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Filed 2/6/24 Bracewell v. State Dept. of Public Health CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication 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.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

KEITH BRACEWELL,

Plaintiff and Appellant,

v.

STATE DEPARTMENT OF PUBLIC HEALTH et 

al.,

Defendants and Respondents.

C097453

(Super. Ct. No. 34-2021-

00305066-CU-BC-GDS)

In a prior appeal, we ruled against claims alleged by plaintiff and appellant Keith 

Bracewell and his wife in a petition for writ of mandate concerning the disqualification of 

their food stores from participating in a federal program to provide supplemental food for 

women and children. In this action, Bracewell alleges contract and negligence causes of 

action that are based on the same facts and issues which we and the trial court resolved in 

the prior action. Although he contends the doctrine of claim preclusion should not apply 

due to extrinsic fraud committed on the courts by the defendants, we find the argument to 
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be without merit. We thus affirm the trial court’s judgment of dismissal following a 

demurrer on the basis of claim preclusion.

FACTS AND HISTORY OF THE PROCEEDINGS

Much of this discussion is taken from our unpublished opinion in the earlier 

action, Bracewell v. California Dept. of Public Health (Oct. 29, 2019, C083492) 

[nonpub. opn.] [2019 Cal.App.Unpub.LEXIS 7200] (Bracewell I).

The Special Supplemental Nutrition Program for Women, Infants and Children 

(the WIC program) provides supplemental nutrition to pregnant and postpartum mothers 

and their children up to the age of five. “Congress enacted the federal Child Nutrition 

Act of 1966 (42 U.S.C. § 1771 et seq.), which established the WIC program. (42 U.S.C. 

§ 1786.) [Defendant and respondent Department of Public Health] (Department) 

administers the program in this State in accordance with federal WIC requirements and 

guidelines. (Health & Saf. Code, §§ 20, 123280.) The Department contracts with retail 

food vendors to provide supplemental food under the program. (Health & Saf. Code, 

§ 123310.) Vouchers or food instruments issued to eligible program participants are 

redeemed for WIC-approved food products at authorized food vendors, and the vendors 

submit the vouchers to the State for reimbursement. Only authorized food vendors may 

accept WIC food vouchers. (Cal. Code Regs., tit. 22, § 40735, subd. (a).) Each retail 

outlet location must be authorized separately under the program. (Cal. Code Regs., 

tit. 22, § 40735, subd. (a).) In addition, authorized vendors must comply with the 

Department’s ‘rules of vendor authorization, reimbursement, and monitoring that control 

program food costs, maximize participant access, and ensure program integrity.’ (Health 

& Saf. Code, § 123315, subd. (a)(8).)

“The Bracewells owned and operated two food stores, Basic Foods and Basic 

Foods #3, in Bakersfield. The stores were approved food vendors participating in the 

WIC program.
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“A food vendor must execute a vendor agreement with the Department to be 

entitled to reimbursement for food vouchers. (Cal. Code Regs., tit. 22, §§ 40735, subd. 

(a), 40739; 7 C.F.R. § 246.12, subd. (h)(1).) In 2006, the Bracewells entered into a 

vendor agreement with the predecessor to the Department. Pursuant to that agreement, 

the Bracewells agreed to comply with all federal and state laws, regulations and rules 

governing the WIC program. Consistent with state law, the agreement required ‘the food 

vendor’ to ‘[m]aintain, for a period of three years, records including but not limited to: 

all inventory records necessary for Federal and State tax reporting purposes, inventory 

records showing all wholesale and retail purchases; invoices identifying the quantity and 

prices of specific supplemental foods; sales and use tax returns, and books of account and 

other pertinent records that are necessary to substantiate the volume and prices charged 

through food instrument redemption.’ (See Health & Saf. Code, § 123315, subd. (a)(6); 

Cal. Code Regs., tit. 22, § 40735, subd. (a).) The agreement further provided that the 

State reserved the right to audit a food vendor’s records and books of account for 

compliance with the agreement and to disqualify the food vendor from participation in 

the program if it is determined that the vendor failed to comply with the agreement or has 

committed violations subject to disqualification under 7 Code of Federal Regulations part 

246 and California Code of Regulations, title 22, section 40740. Although they were 

included in one vendor agreement, Basic Foods and Basic Foods #3 each had its own 

vendor identification number. Moreover, the vendor agreement provided that each store 

location was authorized separately.

