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o0lCUOUlUlUlUlOrOO NOD OR OOD
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on DUN FF WYN &§ DO OAT DH F&F WHY
JAMES KAWAHITO (SBN 234851)
KAWAHITO LAW GROUP APC
222 N. Pacific Coast Hwy., Suite 2222
El Segundo, CA 90245
Telephone: (310) 746-5300
Facsimile: (310) 593-2520
Email: jkawahito@kawahitolaw.com
Attorneys for Plaintiff the Center for Advanced Public Awareness, Inc.
ELECTRONICALLY
FILED
Superior Court of California,
County of San Francisco
05/03/2019
Clerk of the Court
BY: VANESSA WU
Deputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
CENTER FOR ADVANCED PUBLIC
AWARENESS, INC., in the public interest,
Plaintiff,
vs.
MID CITY CANNABIS CLUB, INC. dba LA
BREA COLLECTIVE, a California
Corporation; and DOES 1 through 50,
inclusive,
Defendants.
Case Number: CGC-19-573796
MEMORANDUM OF POINTS AND
AUTHORITITES IN SUPPORT OF
MOTION TO APPROVE PROPOSITION
65 SETTLEMENT AND CONSENT
JUDGMENT
Violation of Proposition 65, the Safe
Drinking Water and Toxic Enforcement Act
of 1986 (Health and Safety Code § 25249.5 et
seq.)
Date: June 25, 2019
Time: 9:30 a.m.
Dept.: 302
Judge: Honorable Ethan P. Schulman
Reservation No.: 05020625-07
MOTION FOR CONSENT JUDGMENT ————_S—OSSSSOSoO ON DA F&F Ww YY —
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I. INTRODUCTION
Plaintiff the Center for Advanced Public Awareness (“CAPA”) hereby seeks the Court's
approval of the settlement in the form of a stipulated judgment (“Consent Judgment” or
Settlement”) entered into with defendant Mid City Cannabis Club, Inc. dba La Brea Collective
(“MCC” or “Defendant”) in this action to enforce the provisions of Health and Safety Code
section 25249.6 et seq. (“Proposition 65”) on behalf of the general public. The Consent Judgment
resolves CAPA’s allegations that MCC sold and distributed for sale in California marijuana
flowers, buds, leaves, stems and other organic parts of the cannabis and marijuana plants intended
for combustion via smoking and/or inhalation without first providing the health hazard warning
required by Proposition 65. A true and correct copy of the Consent Judgment is attached as
Exhibit 1 to the Declaration of James Kawahito (“Kawahito Decl.”), filed concurrently herewith,
and also as Exhibit 1 to the Proposed Judgment.
As discussed more fully herein, the Consent Judgment is the result of arm’s-length
negotiations conducted by the parties’ experienced counsel. The Settlement is fair and reasonable
to the parties, serves the public interest, has been submitted to the Attorney General for review,
and fully complies with the statutory requirements of Proposition 65.
This action has conferred a benefit on the public in that pursuant to the Consent Judgment,
MCC will no longer sell the products at issue without providing warnings as set forth in Section 2
of the Consent Judgment. Accordingly, CAPA requests that the Court grant this motion to
approve the Consent Judgment and enter judgment in accordance with its terms.
Il. | PROCEDURAL HISTORY AND BACKGROUND
CAPA is a not-for profit corporation duly organized and existing in the State of California,
which seeks to promote awareness of exposures to toxic chemicals and to improve human health
by reducing or eliminating hazardous substances used in consumer products. In July 2018, an
investigator for CAPA visited the MCC dispensary in Los Angeles, California, and purchased the
Covered Products from MCC. The investigator was not provided with a Proposition 65 warning
related to the Covered Products. In particular, the investigator did not see any Proposition 65 sign
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or warnings displayed in the facility, and no warnings were on the packaging of the Covered
Products or the receipt.
Upon making the determination that Defendant’s marijuana flowers, buds, leaves, stems
and other organic parts of the cannabis and marijuana plants intended for combustion via smoking
and/or inhalation (the “Covered Product(s)”) would result in consumer exposures to marijuana
smoke, CAPA brought this action pursuant to Health and Safety Code section 25249.7(d). In
particular, CAPA’s complaint alleges that the Covered Products contain and expose consumers
and other individuals to marijuana smoke, which is listed pursuant to Proposition 65 as a chemical
known to cause cancer. CAPA alleges that Defendant violated Proposition 65 when it failed to
warn its customers and consumers in California of the health hazards associated with exposures to
marijuana smoke from the Covered Products. Defendant denies CAPA’s allegations, and
expressly denies any wrongdoing or that the sale or distribution of the Product violates Proposition
65 or any other law.
On or about August 17, 2018, CAPA served Defendant, the California Attorney General,
and all other requisite public enforcement agencies with a 60-Day Notice of Violation (“Notice”)
alleging that MCC violated Proposition 65. Kawahito Decl. § 6, Ex. 2. The Notice alleged that
MCC had failed to warn its customers and consumers in California of the health hazards
associated with exposures to marijuana smoke from its sale and/or distribution of the Covered
Products. See id.
On February 14, 2019, more than sixty days after service of the Notice, with no public
enforcer having elected to enforce the violations alleged in the Notice, CAPA filed the instant
action. On or around February 25, 2019, the parties finalized and mutually executed the Consent
Judgment. The Consent Judgment resolves all of the claims alleged in the Notice and Complaint,
and provides appropriately tailored releases. See Kawahito Decl. 4, Ex. 1. The Settlement meets
the requirements of Proposition 65, is fair and reasonable, and serves the public interest. Among
other things, it requires Defendant to pay civil penalties for its alleged past violations and provide
clear and reasonable warnings as required under Proposition 65.
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Accordingly, CAPA respectfully requests that the Court approve the Settlement and enter
the proposed Consent Judgment.
