant is appropriate when the complaint fails to allege facts sufficient to state a cause of action. (Code Civ. Proc., § 438, subd. (c)(3)(B)(ii); People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777 (Harris).) We review a motion for judgment on the pleadings de novo. (Harris, at p. 777.) As with a demurrer we accept as true all properly alleged, material facts but we do not presume true deductions, contentions, or conclusions of law or fact. (Ibid.) We "may consider matters subject to judicial notice" (Stone Street Capital, LLC v. California State Lottery Com. (2008) 165 Cal.App.4th 109, 116) and "'evidence outside the pleadings which the trial court considered without objection'" (Estate of Dayan (2016) 5 Cal.App.5th 29, 40). 2. Prop. 65 General Principles
According to some cases, when the court has considered extrinsic evidence, we treat the motion as a motion for summary judgment and review the facts in a light most favorable to the plaintiff. (E.g., O'Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 594, fn. 1.) That standard of review does not change our analysis or the result.
Under section 25249.5 persons in business in California are prohibited from the "discharge or release [of] a chemical known to the state to cause cancer or reproductive toxicity into . . . any source of drinking water . . . ." Section 25249.6 prohibits businesses in California from "knowingly and intentionally" exposing anyone to carcinogens, or toxic chemicals with negative effects on reproduction, "without first giving clear and reasonable warning to such individual."
"Proposition 65 is '"a remedial statute intended to protect the public,"' which seeks to prevent contamination of sources of drinking water and requires 'businesses to warn individuals about carcinogens and reproductive toxins to which they are exposed through consumer transactions, employment, and the environment.' [Citation.]" (DiPirro v. Bondo Corp. (2007) 153 Cal.App.4th 150, 180, fn. omitted (DiPirro).) It was "designed in part so the people of California would "'be informed about exposures to chemicals that cause cancer, birth defects, or other reproductive harm."'" (Monsanto Co. v. Office of Environmental Health Hazard Assessment (2018) 22 Cal.App.5th 534, 552.) It "should be broadly construed to accomplish its protective purposes." (California Chamber of Commerce v. Brown (2011) 196 Cal.App.4th 233, 258.)
Section 1 of Prop. 65 states: "'The people therefore declare their rights: [¶] (a) To protect themselves and the water they drink against chemicals that cause cancer, birth defects, or other reproductive harm. [¶] (b) To be informed about exposures to chemicals that cause cancer, birth defects, or other reproductive harm. [¶] (c) To secure strict enforcement of the laws controlling hazardous chemicals and deter actions that threaten public health and safety. [¶] (d) To shift the cost of hazardous waste cleanups more onto offenders and less onto law-abiding taxpayers.' (Ballot Pamp., Gen. Elec. (Nov. 4, 1986), text of Prop. 65, § 1, p. 53, reprinted in Historical and Statutory Notes, 40E West's Ann. Health & Saf. Code (2006 ed.) foll. § 25249.5, p. 322.)" (DiPirro, supra, 153 Cal.App.4th at p. 180, fn. 19.)
Prop. 65 allows enforcement actions to be brought by "a person in the public interest." (§ 25249.7, subd. (d).) If an alleged violation concerns section 2524.6's warning requirement, as here, a certificate of merit is required.
This is in addition to prosecution by the state Attorney General, district attorneys and other governmental prosecutors. (§ 25249.7, subd. (c).) If an action brought by a person in the public interest settles, the settlement must be approved by the court. (§ 24259.7, subd. (f)(4).)
