Court Opinion

ID: 2802662
Source: CourtListenerOpinion
Date Created: 2015-05-21 17:03:15.718009+00
Date Added: 2024-06-11T11:29:45.357287
License: Public Domain

Filed 4/28/15; pub. order 5/21/15 (see end of opn.)

                 IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                               DIVISION FOUR

WHITNEY R. LEEMAN,
         Plaintiff and Appellant,
                                                           A142321
v.
ADAMS EXTRACT & SPICE, LLC,                                (San Francisco City & County
                                                           Super. Ct. No. CGC-13-529493)
         Defendant and Respondent.

                                                      I.
                                              INTRODUCTION
         This appeal arises from a private enforcement action filed by appellant Whitney R.
Leeman, Ph.D. (Leeman), pursuant to Health and Safety Code sections 25249.5 et seq., known as
Proposition 65. The complaint alleged that respondent Adams Extract & Spice, LLC (Adams)
was in violation the provisions of Proposition 65 by failing to issue an adequate warning that its
product contained a chemical identified on the Governor’s list “of those chemicals known to the
state to cause cancer or reproductive toxicity . . . .” (Health & Saf. Code, § 25249.8, subd. (a).)
In addition to other remedies, Proposition 65 provides that if the plaintiff is successful in
bringing an action, he or she is entitled to recover attorney fees under Code of Civil Procedure
section 1021.5. (Graham v. DaimlerChrysler Corp. (2004) 34 Cal. 4th 553, 560-561.)
         The parties ultimately settled their dispute shortly before trial. The settlement included a
stipulated award of $72,500.00 for attorney fees and costs, incurred by Leeman relating to the
investigation, litigation and settlement of the case.
         In confirming the settlement, the court modified the attorney fee amount by reducing it
by almost exactly 50 percent to $35,839.67. A subsequent motion was made to correct and
modify the judgment by, inter alia, increasing the fee award to that agreed to by the parties.

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Adams joined in the motion. While modifying the judgment in another respect not material to
this appeal, that portion of the motion relating to attorney fees was denied without comment.
       We agree with Leeman that the trial court committed reversible error in unilaterally
modifying that single provision in the parties’ settlement agreement and stipulated consent
judgment relating to attorney fees. Therefore, we reverse and remand the case for further
proceedings consistent with this opinion.
                                                 II.
                     FACTUAL AND PROCEDURAL BACKGROUNDS
       Leeman filed a complaint seeking civil penalties and injunctive relief against Adams on
March 13, 2013, in San Francisco Superior Court. The complaint alleged that Adams included a
carcinogenic chemical known as 4-Methylimidazole (4-MEI) in its food extracts, flavoring, and
food coloring products without an adequate warning as required by Proposition 65, because 4-
MEI was a chemical listed by California as known to cause cancer. In addition to preliminary
and permanent injunctions requiring Adams to provide a “clear and reasonable warning” about
the inclusion of 4-MEI in its products, the complaint sought civil penalties against Adams,
pursuant to Health and Safety Code section 25249.7, subdivision (b), in the amount of $2,500.00
for each day of its violation of Proposition 65. The following month, Adams filed its answer to
the complaint generally denying the complaint’s allegations, and asserting 18 separate
affirmative defenses to the action.
       Ten months later, in February 2014, Leeman’s counsel filed a motion to approve a
settlement that had been reached between the parties, and to issue a consent judgment stipulated
to by the parties. The proposed stipulated consent judgment was 13 pages long, and sought to
resolve the Proposition 65 issues by including provisions under which Adams would pay
$20,000.00 in civil penalties (subject to a downward adjustment if the offending chemical was
timely removed from Adams’s product). It also included the following term: “The parties
acknowledge that Dr. Leeman and her counsel offered to resolve this dispute without reaching
terms on the amount of fees and costs to be reimbursed to them, thereby leaving this fee issue to
be resolved after the material terms of the agreement had been settled. Dr. Leeman expressed a
desire to resolve the fee and cost issue shortly after the other settlement terms had been finalized.
The parties then attempted to (and did) reach an accord on the compensation due to Dr. Leeman
and her counsel under general contract principles and the private attorney general doctrine,