Ill. PROPOSITION 65
Formally known as the Safe Drinking Water and Toxic Enforcement Act, California voters
overwhelmingly approved the Proposition 65 ballot initiative in 1986. Codified in Health and
Safety Code Section 25249.5 et seq., Proposition 65 requires any person in the course of doing
business- defined as individuals or entities with ten or more employees- provide a “clear and
reasonable warning” before “knowingly and intentionally” exposing any individual to a chemical
listed as known to cause cancer, reproductive harm or birth defects. The Act provides an
exemption from the warning requirement where the alleged violator can show that the exposure
would have “no observable effect” with regard to reproductive harm, assuming an exposure at
one-thousand times the level in question. Health & Safety Code §§ 25249.6 and 25249.10(c).
The exposure level that would have “no observable effect,” commonly referred to as the “NOEL,”
is defined by regulations as “the maximum level of exposure at which a chemical has no
observable reproductive effect.” Cal. Code Regs. tit. 27, § 25801(c); Cal. Health & Safety Code §
25249.8; Cal. Code Regs. tit. 27, § 25805.
Proposition 65 may be enforced by public prosecutors, including the Attorney General,
district attorneys, and certain city attorneys, or by private individuals or organizations acting “in
the public interest.” To initiate a Proposition 65 enforcement action in the public interest, a
private enforcer must first give notice to the alleged violator and certain public enforcers, and
allow more than sixty days to pass with no public enforcer having elected to prosecute the alleged
violations. Cal. Health & Safety Code§ 25249.7(c) and (d). The act provides statutory penalties
of up to twenty-five hundred dollars ($2,500) per day for each violation. The majority, seventy-
five percent (75%) of the penalty is paid to the State of California for deposit in the Safe Drinking
Water and Toxic Enforcement Fund, a fund administered by the California Office of
Environmental Health Hazard Assessment (“OEHHA”). Cal. Health & Safety Code §
25249.12(c)(1). The private enforcer retains the remaining twenty-five percent (25%) of any
penalty paid. Cal. Health & Safety Code §§ 25249.7(b); 25249.12(d).
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Iv. LAW AND ARGUMENT
A. The Settlement Complies with the Requirements of Proposition 65
California Health and Safety Code Section 25249.7(t)(4) requires judicial approval of
Proposition settlements between private parties. To approve the settlement, the Court must find
that: (1) the warning or other injunctive relief required by the settlement complies with
Proposition 65; (2) the attorneys' fees and costs provided by the settlement are reasonable under
California law; and (3) the amount paid in civil penalties is reasonable based on the criteria set
forth in Health and Safety Code Section 25249.7(b)(2). As discussed in more detail below, the
terms and conditions of the Consent Judgment support each of these three findings.
1. The Injunctive Terms of the Settlement Comply with Proposition 65
Proposition 65 states “[n]o person in the course of doing business shall knowingly and
intentionally expose any individual to [a listed chemical] without first giving clear and reasonable
warning to such individual ....” Health & Safety Code§ 25249.6. To be “clear and reasonable,”
the warning must be placed in such a manner as to render it likely to be read and understood by
ordinary individuals under customary conditions of purchase or use. Cal. Code Regs. tit. 27, §
25601 et seq.
Here, the Consent Judgment calls for a robust warnings regime that includes In-Store
Warnings, Product Label Warnings, and Internet Website Warnings. Kawahito Decl. § 4, Ex. 1
Section 2.
a. In Store Warnings.
The Settlement requires that In-Store Warnings shall be provided at one or more of the
following locations: (a) at or near each cash register in the store; (b) at or near each display case
containing the Covered Products in the store; or (c) at or near the entrance of the store. The
warnings shall be at least 8 inches by 10 inches, and posted at a height and location that will make
it conspicuous and easy to read for the average person. The text of the warning shall be printed in
black ink, in a font that is easy to read and legible, but in no case less than a size 22 font. The
language shall be substantially similar to that set forth below and may also include a warning
concerning birth defects or other reproductive harm at the discretion of MCC.
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MOTION FOR CONSENT JUDGMENTCo eo NIN DH FF WN
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ont nAnA BF YW NH &§ SLwYo ON DH BF WN SF OS
Z\WaRNING: This product can expose you to chemicals, including Marijuana
Smoke, which are known to the State of California to cause cancer. For more
information go to www.P65Warnings.ca.gov.
Or
ZAwaRNING: This product can expose you to chemicals including Marijuana
Smoke, which are known to the state of California to cause cancer, and [name of
reproductive toxicant], which are known to the State of California to cause birth
defects or other reproductive harm. For more information go to
www.P65Warnings.ca.gov.
b. Product Label Warnings.
The Settlement also requires that the text of any Product Label Warnings shall be
prominently displayed on the label and must be displayed with such conspicuousness as compared
with other words, statements, designs or devices on the label, labeling, or sign, as to render the
warning likely to be seen, read, and understood by an ordinary individual under customary
conditions of purchase or use. For the short form version of the warning set forth below, the
warning shall be in a type size no smaller than the largest type size used for other consumer
information, as that term is defined in Tit. 27, CCR, Section 25600.1(c), on the product and, in no
case, shall the warning appear in a type size smaller than 6-point type. The Product Label
Warnings shall be securely affixed to (via a label) or printed upon the packaging of each Covered
Product. Employees may not write over the text of the warning for any reason. The language shall
be substantially similar to that set forth below
A WARNING: This product can expose you to chemicals including Marijuana
Smoke, which are known to the State of California to cause cancer. For more
information go to www.P65Warnings.ca.gov.
Or
A WARNING: This product can expose you to chemicals including Marijuana
Smoke, which are known to the State of California to cause cancer, and [name of
reproductive toxicant], which are known to the State of California to cause birth
defects or other reproductive harm. For more information go to
www.P65Warnings.ca.gov.
cc. Internet Website Warnings
For all Covered Products that are advertised on a website as offered for sale at MCC’s
dispensary or available for delivery directly to MCC’s dispensary members, a warning that
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complies with the content requirements of Section 25603(a) must also be provided by including
either the warning or a clearly marked hyperlink using the word “WARNING” on the Covered
Product’s display page, or by otherwise prominently displaying the warning to the purchaser prior
to completing the purchase. If a Product Label Warning is provided as set forth above, the
warning provided on the website may use the same content as the Product Label Warning.
