(CN) - The Eastern District Court of California ruled Thursday it will not dismiss a national food company's lawsuit that contends an individual and a company have filed a "sham" lawsuit over a naturally occurring chemical in baked goods.

The litigation between B&G Foods North America, Inc. and defendantsKim Embry and Environmental Health Advocates, Inc. is a battle over California chemical disclosure rules commonly known as "Proposition 65."

B&G sold devil's food cookie cakes and chocolate crme sandwich cookies across the nation. The products contained acrylamide, a naturally occurring byproduct in all baking.

Acrylamide is found in baked or fried goods like french fries, potato chips, donuts and some tobacco products. The chemical has also been identified in other products considered healthier, including almonds and coffee.

California has included acrylamide on its list of "known" carcinogens regulated by Proposition 65, which imposes requirements of warning labels on the packaging of foods and drinks that contain chemicals on this list. More than 1,000 products fall under the requirements.

B&G's complaint included four allegations that point to the defendants' Proposition 65 litigation being a sham, including violating the First Amendment.

It alleges the defendants' laboratory of choice to test samples utilized unreliable methods, which in fact produced false results, and then destroyed those samples so they could not be retested.

The complaint alleges the defendants made false statements, saying they had consulted with experts, and that the defendants did not conduct the required pre-lawsuit investigation. Also alleged was the defendants made false or misleading statements in their state court complaint.

B&G says the defendants violated its First Amendment rights by bringing private enforcement actions under California chemical disclosure rules under Proposition 65.

Furthermore, B&G alleges abuse of the legal process, saying the defendants are not interested in the merits of their cases, because their goal is to impose litigation costs and coerce action, while generating fees from settlements.

Concurrently, while this case has unfolded, the California Chamber of Commerce pursued similar claims to B&G. The chamber has argued businesses have a First Amendment right not to be compelled to put a false and misleading warning on their products' packaging.

As for the issue of the litigants asking for sanctions against the other, Chief U.S District Judge Kimberly Mueller, a Barack Obama appointee, ruled against both.

Mueller set a pretrial scheduling conference for June 29.

Source: Courthouse News Service