People v. E*Poly Star, Inc.

• Court: California Court of Appeals
• Writing for the Court: PERLUSS, P.J.
• Citation: People v. E*Poly Star, Inc., 141 Cal.Rptr.3d 243 (Cal. App. 2012)
• Decision Date: 14 May 2012
• Docket Number: No. B233008.,B233008.
• Parties: The PEOPLE, Plaintiff and Appellant, v. E*POLY STAR, INC., et al., Defendants and Respondents.

141 Cal.Rptr.3d 243

The PEOPLE, Plaintiff and Appellant,

v.E*POLY STAR, INC., et al., Defendants and Respondents.

No. B233008.

Court of Appeal, Second District, Division 7, California.

May 14, 2012.

Review Granted Aug. 15, 2012.

Review Dismissed, Cause Remanded March 20, 2013.

Steve Cooley, Los Angeles District Attorney, Stanley P. Williams, Leslie A. Hanke, Thomas R. Wenke, Deputy District Attorneys; Elizabeth A. Egan, Fresno County District Attorney, Michael Brummel, Deputy District Attorney; Edward S. Berberian, County of Marin District Attorney, and Robert E. Nichols, Deputy District Attorney, for Plaintiff and Appellant.

Patton Martin & Sullivan, Pleasanton, John H. Patton ; Tod M. Ratfield, APC, and Tod M. Ratfield, for E*Poly Star, Inc., Zhi Zhong Sun, Steven Choi and Donald V. Schmahl, Defendants and Respondents.

PERLUSS, P.J.

The district attorneys of Los Angeles, Marin and Fresno Counties on behalf of the People of the State of California filed an action for injunctive relief and civil penalties against E*Poly Star, Inc. and several of its officers and directors under Business and Professions Code sections 17200 (unfair competition) and 17500 (untrue or misleading representations).¹ The district attorneys' complaint alleges E*Poly Star, which manufactures and distributes polyethylene and paper products to state and local government entities, has for a period of years and "continuing through the present" misrepresented the length, width, thickness and count of its packaged products and commodities in violation of state law. The trial court sustained E*Poly Star's demurrer to the complaint without leave to amend and dismissed the action, finding the claims were barred by the applicable statutes of limitations, which began to run no later than August 2, 2006 when E*Poly Star was notified by the Weights and Measures Office of the Los Angeles County Department of Agricultural Commissioner that its products were found to be short weighted in violation of several provisions of the Business and Professions Code. Because the district attorneys' have adequately alleged E*Poly Star has violated California's unfair competition law (UCL) ( § 17200 et seq. ) within four years of filing this action, we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Complaint

Pursuant to sections 17203, 17206, subdivision (a), 17535, and 17536, subdivision (a), on November 29, 2010 the district attorneys of Los Angeles, Marin and Fresno County filed a civil action in the name of the People of the State of California against E*Poly Star and three of its officers and directors, Zhi Zhong Sun (chief executive officer), Steven Choi (executive vice president) and Donald V. Schmahl (director). E*Poly Star manufacturers and imports polyethylene products (plastic bags) and paper products (toilet paper) for sale to various state and local government entities.

The district attorneys' complaint alleges E*Poly Star has violated California's false advertising law (first cause of action) and the UCL (second cause of action) by making false and misleading statements regarding the dimensions, quantity and thickness of its products when it sold those products to 17 different governmental entities.² Specifically, E*Poly Star is alleged to have misrepresented the net quantity of the contents of its packaged products; misrepresented the length, width, thickness and count of its packaged products; distributed products without labels; and distributed products with labels that do not conform to various statutory and regulatory requirements. The violations are alleged to have begun "at a date unknown but occurring within four years of the filing of this Complaint and continuing through the present." In addition, the complaint alleges, "[u]nless enjoined by order of this Court, Defendants are likely to continue to engage in such acts of unfair competition."

The complaint prays for injunctive relief, a civil penalty of $2,500 for each violation of section 17500, a civil penalty of $2,500 for each violation of the UCL and costs of suit including the costs of investigation.