A certificate of merit must include factual information sufficient to establish the plaintiff or the plaintiff's attorney has consulted with an expert regarding the chemical that is the subject of the action and is informed and believes "there is a reasonable and meritorious case for the private action." (§ 25249.7, subd. (d)(1).) One pursuing an action in the public interest must also show no public prosecutor is suing based on the same violation. (§ 25249.7, subd.(d)(2).) --------
Both injunctive relief and civil penalties up to $2,500 per day per violation are available against "[a] person who violates or threatens to violate Section 25249.5 or 25249.6." (§ 25249.7, subds. (a), (b).) A private party suing in the public interest is entitled to recover 25 percent of all penalties assessed against a defendant. (§ 25249.12, subd. (d).) Such a party is also entitled to recover attorney fees under the private attorney general attorney fees statute. (Code Civ. Proc., § 1021.5.) 3. Person in the Public Interest
The court found plaintiff was acting solely for his own financial interests and was not acting in the public interest, thus defeating his standing to pursue the action. Plaintiff argues the court erred by imposing "a personal motivation litmus test" (capitalization, boldface, & underlining omitted). He contends Prop. 65 contains no such requirement and claims cases construing the statute "have stated explicitly" "a party's personal motivation" is irrelevant. He further claims "parties 'are deemed to sue . . . in the public interest' regardless of their personal motivations." We disagree.
It is true Prop. 65 provides some monetary incentive for a private party to file an enforcement action. (Mateel Environmental Justice Foundation v. Office of Environmental Health Hazard Assessment (2018) 24 Cal.App.5th 220, 241, fn. 14 [penalties and attorney fees are financial incentives for private Prop. 65 action].) But the thrust of Prop. 65 is the protection of the public, not the personal gain of a private plaintiff. "The interest in suing in a representative capacity has been determined not to be a property right in the context of other types of actions." (Consumer Advocacy Group, Inc. v. ExxonMobil Corp. (2008) 168 Cal.App.4th 675, 692.) "[T]he statutory framework governing a Proposition 65 action affirms the representative nature of the individual's role. An individual may sue under the Act only in the public interest; there is no provision for an individual to sue on his or her own behalf. (§ 25249.7, subd. (d).)" (Id. at pp. 692-693.) Rather, Prop. 65 is "a mechanism for vindicating public rights. This purpose is not altered by the potential for an individual to share in any penalties recovered." (Id. at p. 693.)
Prop. 65 is "informational and preventative rather than compensatory in its nature and function. The statutory damages available . . . [are] in the nature of civil penalties [and] do not grow out of a claim for moneys due and owing or for personal harm or property damages . . . ." (DiPirro, supra, 153 Cal.App.4th at pp. 182-183.) Instead, Prop. 65 has a "fundamentally equitable purpose and remedy: to facilitate the notification of the public of potentially harmful substances, so informed decisions may be made by consumers on the basis of disclosure." (Id. at p. 183.)
"An award of civil penalties under [Prop. 65] is a statutory punitive exaction determined on the basis of equitable principles, designed to deter misconduct and harm, not to compensate the plaintiff for actual damages sustained." (DiPirro, supra, 153 Cal.App.4th at p. 183, fn. omitted.)
Nevertheless, under normal circumstances a private plaintiff's right to recover civil penalties and attorney fees would not be an issue. But this case presents unusual circumstances.
The record plainly reflects plaintiff has no interest in protecting the people of California. The Attorney Letter and the Demand Letter both show plaintiff was interested in his own pecuniary gain rather than the health of Californians. Plaintiff himself admitted this.
Further, the "ironclad nondisclosure" plaintiff offered in return for improving his own financial position was antithetical to the purposes of Prop. 65, i.e., informing the public about possible carcinogens and requiring corrective action. There was no benefit to the people of California. Thus, the circumstances of plaintiff's self-interest show he is not acting in the public interest.
None of the authority on which plaintiff relies supports his position. National Paint & Coatings Assn. v. State of California (1997) 58 Cal.App.4th 753, 757-758, 764 (National Paint) is inapt. It states citizens filing a Prop. 65 action pursuant to section 25249.7, subdivision (d) "need not plead a private injury and instead are deemed to sue 'in the public interest.'" (National Paint, at p. 757.)