Supplemental information may be provided only in compliance with Tit. 27, CCR, Section
25601(e).
Based on the foregoing, the Consent Judgment creates a comprehensive warning regime
and standards applicable to all sales of Covered Products by MCC. The foregoing warnings are
likely to alert a reasonable customer of the exposure to marijuana smoke as a result of the use of
the Covered Products. Therefore, all of the Covered Products purchased for sale or manufactured
for sale by MCC in California going forward will be sold with a clear and reasonable warning.
Based on the foregoing, CPA requests that the Court find that the injunctive relief
negotiated by the parties, including product reformulation, complies with Proposition 65. Cal.
Health & Safety Code § 25249.7(f)(4).
2. The Civil Penalty Amount Is Reasonable
Pursuant to the Consent Judgment, MCC will pay $4,000 in civil penalties. The parties’
negotiations took into account the facts and circumstances of this case and their consideration of
each of the statutory factors provided by the Health and Safety Code. The settlement discussions
included numerous e-mails and telephone calls between counsel during which the parties
exchanged product sales data, laboratory results, and other relevant information. Kawahito Decl. {
11. Asa result of these negotiations, and in order to facilitate the settlement of this case, the
parties agreed to the $4,000 civil penalty amount. Jd. The following statutory factors support a
finding that the civil penalty is appropriate.
(a) The economic effect of the penalty on the violator. The amount of the penalty is
sufficient to remind Defendant and their management to remain aware of, and implement
Proposition 65 requirements, without unduly hurting Defendant’s business. In addition, the parties
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are aware that there are additional costs that will be borne by Defendant as they ensure that
Covered Products are sold with a clear and reasonable warning in California going forward.
(b) Whether the violator took good faith measures to comply. MCC represents that it was
not unaware of any violation, and that as soon as it received CAPA’s Notice, it immediately took
steps to investigate and address CAPA’s allegations.
(c) The willfulness of the violator's misconduct. MCC maintains it did not intentionally
ignore, disregard, or violate Proposition 65, and once it learned of the allegations, it worked to
ensure that all of their Products comply with Proposition 65. Defendant’s cooperation throughout
the settlement process indicates that it is an entity intent on complying with the statute.
(d) Severity. CAPA considers the sale of Covered Products resulting in the exposure to
marijuana smoke without the requisite exposure warnings a severe violation of Proposition 65.
Defendant, however, maintains that the number of violations was minimal, and that it immediately
took action to investigate and correct the allegations. Defendant has also agreed to pay civil
penalties to compensate the public for the alleged past violations.
(e) The deterrent effects of the penalty on the violator and the regulated community.
Defendant’s payment of civil penalties will serve as an incentive for continued compliance with
Proposition 65. Further, by virtue of word-of-mouth in the industry, and the fact that the Consent
Judgment, if approved, will be a matter of public record, it is likely that other companies selling
similar products will learn of this action. The awareness of the regulated community as a whole
will encourage other companies to comply with Proposition 65 to avoid the imposition of
similar penalty payments. Cal. Health & Safety Code § 25249.7(b)(2).
3. The Fee/Cost Recovery is Reasonable under California Law
As part of the Settlement, Defendant will reimburse CAPA $31,000 for the attorneys’ fees
and litigation costs incurred in this action. The parties reached this agreement in accordance with
general contract principles and the private attorney general doctrine codified at Code of Civil
Procedure Section 1021.5. The negotiated reimbursement is significantly less than the roughly
$34,000 in fees and costs incurred by the investigation, litigation, and other enforcement related
activity required by this case. Kawahito Decl. § 23. Indeed, as set forth in the declaration of
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James Kawahito, in addition to the attorneys’ fees associated with bringing this action, CAPA has
incurred costs associated with investigators, intake, research, etc. Id.
The attorneys at the Kawahito Law Group (“KLG”) spent significant time in investigating
the Product; reviewing the investigator’s findings, and working with CAPA’s consultants to
determine if the sale of the Covered Products violated Proposition 65 in the absence of a warning.
It also prepared the notice of violation and the complaint, worked with counsel for Defendant to
arrive at settlement terms, prepared and exchanged drafts of the proposed Consent Judgment; and
prepared this motion. Jd. at {22. Similar hourly rates as the one requested here for James
Kawahito have been approved by numerous other state and federal courts. Jd. at §21. As set forth
in the declaration of James Kawahito, the $31,000 in attorney fees and cost reimbursements is less
than the lodestar amount of $34,015.59 in total fees and costs incurred. Id. at § 22.
Given CAPA’s compromise on the fees to be reimbursed, the time and resources invested,
and the public benefit achieved, both in terms of the civil penalties collected and the injunctive
relief obtained, the negotiated fee recovery in this case is reasonable under California law, and
more efficient in terms of party and judicial resources than a contested fee application. The
supporting declaration filed herewith provides evidence to support the finding that the negotiated
fee and cost reimbursement is reasonable. It shows that the fees and costs incurred in this matter
exceed $34,000 from the initial investigation of the matter through the filing and litigation of this
action. Jd. All such activity was necessary to obtain the results set forth in the Consent Judgment
and favorable resolution in the public interest. It is noteworthy that the fees presented for approval
are only those incurred prior to the filing of this motion. Future amounts incurred, appearing at the
hearing, and fully concluding this matter with the parties, the Court, and the Attorney General's
Office will not be recovered, and are not included among the tabulated fee and cost summary
amounts submitted.
As set forth in the Attorney General's guidelines for evaluating the reasonableness of an
award of attorneys’ fees provided by a Proposition 65 settlement, a party may be deemed
successful so as to permit an award “if the plaintiff's action was the cause or ‘catalyst’ of the
change in conduct.” Cal. Code Regs. tit. 11, § 3201(a). The regulations provide that “a settlement
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that provides for ... a clear and reasonable warning, where there had been no warning provided
prior to the sixty-day notice ... is also presumed to confer a significant public benefit.” 11 Cal.
