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Aloe Vera Awarded $561,000 in Trial Costs

Aloe Vera Awarded $561,000 in Trial Costs

Author: Jack Schatz/Wednesday, November 02, 2016/Categories: California Law and Regulation, CalEPA, OEHHA, Prop65, Litigation, Settlements, Trials, FDA, USDA

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Dietary supplement manufacturer Aloe Vera, Inc. has been awarded $561,155 by a San Francisco Superior Court Judge following its defense verdict in a Proposition 65 enforcement action. The case was brought in 2011 by the Environmental Research Center (ERC), a San Diego-based citizen enforcement group.

Lead trial counsel, Carol R. Brophy says “It’s rare for trial counsel to get more than a pittance in costs following a trial victory.”

Aloe Vera’s strategic use of a CCP 998 offer--a statutory compromise offer used to force the settlement of a case, played a key role in Aloe Vera’s award of costs.

Following the trial, Aloe Vera’s counsel filed a memorandum of costs for a total of $591,085. Of this amount, $521,000 was attributable to expert fees which were sought based on plaintiff's rejection of a CCP 998 Offer.

ERC filed a motion to strike requesting the court to disallow all the costs requested by Aloe Vera.  Judge Curtis A. Karnow of the San Francisco Superior Court examined various categories of the costs reducing the cost request by only $24,929.00

In his order Judge Karnow emphasized the most important element being that the CCP 998 offer on behalf of our client was in good faith.

The CCP 998 offer was not typical because it sought plaintiffs' outright dismissal in exchange for a waiver of costs. Because the products at issue in the trial are foods, and putting warnings on the products was not an option for Aloe Vera, the company would not agree to any injunctive relief or civil penalty.

ERC in its brief argued that “the CCP 998 offer was made in bad faith because there was no expectation that the plaintiff would accept.”

However, Judge Karnow observed that “When they made their offer, defendants cited Environmental Law Foundation v. Beech-Nut Nutritional Corp., 235 Cal. App. 4th 307 (2015), an appellate decision that held that it is appropriate to average exposure to lead in food products over time, instead of per day, which tracked with Judge Karnow’s reasoning in his Statement of Decision. 

Judge Karnow also noted that the Beech-Nut opinion was published months before the CCP 998 offer was made, and that the defendants were relying on the plaintiff’s exposure data.

Aloe Vera countered that both parties had enough information to evaluate the 998 Offer for reasonableness.

Judge Karnow emphasized that the California Supreme Court has not decided whether a good faith requirement is built into CCP § 998, citing Regency Outdoor Advertising, Inc. v. City of Los Angeles, 39 Cal. 4th 507, 531(2006)

He enumerated the factors cited in several California appellate cases.

·         First, the burden is on the plaintiff to show the offer was unreasonable

·         Judgment for the defendant suggests the offer was reasonable.

·         If a defendant reasonably agrees that there is no liability, even a very small offer can be in good faith.

·         Notwithstanding Plaintiff’s perception of their likelihood to prevail, when the defendant perceives himself to be fault free and has concluded that he has a very significant likelihood of prevailing at trial, it is consistent with the legislative purpose of section 998 for the defendant to make a modest settlement offer.  If the offer is refused, it is also consistent with the legislative intent that the defendant to engage the services of experts to assist him in establishing that he is not liable to the plaintiff.

Judge Karnow concluded that Aloe Vera reasonably perceived themselves to be free of fault and had a significant likelihood of prevailing at trial. Thus, Aloe Vera’s request for costs of expert witnesses and related costs was reasonable, Judge Karnow ruled.

“The size of the cost award sends a message to prospective plaintiffs that they must evaluate the defendant's affirmative defenses or be held accountable for costs, including high expert fees, in Proposition 65 cases,” Brophy said.

Defendant Aloe Vera, Inc. was represented by lead counsel Carol R. Brophy of the San Francisco office of Sedgewick LLP.

The Environmental Research Center, Inc. was represented by Philip T. Emmons Law Offices of Walnut Creek and Ryan Hoffman of Berkeley.

Lead trial counsel, Carol R. Brophy says “It’s rare for trial counsel to get more than a pittance in costs following a trial victory.”

Aloe Vera’s strategic use of a CCP 998 offer--a statutory compromise offer used to force the settlement of a case, played a key role in Aloe Vera’s award of costs.

Following the trial, Aloe Vera’s counsel filed a memorandum of costs for a total of $591,085. Of this amount, $521,000 was attributable to expert fees which were sought based on plaintiff's rejection of a CCP 998 Offer.

ERC filed a motion to strike requesting the court to disallow all the costs requested by Aloe Vera.  Judge Curtis A. Karnow of the San Francisco Superior Court examined various categories of the costs reducing the cost request by only $24,929.00

In his order Judge Karnow emphasized the most important element being that the CCP 998 offer on behalf of our client was in good faith.

The CCP 998 offer was not typical because it sought plaintiffs' outright dismissal in exchange for a waiver of costs. Because the products at issue in the trial are foods, and putting warnings on the products was not an option for Aloe Vera, the company would not agree to any injunctive relief or civil penalty.

ERC in its brief argued that “the CCP 998 offer was made in bad faith because there was no expectation that the plaintiff would accept.”

However, Judge Karnow observed that “When they made their offer, defendants cited Environmental Law Foundation v. Beech-Nut Nutritional Corp., 235 Cal. App. 4th 307 (2015), an appellate decision that held that it is appropriate to average exposure to lead in food products over time, instead of per day, which tracked with Judge Karnow’s reasoning in his Statement of Decision. 

Judge Karnow also noted that the Beech-Nut opinion was published months before the CCP 998 offer was made, and that the defendants were relying on the plaintiff’s exposure data.

Aloe Vera countered that both parties had enough information to evaluate the 998 Offer for reasonableness.

Judge Karnow emphasized that the California Supreme Court has not decided whether a good faith requirement is built into CCP § 998, citing Regency Outdoor Advertising, Inc. v. City of Los Angeles, 39 Cal. 4th 507, 531(2006)

He enumerated the factors cited in several California appellate cases.

·         First, the burden is on the plaintiff to show the offer was unreasonable

·         Judgment for the defendant suggests the offer was reasonable.

·         If a defendant reasonably agrees that there is no liability, even a very small offer can be in good faith.

·         Notwithstanding Plaintiff’s perception of their likelihood to prevail, when the defendant perceives himself to be fault free and has concluded that he has a very significant likelihood of prevailing at trial, it is consistent with the legislative purpose of section 998 for the defendant to make a modest settlement offer.  If the offer is refused, it is also consistent with the legislative intent that the defendant to engage the services of experts to assist him in establishing that he is not liable to the plaintiff.

Judge Karnow concluded that Aloe Vera reasonably perceived themselves to be free of fault and had a significant likelihood of prevailing at trial. Thus, Aloe Vera’s request for costs of expert witnesses and related costs was reasonable, Judge Karnow ruled.

“The size of the cost award sends a message to prospective plaintiffs that they must evaluate the defendant's affirmative defenses or be held accountable for costs, including high expert fees, in Proposition 65 cases,” Brophy said.

Defendant Aloe Vera, Inc. was represented by lead counsel Carol R. Brophy of the San Francisco office of Sedgewick LLP.

The Environmental Research Center, Inc. was represented by Philip T. Emmons Law Offices of Walnut Creek and Ryan Hoffman of Berkeley.

 

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Jack Schatz

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