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codified at Code of Civil Procedure section 1021.5, for all work performed through the mutual
execution of this agreement. Adams shall, on or before the Effective Date, pay $72,500.00 for
fees and costs, including without limitation, all attorney[] fees, costs and expenses incurred as a
result of investigating, bringing this matter to Adams’s attention, and negotiating a settlement in
the public interest.”
        The motion sought court approval of the settlement under Health and Safety Code
section 25249.7, subdivision (f)(4), and requested that the settlement be entered as a judgment
pursuant to Code of Civil Procedure section 664.6, serving the motion on the California Attorney
General as required by Health and Safety Code section 25249.7, subdivision (e).1 Attorney fees
and costs in the stipulated amount were sought under Code of Civil Procedure section 1021.5.
As to the fees, the motion noted that the amount to which the parties stipulated, $72,500.00, was
substantially less than the $102,000.00 in fees and costs actually incurred in investigating,
litigating, and in the anticipated future enforcement-related activity Leeman and her attorneys
had and would incur.
        The motion was accompanied by the declaration of Clifford Chanler, one of the attorneys
representing Leeman. Attached to Chanler’s declaration was Exhibit B, a breakdown of the
time, hourly rates, tasks and the identity of the person performing the services. The fee request
was broken down into six categories of attorney-related tasks: investigative fees, notice fees,
litigation fees, settlement fees, approval fees, and associated costs totaling $839.67. Hourly rates
ranged from $120.00 to $895.00 per hour, depending on the person involved in the work task.
The text of Chanler’s declaration described in detail the work the attorneys and staff completed
in each fee category, indicating that the amount negotiated by the parties and contained in the
proposed consent judgment was approximately 70 percent of the lodestar amounts actually
incurred for the covered work.
        The matter came on for a brief hearing on April 7, 2014. As to the matter of the fee and
cost request, the transcript of that hearing included the following exchange between the court and
appellant’s trial counsel:
“THE COURT:             And you’re seeking $72,500 in attorney fees?
“MR. HAVESON:           Yes, Your Honor.

        1
          Although the Attorney General’s Office requested modification of certain aspects of
the settlement agreement, no objection was voiced as to the provision regarding attorney fees.

                                                 3
“THE COURT:             Did I miss the declaration with your time?
“MR. HAVESON:           There is a declaration where we provide a summary and detail of the time
with what was done. I have an additional copy.
“THE COURT:             Well, was it in the papers that are in front of me?
“MR. HAVESON:           I do believe that we filed—
‘THE COURT:             Where is it?
‘MR. HAVE50N:           It is titled ‘Declaration of Clifford A. Chanler in Support of Motion to
Approve Proposition 65 Settlement and Consent Judgment.’ This would have been filed on
February 7th.
“THE COURT:             Well, where are the details about the attorney[] fees?
“MR. HAVESON:           It begins on page four at paragraph 13 and continues, I believe, until the
end of the document.
“THE COURT:             Well, it makes a reference to Exhibit B. These are your summaries. Is
that what you mean?
“MR. HAVESON:           Yes, Your Honor. [¶] We have divided the tasks by category, by attorney
initials, other para-professional initials, the hourly rate, the number of hours incurred for that
particular stage of the litigation, and the total. fees.
“THE COURT:             I will take this under submission. I think some of these hourly rates are
rather extensive.
“MR. HAVESON:           If I may, Your Honor, the actual amount that Plaintiff and Defendant have
agreed to is a substantial discount from the rates that have been stated.
“THE COURT:             Well, I’ll take it under submission.
“MR. HAVESON:           Okay. If there is any further briefing Your Honor requires, we would be
happy to provide it. Thank you.”
        Later that same day the judge signed an order that approved the settlement and consent
judgment except the judge reduced the amount of fees and costs from the $72,500.00 agreed to
between the parties to $35,839.67. No explanation for doing so was given.
        Eight days later an ex parte application was made by Leeman to modify the court’s
earlier judgment in several respects, including reinstating the full amount of the attorney fees and
costs agreed to by the parties, and set forth in the originally proposed consent judgment. This
ex parte application was followed by a noticed motion filed on April 25, 2014, seeking the same