“In 2008, the State Controller’s Office audited the records of Basic Foods and 

Basic Foods #3 for the period January 1, 2006 to December 31, 2006. The Department 

issued separate notices of audit findings and disqualification to Basic Foods and Basic 

Foods #3, finding each store had been reimbursed in excess of eligible costs by more than 

20 percent of the total food voucher dollars redeemed. The stores were disqualified from 

the program for three years pursuant to 7 Code of Federal Regulation section 246.12, 
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subdivision (l)(1)(iii)(B) and California Code of Regulations, title 22, section 40740, 

subdivision (e)(2)(C) [(section 40740(e)(2))]. The Bracewells were required to repay 

$125,099 for Basic Foods and $136,357 for Basic Foods #3.

“The Bracewells filed separate appeals for each store and requested a hearing. 

Administrative Law Judge (ALJ) Dwight Nelsen heard the matter and issued a proposed 

decision denying the appeals. The Bracewells argued the two stores should be treated as 

a single unit for auditing purposes because they were treated as one entity for federal tax 

purposes, but the ALJ rejected the argument. He said the vendors’ participation in the 

program was based on contract and the vendor agreement provided that each store was 

authorized separately, and the auditor followed applicable procedures which required that 

each store be audited separately. He concluded that combining the two stores as one was 

inconsistent with accepted auditing standards and procedures of WIC stores and the 

vendors’ operations.

“With respect to the inventory each store had for sale during the audit period, ALJ 

Nelsen said there should be a paper trail substantiating the amount and value of the food 

products each store received for sale to WIC beneficiaries. However, each store did not 

have a contemporaneous paper trail to verify what it received from the other store in the 

form of transfers of food products. He found that the vendor’s records for Basic Foods 

showed that the volume of WIC food sales for five food items was unsupported in the 

amount of $125,099, and the vendor’s records for Basic Foods #3 showed that the

volume of WIC food sales for 24 food items was unsupported in the amount of $136,357.

“The ALJ also rejected the Bracewells’ argument that they were not informed of 

the need for maintaining transfer records. He said it was reasonable to expect each store 

to be able to show ‘auditable documentation [of] the volume and value of the products it 

had for sale.’ And the need for documentation of transferred food products should be the 

same as for products from outside wholesalers. The ALJ concluded that disqualification 

was appropriate because the audit of each store showed the vendor was reimbursed in an 
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amount in excess of eligible costs. The Department adopted the ALJ’s proposed 

decision.

“The Bracewells filed a petition for reconsideration, which was denied. The 

Bracewells then filed a petition for writ of mandate in the superior court to compel [the 

ALJs and the Department] to vacate the Department’s final decision and to issue a new 

decision granting their appeals. The trial court granted the writ petition in part and 

denied it in part. While the trial court agreed that the Bracewells were required to 

maintain records reflecting transfers of goods between the two stores as part of the WIC 

program’s recordkeeping requirements, it said the evidence presented indicated there may 

not have been an over-reimbursement when transfers between the two stores were taken 

into consideration. The trial court issued a peremptory writ, remanding the matter for 

reconsideration as to the amount the Bracewells were required to repay the Department. 

The trial court denied the Bracewells’ motion for reconsideration.

“On November 9, 2011, the trial court entered judgment and Keith Bracewell filed 

notice of entry of judgment. About five weeks later, the Bracewells filed a writ petition 

in this Court, which this Court denied because the Bracewells had a remedy by appeal. 

The Bracewells did not file a timely notice of appeal concerning the November 9, 2011 

judgment.