Code Regs. § 3201(b)(I). Here, CAPA procured Defendant’s commitment to provide Proposition
65 complaint warnings, and therefore operated as the catalyst creating a change in the seller’s
behavior, and, thereby, the marketplace, which constitutes a significant public benefit.
While the Attorney General's regulations are not binding, they are instructive as to the
level of scrutiny the Court should apply in determining the reasonableness of a negotiated
reimbursement of fees and costs. California Code of Regulations title 11, section 3201 states:
[T]he fact that the defendant agreed to pay the fee does not automatically
render the fee reasonable. The fact that the fee award is part of a
settlement, however, may justify applying a somewhat less exacting
review of each element of the fee claim than would be applied in a
contested fee application.
(Emphasis added.) Based on this standard of review, the number of attorney and staff hours
invested in the case and, in light of the declaration and other evidence supporting actual fees and
costs that exceed the negotiated amount, the Court should find that the fees and costs provided by
the Settlement are reasonable under California law.
B. The Settlement Should Be Entered as a Judgment
This motion is brought in part pursuant to Code of Civil Procedure section 664.6, which
provides:
If parties to pending litigation stipulate in a writing signed by the parties
outside the presence of the court . . . for settlement of the case, or part
thereof, the court, upon motion, may enter judgment pursuant to the
terms of the settlement.
Section 664.6 gives expression to a strong policy favoring settlement of pending litigation.
Inre Marriage of Assemi, 7 Cal. 4th 896, 910 (1994). A court may approve a settlement provided
the terms of the settlement are not contrary to law or violative of public policy. Rich Vision
Centers, Inc. v. Bd. of Med Examiners, 144 Cal. App. 3d 110, 115-116 (1983). “Settlements can
produce peace and goodwill in the community while reducing the expense and persistency of
litigation,” and “[pJublic policy strongly discourage[s] litigation and encourages settlement.”
Skulnick v. Roberts Express, Inc., 2 Cal. App. 4th 884, 891 (1992). California courts also
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recognize the importance of' “settlement as part of the litigation process.” Soliz v. Williams, 74
Cal. App. 4th 577, 587 (1999). As such, there is a strong presumption favoring the settlement of
litigation. Assemi, 7 Cal. 4th at 910.
Here, the Settlement contains no term or condition prohibited by law or contrary to public
policy. In fact, all of the terms specifically further the public policy expressed in the preamble to
Proposition 65, namely, protecting the public against, and enforcing its right to know about,
chemicals that cause cancer, birth defects, or other reproductive harm. Historical and Statutory
Notes, West's Ann. Health & Safety Code foil. § 25249.5 (2006 ed.). Additionally, the Consent
Judgment is a product of arm’s-length negotiations conducted by experienced counsel who
possessed sufficient information to evaluate the case and the terms of the settlement. Kawahito
Decl. ¥ 8; Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 245 (2001) (presumption that
proposed settlement was fair where the settlement is reached through arm's-length bargaining, the
parties and the court have sufficient information, counsel is experienced in similar litigation, and
the percentage of objectors is small). In the instant action, the parties’ settlement discussions
continued for several months, and were conducted by experienced attorneys in possession of
sufficient information to evaluate the proposed terms.
Moreover, pursuant to the relevant rules, the Consent Judgment was submitted to the
California Attorney General’s office at least 45 days prior to the date of the hearing. Kawahito
Decl. ff] 23-24. Assuming no objection by the Attorney General, the Court should enter the
Consent Judgment as a judgment pursuant Section 664.6.
V. CONCLUSION
For the foregoing reasons, CAPA respectfully requests that the Court approve and enter the
[Proposed] Consent Judgment.
Dated: May 3, 2019 KAWAHITO LAW GROUP APC
ys for Plaintiff
CENTER FOR ADVANCED PUBLIC
AWARENESS
10
MOTION FOR CONSENT JUDGMENTBB woN
a nw
PROOF OF SERVICE
1 am employed in the County of Los Angeles, State of California. | am over the age of
18 and not a party to this action; my current business address is 222 N. Pacific Coast Hwy.,
Suite 2222, El Segundo, CA 90245
On May 3, 2019, I served the foregoing document(s) described as:
MEMORANDUM OF POINTS AND AUTHORITITES IN SUPPORT OF MOTION TO
APPROVE PROPOSITION 65 SETTLEMENT AND CONSENT JUDGMENT
on the interested parties in this action as follows:
x BY THE FOLLOWING MEANS:
I placed an original enclosed in sealed envelope(s) addressed as follows:
Ann Grimaldi, Esq. Proposition 65 Enforcement Reporting
Jennifer K. Singh, Esq. Attention: Prop 65 Coordinator
Grimaldi Law Offices 1515 Clay Street, Suite 2000
535 Mission Street, 14th Floor Post Office Box 70550
San Francisco, CA 94105 Oakland, California 94612-0550
_x_ BY MAIL
x I placed the envelope(s) with postage thereon fully prepaid in the United States
~~ mail, at El Segundo, California.
x 1 am readily familiar with the firm’s practice of collection and processing
correspondence for mailing with the United States Postal Service; the firm
deposits the collected correspondence with the United States Postal Service that
same day, in the ordinary course of business, with postage thereon fully prepaid,
at El Segundo, California. I placed the envelope(s) for collection and mailing
on the above date following ordinary business practices.