                                                    4
relief. The motion, which was joined in by Adams, included a specific request that the court
reinstate the amount of attorney fees and costs to be awarded to Leeman, consistent with the
parties’ settlement agreement.
        On May 21, 2014, the judge granted the motion to correct and modify the judgment as
requested, except the court refused to modify its earlier reduction in attorney fees and costs. No
explanation for refusing to do so was provided by the court. An amended judgment reflecting
the court’s May 21 order was filed that same day. This timely appeal followed.
        Adams has not filed a respondent’s brief on appeal.
                                                  III.
                                            DISCUSSION
        “[Code of Civil Procedure] [s]ection 664.6 permits a court to enter judgment pursuant to
the terms of a settlement if the parties stipulate orally before the court or in writing to settle all or
part of a case. [Citation.]” (Skulnick v. Roberts Express, Inc. (1992) 2 Cal. App. 4th 884, 889
(Skulnick).) Section 664.6 provides in pertinent part: “If parties to pending litigation stipulate
. . . orally before the court, for settlement of the case, or part thereof, the court, upon motion,
may enter judgment pursuant to the terms of the settlement.” (Italics added.)
        A settlement agreement is interpreted according to the same principles as any other
written agreement. (Gouvis Engineering v. Superior Court (1995) 37 Cal. App. 4th 642, 649.) It
must be interpreted to give effect to the mutual intent of the parties as it existed at the time,
insofar as that intent can be ascertained and is lawful. (Civ. Code, § 1636; Ticor Title Ins. Co. v.
Rancho Santa Fe Assn. (1986) 177 Cal. App. 3d 726, 730.) If the language of the agreement is
clear and explicit and does not involve an absurdity, determination of the mutual intent of the
parties and interpretation of the contract is to be based on the language of the agreement alone.
(Civ. Code, §§ 1638, 1639; Sass v. Hank (1951) 108 Cal. App. 2d 207, 211.)
        While the court may interpret the terms of the parties’ settlement agreement, “nothing in
section 664.6 authorizes a judge to create the material terms of a settlement, as opposed to
deciding what terms the parties themselves have previously agreed upon.” (Weddington
Productions, Inc. v. Flick (1998) 60 Cal. App. 4th 793, 810, italics omitted.) Hernandez v. Board
of Education (2004) 126 Cal. App. 4th 1161, 1176 (Hernandez); Reed v. Murphy (1925) 196 Cal.
395, 399 [“if a consent judgment or decree is different from or goes beyond the terms of the

                                                   5
stipulation which forms its basis it may be set aside upon appeal or by other appropriate
procedure, as it would not be in reality a consent judgment”].)
       This agreement required no interpretation, nor were there any material disputed facts
concerning the settlement and the parties’ intent. (See Hernandez, supra, 126 Cal.App.4th at
p. 1176.) Indeed, there is no question that the parties agreed to compromise the amount of
attorney fees and costs incurred by Leeman in prosecuting the underlying case. As part of that
agreement, the parties stipulated as a term of their settlement agreement and consent judgment
that Leeman be awarded $72,500.00—a 30 percent reduction in the fees and costs actually
incurred. Perhaps ironically, earlier in their negotiations, Leeman initially offered not to include
a stipulated amount of attorney fees in the settlement agreement, and leave it to the court to set
that amount. However, ultimately the parties compromised that portion of the settlement.
       While the court has the authority to refuse to issue the requested consent judgment, what
the court could not do in considering approval of a settlement under Code of Civil Procedure
section 664.6 was to add to or modify an express term of the settlement. As pointed out by our
Supreme Court in California State Auto. Assn. Inter-Ins. Bureau v. Superior Court (1990) 50
Cal. 3d 658 (CSAA), under section 664.6, “Although a court may not add to or make a new
stipulation without mutual consent of the parties [citation], it may reject a stipulation that is
contrary to public policy [citation], or one that incorporates an erroneous rule of law [citation].”
(CSAA, at p. 664.) The foregoing is precisely Leeman’s position in this appeal. While the trial
court could have rejected the settlement agreement as a whole, the court was not permitted to
modify the existing settlement agreement without the mutual consent of the parties.
       This division’s decision in 7-Eleven Owners for Fair Franchising v. Southland Corp.
(2000) 85 Cal. App. 4th 1135 illustrates this point. As part of the overall settlement agreement in
that case, the parties agreed that the defendant would pay $4.75 million for attorney fees and
costs, (id. at p. 1164), which the trial court approved. On appeal, counsel argued he should have
been awarded $8.75 million in fees. (Ibid.) In answering this argument, this court implicitly
acknowledged that even if we agreed that the amount of the attorney fees and costs was not fair
and reasonable, we would not have discretion to modify any of term of the settlement agreement,
including the terms with respect to attorney fees and costs, because if we did, “the settlement
[would be] derailed.” (Ibid.) This court reasoned, “The short of the matter is that, were we to
accept Mr. Franklin’s claim that the fees awarded him were inadequate, the effect would be to