“On remand, the Department vacated its decision. ALJ Mark Otto ultimately 

submitted a proposed decision concluding that the vendors must reimburse the 

Department $11,231; certified public accountant Denny Bridges concluded the combined 

net unsupported redemption amount for the two stores was $11,231, and the Department 

did not present evidence of the monetary loss it suffered and did not dispute the amounts 

Mr. Bridges used in his calculations. The Department adopted the ALJ’s proposed 

decision and issued its final decision.

“The trial court did not discharge the peremptory writ. [In November 2015, the 

court found that the ALJ’s decision requiring reimbursement of $11,231 was supported 
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by substantial evidence. However, the court] agreed with the Bracewells that, if the 

Bracewells owed only $11,231 and not $261,456, ALJ Otto needed to determine whether 

the disqualification should be modified. [The Bracewells did not appeal this decision. 

(Bracewell I, supra, 2019 Cal.App.Unpub.LEXIS 7200.)] On remand, ALJ Otto declined 

to modify the disqualification, and the Department adopted the decision. Although the 

Bracewells asserted further objections in the trial court, the trial court overruled the 

objections, discharged the peremptory writ and dismissed the matter on September 21, 

2016. The Department filed a notice of entry of that order and the Bracewells filed a 

notice of appeal within 60 days thereafter.” (Bracewell I, supra, 2019 

Cal.App.Unpub.LEXIS 7200.)

In the appeal, the Bracewells contended (1) the two stores should not have been 

audited as separate vendors or required to maintain records showing inter-store transfers 

of food products; (2) it was improper to disqualify the stores; and (3) there was

insufficient evidence that the stores were reimbursed in excess of eligible costs by 

$11,231. (Bracewell I, supra, 2019 Cal.App.Unpub.LEXIS 7200.)

This Court disagreed with the Bracewells and affirmed the trial court’s 2016 order. 

We concluded (1) the challenge to the separate audits and transfer records requirement 

was barred because the Bracewells did not timely appeal the 2011 judgment; (2) the 

decision to disqualify the stores was not erroneous; and (3) the challenge to the 

sufficiency of the evidence was barred by the failure to timely appeal the November 2015 

order. (Bracewell I, supra, 2019 Cal.App.Unpub.LEXIS 7200.) The California Supreme 

Court denied the Bracewells’ petition for review on January 15, 2020. 

On March 11, 2020, the Bracewells filed a complaint in superior court against the 

Department and the Controller’s Office (collectively the Departments). The Departments 

filed a demurrer, contending among other arguments that the Bracewells had not filed a 

claim with the Departments as required by the Government Claims Act (Gov. Code, 

§ 911.2). 
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The Bracewells dismissed the action on September 28, 2020. Then, on 

December 21, 2020, they presented the Departments with a government claim. 

On July 29, 2021, the Bracewells filed this action against the Departments. The

trial court sustained the Departments’ demurrer with leave to amend, finding the 

Bracewells did not file their government claim timely. 

The Bracewells filed a first amended complaint on March 30, 2022. In the 

complaint, they allege causes of action for breach of contract, negligence, and negligent 

interference with economic advantage. They contend the Departments breached the 

vendor agreement on September 30, 2008, by (1) disqualifying them as WIC vendors and 

banning their participation in the WIC program for three years; (2) requiring transfer 

documents and auditing their stores separately and incompletely in violation of accepted 

tax auditing practices; and (3) incorrectly determining that Basic Foods #3 had been 

reimbursed excessively. 

For their negligence claim, the Bracewells contend that on or about September 30, 

2008, (1) the Departments negligently interpreted the vendor agreement; (2) the 

Departments should have known that the audit was not performed according to accepted 

state and federal tax auditing standards; (3) neither store was in violation of state 

regulations; (4) the Departments knew that the initial overpayment assessment of more 

than $261,000 was based on improper auditing practices; and (5) the Departments knew 

that the Bracewells had not actually received any payments in excess of food instrument 

redemption and had not benefited financially from any program fraud. 