National Paint also rejected a claim by the plaintiffs that Prop. 65 violates "due process by entrusting prosecutorial power to private citizens with a financial interest in successful prosecution of the claim." (National Paint, supra, 58 Cal.App.4th at p. 764.) The various reasons for the ruling included that prosecutors are not required to be "entirely neutral and detached"; "lower levels of prosecutorial neutrality are permissible in civil as opposed to criminal prosecutions"; allowing private persons to sue "complement[ed] rather than conflict[ed] with public enforcement"; and private plaintiffs neither sued in the state's name nor "wield[ed its] coercive power." (Id. at p. 765.)
However, contrary to plaintiff's argument, National Paint did not state a party filing a Prop. 65 suit is "'deemed to sue 'in the public interest'" regardless of their [sic] personal motivations." The facts in National Paint were nothing like those here and defendants are not claiming plaintiff must allege a "private injury." Nor are defendants arguing a due process violation. Instead, defendants acknowledge a private plaintiff may obtain civil penalties in a Prop. 65 action.
But this case is not about plaintiff's potential receipt of civil penalties. It concerns plaintiff's focus on his own financial gain. As noted, private plaintiffs are not the primary intended recipients of civil penalties under section 25249.7, subdivision (b). (DiPirro, supra, 153 Cal.App.4th at p. 183 ["primary right to bring an action for civil penalties pursuant to [Prop. 65] is also given to the state rather than individuals seeking compensation"].)
Likewise, Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) does not support plaintiff's claim his financial interests "are integral" to achieving Prop. 65's goals. Iskanian was a putative class action filed against an employer for wage and hour violations, including a claim under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.), which authorizes an employee to sue an employer on behalf of the state for Labor Code violations. The court held, in part, that an arbitration agreement requiring an employee to waive the right to bring a representative PAGA claim as a condition of employment violated public policy. (Id. at p. 360.)
In Iskanian, the defendant argued "authorizing financially interested private citizens to prosecute claims on the state's behalf without governmental supervision" violated separation of powers. (Iskanian, supra, 59 Cal.4th at pp. 389-390.) In rejecting the claim, the court noted PAGA and other qui tam actions "enhance the state's ability to use . . . scarce [government] resources by enlisting willing citizens in the task of civil enforcement. . . . [T]he lack of government resources to enforce the Labor Code led to a legislative choice to deputize and incentivize employees uniquely positioned to detect and prosecute such violations through the PAGA." (Id. at p. 390.)
Incentivizing plaintiff is not at issue here. Plaintiff was not seeking to enforce Prop. 65 or protect Californians; he was attempting to leverage a better severance package. Plaintiff was not acting in the public interest but acting for his own personal gain and using Prop. 65 as a weapon to achieve his goal.
In finding plaintiff has no standing because he is not acting in the public interest, we are not disqualifying any person with a financial interest in a Prop. 65 action. As noted, Prop. 65 provides monetary incentives. (§§ 25249.7, subd. (b)(1), 25249.12, subd. (d); Code Civ. Proc., § 1021.5.) Nor are we suggesting a private plaintiff is required to "prove a genuine interest in protecting the rights of California citizens."
What we are holding is that under the particularly egregious and exaggerated circumstances of this case, based on the intent and purposes of Prop. 65, plaintiff is not a proper party to represent and protect the interests of Californians. "The purpose of a standing requirement is to ensure that the courts will decide only actual controversies between parties with a sufficient interest in the subject matter of the dispute to press their case with vigor." (Common Cause v. Board of Supervisors, supra, 49 Cal.3d at p. 439.) Plaintiff does not have such a sufficient interest.
Allowing plaintiff to represent the people of the state of California would be sanctioning "frivolous 'shake-down' lawsuits" the amendments to Prop. 65 were designed to eliminate. The trial court was exactly right when it stated, "Turning a blind eye to plaintiff's self-interest and allowing him to represent the interests of all California residents flies in the face of equity and good jurisprudence."
DISPOSITION
The judgment is affirmed. Defendants are entitled to costs on appeal.
THOMPSON, J. WE CONCUR: FYBEL, ACTING P. J. GOETHALS, J.