Pre-regulatory draft changes proposed to the state’s Proposition 65 regulations by the Office of Environmental Health Hazard Assessment (OEHHA) will increase business uncertainty and increase litigation, the California Chamber of Commerce and a broad-based coalition of organizations and businesses are cautioning.
Passed by way of initiative in 1986, the Safe Drinking Water and Toxic Enforcement Act, also known as Proposition 65, requires businesses with 10 or more employees to warn consumers if a product sold in California exposes them to any detectable amount of any of the more than 850 listed chemicals.
The CalChamber coalition includes nearly 140 California-based and national organizations and businesses of varying sizes. Together they represent nearly every major business sector that would be affected by OEHHA’s draft regulation—manufacturers, restaurants, food and beverages, agriculture, automotive, technology, consumer products, apartments, hotels, amusement parks, among others.
Costly and Frivolous Litigation
In the nearly 30 years that have passed since the adoption of Proposition 65, private attorneys’ enforcement lawsuits have moved away from legitimate actions to implement the initiative consistent with its intent and public policy priorities to “gotcha” campaigns designed to trap businesses for “exposures” that are detectable, but which pose no demonstrable risk to human health or the environment.
Statistics maintained by the Office of the Attorney General show that the annual rate of Proposition 65 notice letters being issued has increased significantly, from an average of less than 1,000 a year to nearly 1,100 last year. If notices continue to be issued at the rate for the first four months of this year (422 notice letters), by year’s end 1,266 notice letters will have been issued.
In 2013 alone, the Attorney General’s Office reports there were 352 settled cases, with payments totaling more than $17.4 million. Of that total, attorney fees and costs accounted for 73%, whereas noncontingent civil penalties accounted for 15% and payments in lieu of penalties accounted for 11%.
Notably, one individual attorney entered into 60 settlements in 2013, with total payments amounting to approximately $2.4 million. Of that total, attorney costs and fees totaled approximately $2 million, which amounted to 83% of total settlement payments.
In the vast majority of these settlements, the business admits no wrongdoing and the plaintiff concedes that the business has vigorously maintained its innocence. This reflects the reality that the costs of litigating a Proposition 65 case exceed the cost of settlement.
The current regulations allow businesses to prove by any means they wish that their Proposition 65 warnings are “clear and reasonable,” but also set forth criteria to establish when warnings will automatically be deemed “clear and reasonable” for purposes of Proposition 65.
Specifically, the regulations lay out general warning language and methods for consumer product, occupational and environmental exposure warnings that are deemed to comply with the statute. Businesses using these so-called “safe harbor” warnings are thus protected from the threat of litigation and can carry out their business with a sense of certainty.
It is critical to note that under the current regulations, the vast majority of threatened or actual Proposition 65 litigation relates, not to the contents of a given warning, but rather to whether a warning is provided.
Rather than risk being embroiled in litigation involving a battle of the experts at trial, companies often will instead elect to provide a “safe harbor” warning voluntarily out of an abundance of caution in order to shield themselves from the inevitable threat of litigation that would otherwise exist if they sell a product or own a facility in California and do not warn.
Draft Rules Unworkable
OEHHA has proposed changes it says are intended to carry out the Administration’s vision of improving the quality of Proposition 65 warnings given and providing certainty for businesses subject to the act.
The new proposed requirements, however, take away a business’s ability to simply and cleanly prove the approach it has taken to give Proposition 65 warnings is sufficient to meet the requirements of the law through the “safe harbor” warning.
Instead, OEHHA proposes complicated and burdensome requirements that require warnings to be tailored to specific circumstances, including specific products and their particular contents and use characteristics. Compliance with such new requirements will be infeasible or otherwise financially impossible for many businesses.
Even if compliance is feasible, OEHHA’s draft removes the safe harbor aspect of the regulation and eliminates the right to prove that an alternative warning is clear and reasonable. Therefore, OEHHA’s proposal will open a new frontier where litigation about the contents of a given warning will be equally as frequent as litigation related to whether a warning is provided.
In its comment letter, the coalition explains why it objects to the removal of “safe harbor” warnings and further provides details on why it vehemently objects to13 specific components of the OEHHA proposal.
The coalition members believe that the Governor’s goals for Proposition 65 reform can best be achieved by:
- maintaining the current “safe harbor” warning; and
- creating a website apart from the “clear and reasonable” warning requirement that allows businesses to voluntarily provide additional information about potential exposure to Proposition 65 chemicals.
Businesses are more likely to provide meaningful information for the website regarding exposure to listed chemicals if they are allowed to do so voluntarily without the threat of litigation from private enforcers. Because consumers will know that exposure information is available on the website, companies will be encouraged to explain the context of specific exposure(s) likely to result from use of their products in order to reassure the public of the safety of their products and provide greater context for exposures.
A company that fails to provide such information runs the risk in the market (rather than the courtroom) that consumers (rather than plaintiffs’ attorneys) will question the safety of its products and choose not to purchase or use them.
The CalChamber and members of the coalition are communicating with OEHHA to determine next steps. Currently, OEHHA is poised to begin the formal rulemaking process in July; however, given the breadth and scope of the coalition’s concerns, we remain hopeful that OEHHA will delay the formal rulemaking process so that OEHHA can address the coalition’s concerns within a reasonable and realistic timeframe.
Staff Contact: Anthony Samson