_x___ Executed on May 3, 2019, at El Segundo, California.
x I declare under penalty of perjury under the laws of the State of California that
the above is true and correct.
x I declare that I am employed in the office of a member of the bar of this court at
whose direction the service was made.
stian Burnside
PROOF OF SERVICE
Preview
o0lCUOUlUlUlUlOrOO NOD OR OOD NON NN NN NN Dw ee ee ee on DUN FF WYN &§ DO OAT DH F&F WHY JAMES KAWAHITO (SBN 234851) KAWAHITO LAW GROUP APC 222 N. Pacific Coast Hwy., Suite 2222 El Segundo, CA 90245 Telephone: (310) 746-5300 Facsimile: (310) 593-2520 Email: jkawahito@kawahitolaw.com Attorneys for Plaintiff the Center for Advanced Public Awareness, Inc. ELECTRONICALLY FILED Superior Court of California, County of San Francisco 05/03/2019 Clerk of the Court BY: VANESSA WU Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN FRANCISCO CENTER FOR ADVANCED PUBLIC AWARENESS, INC., in the public interest, Plaintiff, vs. MID CITY CANNABIS CLUB, INC. dba LA BREA COLLECTIVE, a California Corporation; and DOES 1 through 50, inclusive, Defendants. Case Number: CGC-19-573796 MEMORANDUM OF POINTS AND AUTHORITITES IN SUPPORT OF MOTION TO APPROVE PROPOSITION 65 SETTLEMENT AND CONSENT JUDGMENT Violation of Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986 (Health and Safety Code § 25249.5 et seq.) Date: June 25, 2019 Time: 9:30 a.m. Dept.: 302 Judge: Honorable Ethan P. Schulman Reservation No.: 05020625-07 MOTION FOR CONSENT JUDGMENT ————_S—OSSSSOSoO ON DA F&F Ww YY — Rw NYY HY NY NN NY He Bee ew Be ewe eB Be ee ord DA ARK DDH & SOM IA AA RE DOH = S I. INTRODUCTION Plaintiff the Center for Advanced Public Awareness (“CAPA”) hereby seeks the Court's approval of the settlement in the form of a stipulated judgment (“Consent Judgment” or Settlement”) entered into with defendant Mid City Cannabis Club, Inc. dba La Brea Collective (“MCC” or “Defendant”) in this action to enforce the provisions of Health and Safety Code section 25249.6 et seq. (“Proposition 65”) on behalf of the general public. The Consent Judgment resolves CAPA’s allegations that MCC sold and distributed for sale in California marijuana flowers, buds, leaves, stems and other organic parts of the cannabis and marijuana plants intended for combustion via smoking and/or inhalation without first providing the health hazard warning required by Proposition 65. A true and correct copy of the Consent Judgment is attached as Exhibit 1 to the Declaration of James Kawahito (“Kawahito Decl.”), filed concurrently herewith, and also as Exhibit 1 to the Proposed Judgment. As discussed more fully herein, the Consent Judgment is the result of arm’s-length negotiations conducted by the parties’ experienced counsel. The Settlement is fair and reasonable to the parties, serves the public interest, has been submitted to the Attorney General for review, and fully complies with the statutory requirements of Proposition 65. This action has conferred a benefit on the public in that pursuant to the Consent Judgment, MCC will no longer sell the products at issue without providing warnings as set forth in Section 2 of the Consent Judgment. Accordingly, CAPA requests that the Court grant this motion to approve the Consent Judgment and enter judgment in accordance with its terms. Il. | PROCEDURAL HISTORY AND BACKGROUND CAPA is a not-for profit corporation duly organized and existing in the State of California, which seeks to promote awareness of exposures to toxic chemicals and to improve human health by reducing or eliminating hazardous substances used in consumer products. In July 2018, an investigator for CAPA visited the MCC dispensary in Los Angeles, California, and purchased the Covered Products from MCC. The investigator was not provided with a Proposition 65 warning related to the Covered Products. In particular, the investigator did not see any Proposition 65 sign 1 MOTION FOR CONSENT JUDGMENToD OND DH BP WY = 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 or warnings displayed in the facility, and no warnings were on the packaging of the Covered Products or the receipt. Upon making the determination that Defendant’s marijuana flowers, buds, leaves, stems and other organic parts of the cannabis and marijuana plants intended for combustion via smoking and/or inhalation (the “Covered Product(s)”) would result in consumer exposures to marijuana smoke, CAPA brought this action pursuant to Health and Safety Code section 25249.7(d). In particular, CAPA’s complaint alleges that the Covered Products contain and expose consumers and other individuals to marijuana smoke, which is listed pursuant to Proposition 65 as a chemical known to cause cancer. CAPA alleges that Defendant violated Proposition 65 when it failed to warn its customers and consumers in California of the health hazards associated with exposures to marijuana smoke from the Covered Products. Defendant denies CAPA’s allegations, and expressly denies any wrongdoing or that the sale or distribution of the Product violates Proposition 65 or any other law. On or about August 17, 2018, CAPA served Defendant, the California Attorney General, and all other requisite public enforcement agencies with a 60-Day Notice of Violation (“Notice”) alleging that MCC violated Proposition 65. Kawahito Decl. § 6, Ex. 2. The Notice alleged that MCC had failed to warn its customers and consumers in California of the health hazards associated with exposures to marijuana smoke from its sale and/or distribution of the Covered Products. See id. On February 14, 2019, more than sixty days after service of the Notice, with no public enforcer having elected to enforce the violations alleged in the Notice, CAPA filed the instant action. On or around February 25, 2019, the parties finalized and mutually executed the Consent Judgment. The Consent Judgment resolves all of the claims alleged in the Notice and Complaint, and provides appropriately tailored releases. See Kawahito Decl. 4, Ex. 1. The Settlement meets the requirements of Proposition 65, is fair and reasonable, and serves the public interest. Among other things, it requires Defendant to pay civil penalties for its alleged past violations and provide clear and reasonable warnings as required under Proposition 65. 