In their claim for negligent interference with economic advantage, the Bracewells 

contend (1) the auditor performed the audit incorrectly; and (2) after determining the 

amount actually owed was $11,231, the Department misrepresented the grounds for a 

three-year disqualification. The Bracewells further allege that the Department 

wrongfully withheld from the courts a document entitled Initial Statement of Reasons, 

which listed the documents required for the audit under section 40740(e)(2) and the 
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reasons for a three-year disqualification. The document purportedly shows that the audit 

was not properly performed and the Bracewells did not qualify for a three-year 

disqualification. The Bracewells allege that had this document been disclosed to the 

courts during the prior litigation, they would have won their appeal. 

The Departments filed a demurrer to the first amended complaint. They

contended (1) the Bracewells’ claims were barred by res judicata and issue preclusion; 

(2) the Departments were statutorily immune from the Bracewells’ claims; and (3) the 

complaint was barred due to the Bracewells’ failure to timely present a government 

claim. 

The Bracewells opposed the demurrer. They argued that their government claim 

and the action were timely filed under application of the doctrine of equitable tolling. 

They also argued that the Departments were not immune, and the action was not barred 

by the prior litigation. 

The trial court sustained the Departments’ demurrer without leave to amend based 

on the untimeliness of the Bracewells’ government claim. The court explained that Willis 

v. City of Carlsbad (2020) 48 Cal.App.5th 1104, 1120-1123, established that equitable 

tolling does not apply to the government claim presentation deadline, and the court was 

bound to follow Willis.

DISCUSSION

Because we may affirm a judgment of dismissal after a demurrer has been 

sustained without leave to amend on any ground stated in the demurrer, even if the trial 

court did not rule on that ground (Carman v. Alvord (1982) 31 Cal.3d 318, 324), we 

address a different ground raised in the demurrer and not addressed by the trial court that 

is dispositive. 

The Bracewells in their opening brief contend that res judicata, now commonly 

referred to as claim preclusion, should not bar this action. The doctrine of claim 
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preclusion bars claims that were, or should have been, advanced in a previous suit 

involving the same parties or parties in privity with them. (DKN Holdings LLC v. 

Faerber (2015) 61 Cal.4th 813, 824.) The doctrine applies if the second suit involves the 

same primary right between the same parties that was adjudicated to a final judgment on 

the merits in the first suit. (Ibid.) Claim preclusion may potentially not apply if the prior 

judgment was obtained by extrinsic fraud. (7 Witkin, Cal. Procedure (6th ed. 2023) 

Judgement, § 370.)

The Bracewells argue that claim preclusion does not apply because the 

Departments fraudulently concealed a document from the courts that would have changed 

the result of the prior judgments, and the Bracewells did not delay in bringing this action 

upon discovering the fraud. The Departments contend there was no fraud and that claim 

preclusion bars this action. 

The Bracewells assert that the Departments fraudulently concealed from the courts

a document entitled “40740 Initial Statement of Reasons.” This document purportedly 

reveals the true purpose and meaning of section 40740(e)(2), the regulation under which 

the Bracewells were disqualified from the WIC program. That regulation requires a food 

vendor be disqualified for three years from the WIC program if an audit identifies a 

pattern of the vendor claiming reimbursement for the sale of supplemental food which 

exceeds the vendor’s inventory purchase documentation for a specific period of time.

The Bracewells attached portions of the Initial Statement of Reasons dated 

April 12, 2001, to their first amended complaint. They claim the Initial Statement of 

Reasons exposes that the Departments violated the Bracewells’ due process rights by 

imposing disqualification grounds and auditing requirements that do not exist in the 

actual regulation, section 40740(e)(2). The Bracewells contend that had the statement 

been disclosed to the courts in the earlier litigation, they would have won their appeal. 

To be liable for fraudulent concealment, the defendant must have concealed or 

suppressed a material fact when under a duty to disclose that fact to the plaintiff. (Nissan 
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Motor Acceptance Cases (2021) 63 Cal.App.5th 793, 826.) The Bracewells do not allege 

facts showing the Departments were under a legal duty to disclose the Initial Statement of 

Reasons to them. Indeed, that document was already a public document.