                                                   6
unwind a $37 million settlement agreement, reached after almost five years of litigation . . . .”
(Ibid.) Thus, this court acknowledged that if the amount of the attorney fees was changed, it
would constitute a modification of the settlement agreement, something the court is not allowed
to do without setting aside the entire settlement agreement.
       We note that the court’s authority under Code of Civil Procedure section 664.6 to either
approve or disapprove a settlement agreement but not to modify its terms is consistent with
Proposition 65. In this regard, Health and Safety Code section 25249.7, subdivision (f)(4)
provides: “If there is a settlement of an action brought by a person in the public interest under
subdivision (d), the plaintiff shall submit the settlement, other than a voluntary dismissal in
which no consideration is received from the defendant, to the court for approval upon noticed
motion, and the court may approve the settlement only if the court makes all of the following
findings:
       “(A) The warning that is required by the settlement complies with this chapter.
       “(B) The award of attorney’s fees is reasonable under California law.
       “(C) The penalty amount is reasonable based on the criteria set forth in paragraph (2) of
subdivision (b).”
       The court in Consumer Defense Group v. Rental Housing Industry Members (2006) 137
Cal. App. 4th 1185, summarized a court’s obligation under this section by stating “the trial court
must look at the three factors and if any of those factors are not present, it can’t approve the
settlement.” (Id. at p. 1207, original italics.) Stated another way, the court held “[b]y its express
terms, this statute limits trial courts from approving any settlement unless ‘all of the following
findings’ are made.” (Id. at p. 1208.) Consequently, under Health and Safety Code section
25249.7, subdivision (f)(4)(B), the trial court had the right to reject the settlement agreement in
its entirety, and refuse to “approve the settlement” if the court determined that $72,500.00, the
amount agreed upon by the parties for attorney fees and costs, was unfair or unreasonable under
California law.2 (Ibid.) However, we can find nothing in that section authorizing the court to
modify any of the terms of the settlement agreement unilaterally, including the terms of the

       2
          We note that under the guidelines interpreting this provision, “the 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.” (Cal. Code Regs., tit. 11, § 3201.)

                                                  7
agreement with respect to attorney fees and costs, thus requiring the parties to accept a settlement
to which they have not agreed.
       Accordingly, the trial court erred in doing so here and the erroneous judgment must be
vacated, and the matter returned to the trial court for further consideration.
                                                 IV.
                                          DISPOSITION
       The judgment is reversed. The matter is remanded to the trial court with instructions
either to approve or reject the proposed settlement and consent judgment.3 In the interest of
justice the parties are to bear their own costs and attorney fees incurred on appeal.

                                                       _________________________
                                                       RUVOLO, P. J.

We concur:

_________________________
REARDON, J.

_________________________
STREETER, J.

       3
          While Leeman would prefer that we hold that the fee provision was reasonable
and there was no substantial evidence supporting the modification, she also recognizes
that we may simply choose to reverse the judgment and remand the matter back to the
trial court with instructions either to approve or reject the proposed settlement and
consent judgment. If upon remand the trial court decides not to approve the settlement
because it considers the fee provision to be unreasonable, then the trial court is strongly
encouraged to state its reasons for that conclusion.

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Filed 5/21/15
                             CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FIRST APPELLATE DISTRICT

                                          DIVISION FOUR

WHITNEY R. LEEMAN,
        Plaintiff and Appellant,
                                                       A142321
v.
ADAMS EXTRACT & SPICE, LLC,                            (San Francisco City & County
                                                       Super. Ct. No. CGC-13-529493)
        Defendant and Respondent.                      ORDER FOR PUBLICATION

THE COURT:
        The written opinion , which was filed on April 28, 2015, has now been certified for
publication pursuant to rule 8.1105(c) of the California Rules of Court, and it is ordered
published in the official reports.

DATED: ___________________________                   _________________________________
                                                     RUVOLO, P. J.
Trial Court:                            San Francisco Superior Court

Trial Judge:                            Hon. Ernest H. Goldsmith

Counsel for Appellant:                  The Chanler Group, Clifford A. Chanler
                                        California Appeals & Writs, Jacques LeBouef

Counsel for Respondent:                 none on appeal; trial counsel only

A142321, Leeman v. Adams Extract & Spice, LLC