2. E*Poly Star's Demurrer and Request for Judicial Notice

On February 14, 2012 E*Poly Star and the individual defendants demurred to the complaint, contending among other grounds the two causes of action asserted by the district attorneys on behalf of the People were barred by the three-year statute of limitations for false advertising claims ( Code Civ. Proc., § 338, subds. (a) & (h) ) and the four-year limitations period for UCL claims (§ 17208). With their supporting papers defendants requested the trial court take judicial notice, pursuant to Evidence Code section 452, subdivision (c) (official acts of the United States or any State), of an August 2, 2006 notice of violations to E*Poly Star from the Los Angeles County Department of Agricultural Commissioner/Weights and Measures. The notice described several instances in which E*Poly Star's products were found to be "short weight" or "short count" (see § 12024), as well as in violation of the Fair Packaging and Labeling Act (§ 12601 et seq.), based on four inspections that had been conducted between May 25, 2006 and June 23, 2006. Defendants argued the claims asserted in the complaint accrued no later than August 2, 2006 and, as a result, were time-barred.

In opposition the district attorneys explained the complaint alleges E*Poly Star has engaged in an ongoing course of illegal conduct that continued through the date of filing the lawsuit. Accordingly, under the continuing violation doctrine the complaint, filed within the statutory period for the last asserted occurrence of the unlawful practices, was timely. No opposition to E*Poly Star's request for judicial notice was filed.

In its reply memorandum E*Poly Star argued the continuing violation doctrine was developed in discrimination cases and has not been generally applied by California courts outside that context to delay accrual of a cause of action or otherwise toll the running of a governing statute of limitations. According to E*Poly Star, although there may be multiple claims, the cause of action for false advertising or a violation of the UCL accrues upon discovery of the first act, which here was no later than August 2, 2006. In support of its argument E*Poly Star cited and discussed the Court of Appeal's decision in Aryeh v. Canon Business Solutions, Inc. (2010) 185 Cal.App.4th 1159, 111 Cal.Rptr.3d 211, review granted Oct. 20, 2010 (S184929) (Aryeh ), explaining, "While the case is not precedent, nor citable, its decision is instructive."

3. The Trial Court's Order Sustaining the Demurrer Without Leave To Amend

The court heard argument on E*Poly Star's demurrer on March 30, 2011. The court's tentative ruling was to sustain the demurrer without leave to amend, finding both causes of action had accrued on August 2, 2006 and were time-barred. The written tentative ruling cited the Court of Appeal decision in Aryeh, noted Supreme Court review had been granted, provided a paragraph description of the case, and then stated, "Even though Arye [h ] is not citable, the Court has reviewed it for the purpose of considering its analysis. The Court agrees with Arye [h ]'s analysis; there is no reason to apply the continuing violations doctrine to a cause of action for unfair competition." The court declined to consider the other grounds for demurrer.

Addressing the tentative ruling, Marin County Deputy District Attorney Robert Nichols argued, "This action is based upon unlawful[ ] business practices. And there have been a number of separate, but distinct unlawful acts occurring, not only [one], occurring within [the] last four years of the statute of limitations, that is essentially what we have pled, that there are acts after act after act, short weighting, short measuring and so forth." To accept E*Poly Star's legal position, Nichols insisted, would be to grant the company immunity from prosecution forever based upon their unlawful business practices. Counsel for E*Poly Star took issue with that characterization of its position, acknowledging, "If there were a new act today, separately investigated, separately argued, then they could bring a new complaint." But, he contended, the causes of action pleaded here all arose out of the same act that was investigated in May and June 2006 and noticed in the August 2, 2006 letter. Fresno County Deputy District Attorney Michael Brummel replied by directing the court's attention to a printout that reflected separate inspections had been conducted throughout 2007 and additional inspections had occurred in subsequent years indicating weight-and-measures violations by E*Poly Star. The court then asked if those more recent violations had been pleaded. Brummel said he believed they were and noted the reason the district attorney offices from three counties had jointly filed the lawsuit was to avoid a multiplicity of actions. However, if the court believed it was necessary to amend the complaint to plead those additional violations with greater specificity, Brummel said they were prepared to do so. E*Poly Star's counsel urged the court not to allow an amendment, contending it was inconsistent for the district attorneys to now argue there were a number of separate violations when they had previously argued they were all part of a continuing violation of the UCL.

After taking the matter under the submission, the court issued its formal ruling later the same day. The minute order states, "The tentative ruling shall stand. [¶] Demurrer (above) is sustained without leave to amend on grounds fully set forth in said tentative, which is adopted as Court's Order, filed and incorporated herein by reference." On April 27, 2011 the court corrected its March 30, 2011 minute order nunc pro tunc by adding a signed judgment of dismissal of the action.

CONTENTIONS

The district attorneys contend the trial court improperly took judicial notice of the August 2, 2006 notice of...