American International Industries v. Superior Court
| Decision Date | 26 February 1999 |
| Docket Number | No. B121824,B121824 |
| Citation | 82 Cal.Rptr.2d 836,70 Cal.App.4th 406 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Previously published at 70 Cal.App.4th 406 70 Cal.App.4th 406, 1999 Daily Journal D.A.R. 1931, 1999 Daily Journal D.A.R. 6039 AMERICAN INTERNATIONAL INDUSTRIES et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent, Matthew Urbach et al., Real Parties in Interest. |
Livingston & Mattesich, Gene Livingston and Rebecca M. Ceniceros, Sacramento, for Petitioners.
No appearance by Respondent.
Marlin & Saltzman and Louis M. Marlin; Gary J. Sodikoff, Santa Ana, for Real Parties in Interest.
California Chamber of Commerce and Fred L. Main, Sacramento, as Amicus Curiae, on behalf of Petitioners.
Daniel E. Lungren, Attorney General, Roderick E. Walston, Chief Assistant Attorney General, Theodora Berger, Assistant Attorney General, Craig Thompson, Supervising Deputy Attorney General, Edward G. Weil and Susan S. Fiering, Deputy Attorneys General, as Amicus Curiae.
Defendants American International Industries (AII) and Combe Incorporated (Combe) (collectively, defendants) petition for a writ of mandate directing respondent superior court to vacate its order denying their motion for judgment on the pleadings and to enter an order granting the motion.
The issue presented is whether the instant action by plaintiffs and real parties in interest Matthew Urbach, Fred Dorsett, Todd Richardson, Ronald Spitzer, Bill Ladd and Bill Brinker (collectively, the Urbach plaintiffs) is barred on the grounds of res judicata and/or by federal law.
We conclude certain causes of actions are barred by res judicata and others by the Federal Food, Drug and Cosmetic Act (FDCA) (21 U.S.C. § 301 et seq.). The only cause of action which is not barred is the products liability claim. Therefore, the petition is granted in part and denied in part.
The Center for Environmental Health (CEH) is a nonprofit corporation aimed at protecting the environment, improving human health and supporting environmentally sound practices. Combe and AII manufacture and distribute Grecian Formula and other hair coloring products in California, which products contain lead acetate. Pursuant to Health and Safety Code section 25249.5 et seq., the Safe Drinking Water and Toxic Enforcement Act of 1986 (Toxic Enforcement Act), commonly known as Proposition 65, lead, lead compounds and lead acetate have been formally listed by the State of California as chemicals known to cause cancer, birth defects or other reproductive harm. 1
On August 9, 1996, CEH served Combe, AII and the California Attorney General with a document entitled "Notice of Violation of Proposition 65," which gave notice that Combe and AII allegedly were in violation of the Toxic Enforcement Act for failing to warn purchasers that certain products they sell in California expose users to toxic chemicals listed under the Toxic Enforcement Act. 2
On February 7, 1997, CEH filed suit against Combe and AII in the San Francisco With the involvement of the Attorney General, the action was resolved by a settlement agreement and stipulated judgment filed January 7, 1998. The settling parties were CEH, Combe and AII.
Superior Court, alleging (1) violation of the Toxic Enforcement Act; and (2) violation of the Unfair Competition Act (Bus. & Prof.Code, § 17200 et seq.) on behalf of the general public, including individuals in California, who allegedly were exposed to lead acetate. 3 The gravamen of the suit was defendants' alleged failure to disclose that their products contained lead acetate
Although the suit by CEH was premised on a failure to warn theory, the remedy provided in the settlement was a reformulation of the products. In the settlement agreement, Combe and AII undertook to "pursue in good faith reformulation of the Products to reduce the amount of lead acetate ... by 50%...." After the "Compliance Date," AII and Combe would manufacture, distribute or sell only the reformulated products. The judgment also provided it was subject to vacation if defendants were unable to achieve the reformulated level of lead acetate. 4
Combe and AII also agreed to issue at least $70,000 in coupons to California consumers and to pay $69,000 in restitution to CEH, which monies were to be allocated to three other CEH projects. Those projects were aimed at eliminating the abuse of toluene by inner city youth, reducing toxic exposures from a waste incineration plant in Oakland, and identifying safer alternatives to the use of lead in the home and workplace.
In addition, Combe and AII agreed to pay a civil penalty of $22,500 to CEH and to pay CEH $173,500 as reimbursement for its attorney fees, costs and other expenses.
With respect to the effect of the judgment, the agreement recited:
The Attorney General, who participated in the settlement, also affirmed that this resolution was in the public interest. A condition of the settlement agreement was that it be signed by a representative of the Attorney General and it stated: "The signature of the representative of the Office of the Attorney The settlement agreement contained a nondisclosure provision, paragraph 21, which states: 6 Thus, the nondisclosure provision was aimed at affording defendants the opportunity to reformulate their products before the general public would learn of the controversy surrounding the lead content of the products. 7
General evidences the view of that office that no further action is warranted concerning the violations alleged against Combe and AII, and that this Agreement is in the best interest of the general public." The Attorney General signed off on the agreement. 5
On July 7, 1997, while the prior action against AII and Combe was still pending in the San Francisco Superior Court, the Urbach plaintiffs, on their own behalf and on behalf of all others similarly situated, filed the instant class action complaint in Los Angeles Superior Court against AII and Combe, arising out of the marketing and sale of hair coloring products to consumers without warning of the potential dangers associated with lead acetate, a color additive. The complaint alleged: (1) violation of Civil Code section 1770, the Consumers Legal Remedies Act; (2) fraud by concealment; (3) false and misleading advertising (Bus. & Prof.Code, § 17500); (4) violation of the Toxic Enforcement Act; and (5) violation of Business and Professions Code section 17200 et seq.
The complaint also sought an order certifying the class and appointing the plaintiffs and their counsel to represent the class. 8
An amended complaint followed, adding a sixth cause of action for products liability based on failure to warn. In that cause of action, plaintiffs sought compensatory damages to cover the cost of cleaning their homes to eliminate the lead products' hazard, and to pay for the medical testing of children exposed to the products. Plaintiffs expressly excluded from this cause of action any and all claims for personal injury resulting from hand-to-surface transfer and ingestion of the lead contained in the products.
Combe and AII filed answers setting forth numerous affirmative defenses, including res judicata and federal preemption.
On February 2, 1998, shortly after entry of judgment in the San Francisco action, Combe and AII brought a motion for judgment on the pleadings in the Los Angeles action. They contended the complaint should be dismissed in its entirety because the judgment in the CEH action had res judicata effect and the causes of action for false advertising, fraud by concealment and violation of the Consumers Legal Remedies Act were barred by federal law.
In opposition, the Urbach plaintiffs argued defendants were seeking to circumvent the protections afforded members of a class action by imposing the terms of a non-class settlement under the misapplication of the doctrine of res judicata. Plaintiffs On February 17, 1998, the trial court denied defendants' motion for judgment on the pleadings. It observed ...
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