2 MOTION FOR CONSENT JUDGMENTwo eo NIN DH FF WN NNR NY NY NNN NY He ee ee ee ee oI DAA ROH HF SOC wMRrA AAR HH AHS Accordingly, CAPA respectfully requests that the Court approve the Settlement and enter the proposed Consent Judgment. Ill. PROPOSITION 65 Formally known as the Safe Drinking Water and Toxic Enforcement Act, California voters overwhelmingly approved the Proposition 65 ballot initiative in 1986. Codified in Health and Safety Code Section 25249.5 et seq., Proposition 65 requires any person in the course of doing business- defined as individuals or entities with ten or more employees- provide a “clear and reasonable warning” before “knowingly and intentionally” exposing any individual to a chemical listed as known to cause cancer, reproductive harm or birth defects. The Act provides an exemption from the warning requirement where the alleged violator can show that the exposure would have “no observable effect” with regard to reproductive harm, assuming an exposure at one-thousand times the level in question. Health & Safety Code §§ 25249.6 and 25249.10(c). The exposure level that would have “no observable effect,” commonly referred to as the “NOEL,” is defined by regulations as “the maximum level of exposure at which a chemical has no observable reproductive effect.” Cal. Code Regs. tit. 27, § 25801(c); Cal. Health & Safety Code § 25249.8; Cal. Code Regs. tit. 27, § 25805. Proposition 65 may be enforced by public prosecutors, including the Attorney General, district attorneys, and certain city attorneys, or by private individuals or organizations acting “in the public interest.” To initiate a Proposition 65 enforcement action in the public interest, a private enforcer must first give notice to the alleged violator and certain public enforcers, and allow more than sixty days to pass with no public enforcer having elected to prosecute the alleged violations. Cal. Health & Safety Code§ 25249.7(c) and (d). The act provides statutory penalties of up to twenty-five hundred dollars ($2,500) per day for each violation. The majority, seventy- five percent (75%) of the penalty is paid to the State of California for deposit in the Safe Drinking Water and Toxic Enforcement Fund, a fund administered by the California Office of Environmental Health Hazard Assessment (“OEHHA”). Cal. Health & Safety Code § 25249.12(c)(1). The private enforcer retains the remaining twenty-five percent (25%) of any penalty paid. Cal. Health & Safety Code §§ 25249.7(b); 25249.12(d). 3 MOTION FOR CONSENT JUDGMENTwD mr DH FF WN & NN NY NY NY NN NY Ye ee ee on DH WH F&F WN K§ OC OD Oe HI DH FF BW NY —&§ S&S Iv. LAW AND ARGUMENT A. The Settlement Complies with the Requirements of Proposition 65 California Health and Safety Code Section 25249.7(t)(4) requires judicial approval of Proposition settlements between private parties. To approve the settlement, the Court must find that: (1) the warning or other injunctive relief required by the settlement complies with Proposition 65; (2) the attorneys' fees and costs provided by the settlement are reasonable under California law; and (3) the amount paid in civil penalties is reasonable based on the criteria set forth in Health and Safety Code Section 25249.7(b)(2). As discussed in more detail below, the terms and conditions of the Consent Judgment support each of these three findings. 1. The Injunctive Terms of the Settlement Comply with Proposition 65 Proposition 65 states “[n]o person in the course of doing business shall knowingly and intentionally expose any individual to [a listed chemical] without first giving clear and reasonable warning to such individual ....” Health & Safety Code§ 25249.6. To be “clear and reasonable,” the warning must be placed in such a manner as to render it likely to be read and understood by ordinary individuals under customary conditions of purchase or use. Cal. Code Regs. tit. 27, § 25601 et seq. Here, the Consent Judgment calls for a robust warnings regime that includes In-Store Warnings, Product Label Warnings, and Internet Website Warnings. Kawahito Decl. § 4, Ex. 1 Section 2. a. In Store Warnings. The Settlement requires that In-Store Warnings shall be provided at one or more of the following locations: (a) at or near each cash register in the store; (b) at or near each display case containing the Covered Products in the store; or (c) at or near the entrance of the store. The warnings shall be at least 8 inches by 10 inches, and posted at a height and location that will make it conspicuous and easy to read for the average person. The text of the warning shall be printed in black ink, in a font that is easy to read and legible, but in no case less than a size 22 font. The language shall be substantially similar to that set forth below and may also include a warning concerning birth defects or other reproductive harm at the discretion of MCC. 4 MOTION FOR CONSENT JUDGMENTCo eo NIN DH FF WN NY NN NY NY NN NN we me ee ont nAnA BF YW NH &§ SLwYo ON DH BF WN SF OS Z\WaRNING: This product can expose you to chemicals, including Marijuana Smoke, which are known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov. Or ZAwaRNING: This product can expose you to chemicals including Marijuana Smoke, which are known to the state of California to cause cancer, and [name of reproductive toxicant], which are known to the State of California to cause birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov. b. Product Label Warnings. The Settlement also requires that the text of any Product Label Warnings shall be prominently displayed on the label and must be displayed with such conspicuousness as compared with other words, statements, designs or devices on the label, labeling, or sign, as to render the warning likely to be seen, read, and understood by an ordinary individual under customary conditions of purchase or use. For the short form version of the warning set forth below, the warning shall be in a type size no smaller than the largest type size used for other consumer information, as that term is defined in Tit. 27, CCR, Section 25600.1(c), on the product and, in no case, shall the warning appear in a type size smaller than 6-point type. The Product Label Warnings shall be securely affixed to (via a label) or printed upon the packaging of each Covered Product. Employees may not write over the text of the warning for any reason. The language shall be substantially similar to that set forth below A WARNING: This product can expose you to chemicals including Marijuana Smoke, which are known to the State of California to cause cancer. For more information go to www.P65Warnings.ca.gov. Or A WARNING: This product can expose you to chemicals including Marijuana Smoke, which are known to the State of California to cause cancer, and [name of reproductive toxicant], which are known to the State of California to cause birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov. cc. Internet Website Warnings For all Covered Products that are advertised on a website as offered for sale at MCC’s dispensary or available for delivery directly to MCC’s dispensary members, a warning that 5 MOTION FOR CONSENT JUDGMENTOo Oe NnQ DAH FF W YP NN NN NY NY NNN HY Be ee ee eB Be ee ont DM FW NH K§ OD OD eA DH FF Ww NY KF S&S complies with the content requirements of Section 25603(a) must also be provided by including either the warning or a clearly marked hyperlink using the word “WARNING” on the Covered