When a state government agency engages in administrative rulemaking, it must 

prepare and make available to the public an initial statement of reasons for its proposed 

regulatory action. (Gov. Code, § 11346.2, subd. (b).) In general, the initial statement of 

reasons must describe the proposed regulation’s purposes and benefits, assess its potential 

economic impacts, and discuss reasonable alternatives. (Gov. Code, § 11346.2, subd. 

(b).)

The agency must include the initial statement of reasons in its notice package 

submitted to the Office of Administrative Law to initiate the approval process. (Gov. 

Code, § 11346.2, subd. (b).) The statement is not published in the Notice Register, but 

the agency must post the statement on its website. (Gov. Code, § 11340.85, subd. (c)(2).) 

The agency must also make the statement available to the public upon request. (Gov. 

Code, § 11346.2, subd. (b).) 

Without evidence to the contrary, we presume a government agency has complied 

with its statutory obligations. (Mateel Environmental Justice Foundation v. Office of 

Environmental Health Hazard Assessment (2018) 24 Cal.App.5th 220, 239; Evid. Code, 

§ 664.) Thus, the Department posted the Initial Statement of Reasons on its website on or 

around the date of the statement’s release, April 12, 2001, and has made it available to 

the public upon request. The Department was under no further duty to “disclose” the 

statement to the Bracewells or the courts.

Because the Bracewells’ allegations concerning the Initial Statement of Reasons 

do not successfully plead fraudulent concealment, the doctrine of claim preclusion 

applies and bars this action from proceeding. This action involves the same cause of 

action, or primary right, that was litigated in the prior action to a final judgment by the 
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same parties or those in privity with the parties. Both actions arise from the alleged harm 

resulting from the disqualification of the Bracewells’ stores from the WIC program. 

Although the first amended complaint in this matter alleges breach of contract and 

negligence, those causes of action are based on the same allegations of wrongdoing 

resolved in the first action: whether the two stores were properly audited as separate 

vendors; whether the stores complied with state and federal requirements to maintain 

transfer records and whether such requirements existed; whether the Bracewells received 

and were required to repay the assessed overpayment; and whether disqualification was a 

proper remedy. The first action resolved each of these issues on the merits, and that 

matter is now final. Claim preclusion prevents the Bracewells from relitigating those 

issues in this action under any theory.

The Bracewells contend they raise issues and arguments in this action that the 

prior action did not consider. They assert the prior action did not address: whether the 

Department interpreted and enforced section 40740(e)(2) inconsistently with the Initial 

Statement of Reasons; whether the three-year disqualification was authorized when it was 

not imposed to punish and prevent fraud; whether Basic Foods #3 was not reimbursed in 

excess of expenditures; whether unsold inventories reduced the excess reimbursement to 

zero; and whether tax records were used in the audit as required. 

Those arguments are all based on the manner in which the Department performed 

the audit and the Department’s interpretation and enforcement of section 40740(e)(2), 

both of which were at issue in the first action. A prior judgment is res judicata on matters 

that were litigated, or could have been litigated, in that action. (Warga v. Cooper (1996) 

44 Cal.App.4th 371, 377-378.) “If the matter was within the scope of the [prior] action, 

related to the subject-matter and relevant to the issues, so that it could have been raised, 

the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded 

or otherwise urged.” (Sutphin v. Speik (1940) 15 Cal.2d 195, 202.) The Bracewells’ 

“additional” arguments were all within the scope of the prior action. And because the 
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Initial Statement of Reasons was a public document at the time of the first action, any 

arguments the Bracewells raise in this matter based on that statement could have been 

raised in the prior action. Claim preclusion thus bars the first amended complaint.

Because this issue is dispositive, we need not address the parties’ other arguments.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to the Departments. (Cal. 

Rules of Court, rule 8.278(a).) 

 

HULL, Acting P. J.

We concur:

 

RENNER, J.

 

ASHWORTH, J.



 Judge of the El Dorado County Superior Court, assigned by the Chief Justice pursuant 

to article VI, section 6 of the California Constitution.