California Amends Proposition 65 to Help Curb Lawsuits
Kelley Drye Client Advisory
October 15, 2013

Restaurants, bars, and parking garages, among others, are set to receive relief from the most onerous aspects of  California’s “Proposition 65,” the infamous statute passed by voter referendum in 1986 that is responsible for the ubiquitous signs across the state warning the  public of exposure to toxic substances, as well as an avalanche of lawsuits brought by private citizen enforcement groups.  Proposition 65[1] is intended to push businesses to take a close look at the substances in the products they market, and encourage reformulation away from alleged carcinogens and reproductive toxins.  These admirable goals have been accompanied by, at times, "frivolous" lawsuits brought by private citizen "bounty hunters" against businesses for failure to provide warnings about potential exposures to substances that may be present at their facilities, but over which they have minimal or no control or ability to affect reformulation (such as those present in food, tobacco smoke, or vehicle exhaust).

An amendment[2] signed on October 5, 2013, by California Governor Jerry Brown, would provide substantial relief from some of these lawsuits by allowing businesses who receive notice of an alleged Proposition 65 violation related to certain types of exposures to correct the violation within 14 days.  Specifically, a business will be given 14 days to correct a violation regarding a failure to provide the appropriate warning under Proposition 65 if the alleged violation involves exposure to:

  • Alcoholic beverages consumed on the alleged violator’s premises;

  • Chemicals in a food or beverage prepared and sold on the alleged violator’s premises and primarily intended for immediate consumption, provided that the chemical was not intentionally added and the chemical was formed by cooking or similar preparation of food or beverage components necessary to render the food or beverage palatable or to avoid microbiological contamination;

  • Tobacco smoke (other than from employees) where smoking is permitted at any location on the premises; or

  • Chemicals in engine exhaust, to the extent that the exposure occurs inside a facility primarily intended for parking noncommercial vehicles.

Alleged violators still must pay a small civil penalty ($500 initially) and post the requisite warning, as well as notify the private party who alerted the business to the alleged violation that a warning has been provided.

Background on Proposition 65

Proposition 65 requires businesses who expose individuals in California to substances deemed by the state to cause cancer or reproductive harm to provide a clear and reasonable warning before exposure.  California’s Office of Environmental Health Hazard Assessment (OEHHA) implements Proposition 65 and maintains a list of chemicals identified as carcinogens and reproductive toxins subject to the statute.  Currently, the list maintained by OEHHA contains over 800 substances and is required to be updated yearly. 

The failure to provide a warning can subject violators to penalties of up to $2,500 per day and per exposure.  The state Attorney General may bring a lawsuit to enforce the law’s requirements, and many of the most high profile cases are handled in this manner.  However, most cases are brought under the Proposition 65 “bounty hunter” provision, which allows private plaintiffs to bring an action seeking penalties for alleged Proposition 65 violations.[3] Thus, the law leaves businesses vulnerable not only to scrutiny from state regulators, but from private citizens as well.  Before bringing a lawsuit, private groups must take certain preliminary steps, including providing the alleged violator and the Attorney General’s office with a notice of the alleged violation 60 days before commencing a lawsuit.

Several important, though somewhat limited, exemptions are provided where the exposure in question meets specified criteria regarding the level or source of the exposure.[4] For example, a warning is not required for “naturally occurring” substances in a food product.  Further, if an exposure is so low as to create no significant risk of cancer or reproductive harm (per stringent standards specified under Proposition 65) a warning is not required.  OEHHA has created such “safe harbor” levels for approximately 300 substances.  While these exemptions provide entities with some relief from providing a Proposition 65 warning, the burden rests on the business to demonstrate that an exposure meets an exemption’s requirements.  The cost of meeting this burden – e.g., demonstrating that a substance in food is naturally occurring, or that the level of exposure poses no significant risk – often is prohibitively expensive, as it can require extensive testing and technical analysis.  Many businesses rationally decide to settle a case, by agreeing to provide a warning and  paying a penalty, typically in the range of $20,000-$100,000, instead of facing the costs during litigation of establishing that an exposure is exempt from warning requirements.  Hence, historically, the statute has encouraged over-warning, as businesses may provide warnings even where an exemption may apply simply to avoid costs.[5]

Impact of the Amendment

The current amendment applies only to 60 day notices provided after October 5, 2013.  While it represents an important reform, the amendment covers only a narrow set of entities and a small percentage of the “frivolous” lawsuits spawned by Proposition 65 that recently have been criticized by the California governor, legislators, and numerous industry organizations.  Many other businesses, often unaware of the warning requirement, merit similar consideration and relief.

The amendment highlights the need for companies to identify Proposition 65 counsel to assess their compliance options and defend any decisions that a Proposition 65 warning is not necessary.  Food and dietary supplement entities, in particular, should review their Proposition 65 compliance, as challenges against these types of products have significantly increased in recent years.

Kelley Drye & Warren LLP

Kelley Drye's team of Food and Drug lawyers strives to integrate our clients' business strategies with FDA compliance and to help resolve regulatory enforcement matters when they arise. Working side-by-side with business development and marketing professionals, we provide comprehensive regulatory counseling and assist in developing products, labels, and promotional materials that achieve our clients' goals without running afoul of regulatory requirements. With close knowledge of FDA's enforcement priorities and deep experience with the FTC's regulation of advertising, our team can provide comprehensive legal advice with an eye towards giving clients a competitive edge.

Kelley Drye’s Litigation attorneys have guided clients through the thicket of business litigation.  Known for effectively resolving challenging cases, Kelley Drye’s litigation practice has long been highly-regarded by leading companies around the world.  .  Our litigation partners lead cases with hands-on involvement and in the process train associates to properly develop the best evidence to promote settlements or win trials.  All of our litigators understand that in business litigation, cases must be handled in a way that advances the broader business interests of our clients.  In this regard, all our litigators understand the difference between forceful and effective advocacy that has the desired impact on courts and adversaries leading to satisfactory resolution, versus tactics that create conflicts and drive up litigation costs without advancing the client’s interests.  On numerous occasions clients have commented that Kelley Drye litigation teams get along with each other and have productive relationships with co-counsel and adversaries while still forcefully advocating the client’s position.

For more information about this client advisory, please contact:

Lee S. Brenner
(310) 712-6125
lbrenner@kelleydrye.com

Kenneth D. Kronstadt
(310) 712-6169
kkronstadt@kelleydrye.com

Sarah Roller
(202) 342-8582
sroller@kelleydrye.com

Joseph J. Green
(202) 342-8849
jgreen@kelleydrye.com

 


[1]   Formally known as the Safe Drinking Water and Toxic Enforcement Act of 1986.

[2]   California Assembly Bill 227, available at http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB227

[3]   Each month, scores of new cases are filed mostly by approximately a dozen highly active private plaintiff groups alleging failure to warn due to the presence of Proposition 65-listed substances.  Products containing lead and phthalates have been cited most frequently in 60-day notices and complaints filed over the last several years, as have exposures to tobacco smoke and diesel exhaust.

[4]   Businesses with less than 10 employees also are exempt. 

[5]   Businesses have some discretion regarding the manner in which a warning is provided, but the warning must be “reasonably calculated, considering the alternative methods available under the circumstances, to make the warning message available to the individuals prior to exposure.”  Cal. Code of Regulations § 25601.  The warning “message must clearly communicate that the chemical in question is known to the state to cause cancer, or birth defects or other reproductive harm.”  Id.