Product’s display page, or by otherwise prominently displaying the warning to the purchaser prior to completing the purchase. If a Product Label Warning is provided as set forth above, the warning provided on the website may use the same content as the Product Label Warning. Supplemental information may be provided only in compliance with Tit. 27, CCR, Section 25601(e). Based on the foregoing, the Consent Judgment creates a comprehensive warning regime and standards applicable to all sales of Covered Products by MCC. The foregoing warnings are likely to alert a reasonable customer of the exposure to marijuana smoke as a result of the use of the Covered Products. Therefore, all of the Covered Products purchased for sale or manufactured for sale by MCC in California going forward will be sold with a clear and reasonable warning. Based on the foregoing, CPA requests that the Court find that the injunctive relief negotiated by the parties, including product reformulation, complies with Proposition 65. Cal. Health & Safety Code § 25249.7(f)(4). 2. The Civil Penalty Amount Is Reasonable Pursuant to the Consent Judgment, MCC will pay $4,000 in civil penalties. The parties’ negotiations took into account the facts and circumstances of this case and their consideration of each of the statutory factors provided by the Health and Safety Code. The settlement discussions included numerous e-mails and telephone calls between counsel during which the parties exchanged product sales data, laboratory results, and other relevant information. Kawahito Decl. { 11. Asa result of these negotiations, and in order to facilitate the settlement of this case, the parties agreed to the $4,000 civil penalty amount. Jd. The following statutory factors support a finding that the civil penalty is appropriate. (a) The economic effect of the penalty on the violator. The amount of the penalty is sufficient to remind Defendant and their management to remain aware of, and implement Proposition 65 requirements, without unduly hurting Defendant’s business. In addition, the parties 6 MOTION FOR CONSENT JUDGMENToe NY DH F&F WN NN NN NN N BW DQ wm eae on Dn Ww FF WwW Nn KF OD OD OD YD DH F&F WY KK S&S are aware that there are additional costs that will be borne by Defendant as they ensure that Covered Products are sold with a clear and reasonable warning in California going forward. (b) Whether the violator took good faith measures to comply. MCC represents that it was not unaware of any violation, and that as soon as it received CAPA’s Notice, it immediately took steps to investigate and address CAPA’s allegations. (c) The willfulness of the violator's misconduct. MCC maintains it did not intentionally ignore, disregard, or violate Proposition 65, and once it learned of the allegations, it worked to ensure that all of their Products comply with Proposition 65. Defendant’s cooperation throughout the settlement process indicates that it is an entity intent on complying with the statute. (d) Severity. CAPA considers the sale of Covered Products resulting in the exposure to marijuana smoke without the requisite exposure warnings a severe violation of Proposition 65. Defendant, however, maintains that the number of violations was minimal, and that it immediately took action to investigate and correct the allegations. Defendant has also agreed to pay civil penalties to compensate the public for the alleged past violations. (e) The deterrent effects of the penalty on the violator and the regulated community. Defendant’s payment of civil penalties will serve as an incentive for continued compliance with Proposition 65. Further, by virtue of word-of-mouth in the industry, and the fact that the Consent Judgment, if approved, will be a matter of public record, it is likely that other companies selling similar products will learn of this action. The awareness of the regulated community as a whole will encourage other companies to comply with Proposition 65 to avoid the imposition of similar penalty payments. Cal. Health & Safety Code § 25249.7(b)(2). 3. The Fee/Cost Recovery is Reasonable under California Law As part of the Settlement, Defendant will reimburse CAPA $31,000 for the attorneys’ fees and litigation costs incurred in this action. The parties reached this agreement in accordance with general contract principles and the private attorney general doctrine codified at Code of Civil Procedure Section 1021.5. The negotiated reimbursement is significantly less than the roughly $34,000 in fees and costs incurred by the investigation, litigation, and other enforcement related activity required by this case. Kawahito Decl. § 23. Indeed, as set forth in the declaration of 7 MOTION FOR CONSENT JUDGMENTwo ON DW BF WN NY NY NY NY YW NY DN DR DR we on KD HW F&F YO NH KF OC OD Oe DN DH F&F WHY KF SC James Kawahito, in addition to the attorneys’ fees associated with bringing this action, CAPA has incurred costs associated with investigators, intake, research, etc. Id. The attorneys at the Kawahito Law Group (“KLG”) spent significant time in investigating the Product; reviewing the investigator’s findings, and working with CAPA’s consultants to determine if the sale of the Covered Products violated Proposition 65 in the absence of a warning. It also prepared the notice of violation and the complaint, worked with counsel for Defendant to arrive at settlement terms, prepared and exchanged drafts of the proposed Consent Judgment; and prepared this motion. Jd. at {22. Similar hourly rates as the one requested here for James Kawahito have been approved by numerous other state and federal courts. Jd. at §21. As set forth in the declaration of James Kawahito, the $31,000 in attorney fees and cost reimbursements is less than the lodestar amount of $34,015.59 in total fees and costs incurred. Id. at § 22. Given CAPA’s compromise on the fees to be reimbursed, the time and resources invested, and the public benefit achieved, both in terms of the civil penalties collected and the injunctive relief obtained, the negotiated fee recovery in this case is reasonable under California law, and more efficient in terms of party and judicial resources than a contested fee application. The supporting declaration filed herewith provides evidence to support the finding that the negotiated fee and cost reimbursement is reasonable. It shows that the fees and costs incurred in this matter exceed $34,000 from the initial investigation of the matter through the filing and litigation of this action. Jd. All such activity was necessary to obtain the results set forth in the Consent Judgment and favorable resolution in the public interest. It is noteworthy that the fees presented for approval are only those incurred prior to the filing of this motion. Future amounts incurred, appearing at the hearing, and fully concluding this matter with the parties, the Court, and the Attorney General's Office will not be recovered, and are not included among the tabulated fee and cost summary amounts submitted. As set forth in the Attorney General's guidelines for evaluating the reasonableness of an award of attorneys’ fees provided by a Proposition 65 settlement, a party may be deemed successful so as to permit an award “if the plaintiff's action was the cause or ‘catalyst’ of the change in conduct.” Cal. Code Regs. tit. 11, § 3201(a). The regulations provide that “a settlement 8 MOTION FOR CONSENT JUDGMENToO mw nN DA F&F WY Nn NY NY NY N NY NY NY VY Rw me oN DHA BW NH & SOD ON DH BF WN eK that provides for ... a clear and reasonable warning, where there had been no warning provided prior to the sixty-day notice ... is also presumed to confer a significant public benefit.” 