CalChamber-Supported Bill Promotes Greater Transparency in Proposition 65 Case

A California Chamber of Commerce-supported bill that promotes fairness and transparency in lawsuits brought under Proposition 65 passed the Senate Judiciary Committee this week.

Specifically, AB 1583 (Chau; D-Monterey Park) bill would:

  1. allow the Proposition 65 alleged violator to obtain the factual basis for the Certificate of Merit through normal civil discovery procedures;
  2. require the Attorney General, if he/she determines after reviewing the Certificate of Merit and the supporting factual information filed under Proposition 65 that there is no merit to the action, to serve a letter on the noticing party and the alleged violator stating there is no merit to the action; and
  3. require the Governor’s Office of Business and Economic Development to post on its internet website information relating to a business’ obligations under Proposition 65.

Proposition 65

Proposition 65 was designed to protect California’s drinking water from chemicals known to cause cancer or birth defects, and to warn members of the public about the presence of those chemicals in their environment to help them avoid exposure.

Since its enactment, Proposition 65 has helped protect the public by encouraging businesses to reformulate their products and to eliminate the use of listed chemicals. Proposition 65 requires, among other things, private businesses with more than 10 employees to post warnings when they knowingly expose workers or the public to listed chemicals. These warnings can take the form of placards in business establishments where listed chemicals exist or are released into the environment, or as part of the labeling of a consumer product that contains a listed chemical.

 Prop 65 Promotes Shakedown Lawsuits

Unfortunately, because Proposition 65 incentivizes individual legal pursuits by entitling private enforcers to 25 percent of the penalty collected for successful enforcement, in addition to legal fees, certain plaintiffs have engaged in shakedown lawsuits against small businesses over the lack of a sign. These lawsuits can easily cost several thousands of dollars to litigate, causing many small businesses to settle out of court regardless of whether they were required by law to provide a warning. Indeed, as stated in the AB 1583 Fact Sheet, the average settlement is over $44,000 and, in 2014 and 2015, in-court settlements annually totaled $29,482,280 and $26,266,261, respectively.

Certificate of Merit

Without access to the factual information and basis supporting the Certificate of Merit (because Proposition 65 presently provides that such information is not discoverable), small businesses are left in an untenable position – deciding whether to spend significant funds responding to burdensome discovery and costly litigation (and being able to ask the court to determine whether there was a credible factual basis for the lawsuit only after a prevailing defendant has litigated the case), or settling for an amount to avoid costly litigation in the absence of knowing whether the lawsuit had any merit in the first place.

AB 1583 would allow an alleged violator to obtain the factual basis for the Certificate of Merit pursuant to normal civil discovery procedures, which would place a Proposition 65 defendant on the same footing as defendants in other civil litigation matters. This provision comports with notions of fairness and transparency. Further, requiring the Attorney General to notify the alleged violator when he/she determines there is no merit to the action may assist in reducing litigation costs and dissuade frivolous lawsuits. Posting the obligations under Proposition 65 on the Governor’s Office of Business and Economic Development’s website will also assist businesses and the public to easily identify a business’ obligations under Proposition 65.

AB 1583 will next be heard in the Senate Appropriations Committee; no hearing date is set.

Staff Contact: Louinda V. Lacey