11 Cal. Code Regs. § 3201(b)(I). Here, CAPA procured Defendant’s commitment to provide Proposition 65 complaint warnings, and therefore operated as the catalyst creating a change in the seller’s behavior, and, thereby, the marketplace, which constitutes a significant public benefit. While the Attorney General's regulations are not binding, they are instructive as to the level of scrutiny the Court should apply in determining the reasonableness of a negotiated reimbursement of fees and costs. California Code of Regulations title 11, section 3201 states: [T]he fact that the defendant agreed to pay the fee does not automatically render the fee reasonable. The fact that the fee award is part of a settlement, however, may justify applying a somewhat less exacting review of each element of the fee claim than would be applied in a contested fee application. (Emphasis added.) Based on this standard of review, the number of attorney and staff hours invested in the case and, in light of the declaration and other evidence supporting actual fees and costs that exceed the negotiated amount, the Court should find that the fees and costs provided by the Settlement are reasonable under California law. B. The Settlement Should Be Entered as a Judgment This motion is brought in part pursuant to Code of Civil Procedure section 664.6, which provides: If parties to pending litigation stipulate in a writing signed by the parties outside the presence of the court . . . for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. Section 664.6 gives expression to a strong policy favoring settlement of pending litigation. Inre Marriage of Assemi, 7 Cal. 4th 896, 910 (1994). A court may approve a settlement provided the terms of the settlement are not contrary to law or violative of public policy. Rich Vision Centers, Inc. v. Bd. of Med Examiners, 144 Cal. App. 3d 110, 115-116 (1983). “Settlements can produce peace and goodwill in the community while reducing the expense and persistency of litigation,” and “[pJublic policy strongly discourage[s] litigation and encourages settlement.” Skulnick v. Roberts Express, Inc., 2 Cal. App. 4th 884, 891 (1992). California courts also 9 MOTION FOR CONSENT JUDGMENTOo oO ND DH F&F W NH — NY NY NY NY NY NN DN Dw we ew ee eae on Dn He FF WN KF& COC OD Ge I DH FF YW YN KF O&O recognize the importance of' “settlement as part of the litigation process.” Soliz v. Williams, 74 Cal. App. 4th 577, 587 (1999). As such, there is a strong presumption favoring the settlement of litigation. Assemi, 7 Cal. 4th at 910. Here, the Settlement contains no term or condition prohibited by law or contrary to public policy. In fact, all of the terms specifically further the public policy expressed in the preamble to Proposition 65, namely, protecting the public against, and enforcing its right to know about, chemicals that cause cancer, birth defects, or other reproductive harm. Historical and Statutory Notes, West's Ann. Health & Safety Code foil. § 25249.5 (2006 ed.). Additionally, the Consent Judgment is a product of arm’s-length negotiations conducted by experienced counsel who possessed sufficient information to evaluate the case and the terms of the settlement. Kawahito Decl. ¥ 8; Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 245 (2001) (presumption that proposed settlement was fair where the settlement is reached through arm's-length bargaining, the parties and the court have sufficient information, counsel is experienced in similar litigation, and the percentage of objectors is small). In the instant action, the parties’ settlement discussions continued for several months, and were conducted by experienced attorneys in possession of sufficient information to evaluate the proposed terms. Moreover, pursuant to the relevant rules, the Consent Judgment was submitted to the California Attorney General’s office at least 45 days prior to the date of the hearing. Kawahito Decl. ff] 23-24. Assuming no objection by the Attorney General, the Court should enter the Consent Judgment as a judgment pursuant Section 664.6. V. CONCLUSION For the foregoing reasons, CAPA respectfully requests that the Court approve and enter the [Proposed] Consent Judgment. Dated: May 3, 2019 KAWAHITO LAW GROUP APC ys for Plaintiff CENTER FOR ADVANCED PUBLIC AWARENESS 10 MOTION FOR CONSENT JUDGMENTBB woN a nw PROOF OF SERVICE 1 am employed in the County of Los Angeles, State of California. | am over the age of 18 and not a party to this action; my current business address is 222 N. Pacific Coast Hwy., Suite 2222, El Segundo, CA 90245 On May 3, 2019, I served the foregoing document(s) described as: MEMORANDUM OF POINTS AND AUTHORITITES IN SUPPORT OF MOTION TO APPROVE PROPOSITION 65 SETTLEMENT AND CONSENT JUDGMENT on the interested parties in this action as follows: x BY THE FOLLOWING MEANS: I placed an original enclosed in sealed envelope(s) addressed as follows: Ann Grimaldi, Esq. Proposition 65 Enforcement Reporting Jennifer K. Singh, Esq. Attention: Prop 65 Coordinator Grimaldi Law Offices 1515 Clay Street, Suite 2000 535 Mission Street, 14th Floor Post Office Box 70550 San Francisco, CA 94105 Oakland, California 94612-0550 _x_ BY MAIL x I placed the envelope(s) with postage thereon fully prepaid in the United States ~~ mail, at El Segundo, California. x 1 am readily familiar with the firm’s practice of collection and processing correspondence for mailing with the United States Postal Service; the firm deposits the collected correspondence with the United States Postal Service that same day, in the ordinary course of business, with postage thereon fully prepaid, at El Segundo, California. I placed the envelope(s) for collection and mailing on the above date following ordinary business practices. _x___ Executed on May 3, 2019, at El Segundo, California. x I declare under penalty of perjury under the laws of the State of California that the above is true and correct. x I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. stian Burnside PROOF OF SERVICE