More Lawsuits Likely under California’s Proposed Prop 65 Warnings, Says Industry

Proposed changes to the "clear and reasonable" warning requirements under California's Proposition 65 would increase burdens on businesses—possibly including flexible package manufacturers and their suppliers—in addition to creating more opportunities for bounty hunter lawsuits, says a coalition of industry groups in comments to the California Office of Environmental Health Hazard Assessment (OEHHA). More significantly, the coalition maintains that OEHHA does not have the statutory authority to implement some of the proposed changes.

The Safe Drinking Water and Toxic Enforcement Act of 1986—better known as Proposition 65 or Prop 65—requires the governor of California to publish a list of chemicals "known to the State to cause cancer or reproductive toxicity." The law mandates, in part, that no person may knowingly expose any individual to a significant amount of a listed chemical without first providing a "clear and reasonable warning" to such individual.

Violations of Prop 65 are subject to civil penalties of up to $2,500 per day for each violation. This statute may be enforced by the California Attorney General, local district and city attorneys, or private citizens if the state declines to do so or does not act within 60 days after it is notified of an alleged violation. Success in such a suit entitles private citizens to 25% of any penalties assessed by the courts and possibly attorneys' fees (often referred to as bounty hunters fees). Businesses paid more than $29 million to settle Proposition 65 lawsuits in 2014, a 68% jump from 2013, according to the California Attorney General's office. Of the $29 million, 71% went to trial lawyers.

In May 2013, California Governor Jerry Brown addressed the large monetary rewards obtained by bounty hunters. He explained, "While Proposition 65 has motivated businesses to eliminate or reduce toxic chemicals in consumer products, it is also abused by some lawyers, who bring nuisance lawsuits to extract settlements from businesses with little or no benefit to the public or the environment." In an effort to stop the abuse by "some unscrupulous lawyers," Governor Brown proposed that Prop 65 be revamped to end frivolous "shake-down" lawsuits, improve how the public is warned about dangerous chemicals, and to strengthen the scientific basis for warning levels.

On January 12, 2015, OEHHA proposed revamping the clear and reasonable warning requirement and creating a "Lead Agency Website." The proposed clear and reasonable warning requirements would, among other things:

• Prescribe specific methods for communicating warnings under Prop 65, including the phrase that a person "can be exposed" to a listed chemical and the requirement for the warning to include a URL for a Lead Agency Website;
• Mandate the specific identification of 12 listed chemicals in the warning; and
• Outline the responsibilities of commercial supply chain participants (manufacturers, distributors, producers, and packagers) versus retailers in California.

The initial 12 chemicals that would need to be identified in a warning include several substances of particular relevance. These are benzene, cadmium, lead, and phthalates.

The Lead Agency Website proposal requires businesses that issue Prop 65 warnings for any listed chemical to provide OEHHA specified information about that chemical, including the anticipated route(s) or pathways of exposure and the anticipated level of human exposure, if known.

Increased Burden on Industry

Many of the comments criticized the additional burdens—including financial—that the proposed regulations would impose on industry, without providing significant benefit to consumers. Of particular concern to industry was the amount and type of information that they would be required to provide for the website. Although, after considering the comments, OEHHA announced on May 22, 2015, that it was modifying the Lead Agency Website proposal to, among other things, not require companies to conduct testing for the sole purpose of providing information concerning exposures to listed chemicals for which warnings are required.

The American Chemistry Council (ACC), submitting comments for a coalition of 25 organizations, argued that the website, as proposed, would not be helpful to consumers. The focus on single, discrete chemicals rather than on highly complex compounds and formulations that are consumer products, does not provide consumers with the information they need to make decisions to use or consume products, ACC explained.

The California Chamber of Commerce (CalChamber) and a coalition of more than 160 members pointed out that OEHHA's conclusion that the proposal will not have a significant adverse economic impact on businesses is inadequate. The Coalition commissioned an economic analysis that found that the business costs of the proposed changes would range from $410 million to $818 million over the first 12 years.

Industry also suggested that OEHHA's proposal to replace the current generic safe harbor warning with new, complicated, and highly specialized warning language would expose businesses to a greater risk of litigation. Explaining CalChamber stated, "OEHHA's elimination of this language leaves only a vacuum to replace it, and businesses crafting their own warnings will be far more likely to be attacked by private enforcers who take an expansive view of the statute's ‘clear and reasonable' requirement in order to use the expense businesses face in the litigation process as leverage to continue to extract settlements."

Lack of Statutory Authority

Industry pointed out that OEHHA does not have the statutory authority to create a secondary list of chemicals for special treatment or differentiated warning labels. Additionally, the requirement that "supplemental" information provided by businesses "may not contradict, dilute, or diminish the warning" is "unconstitutionally vague, violating the First Amendment and commercial free speech rights of affected businesses," noted CalChamber since OEHHA does not define what constitutes information that is "supplement to the warning" or what may "contradict, dilute, or diminish the warning."

The Washington Legal Foundation summed up the proposed changes to Prop 65 by noting that instead of offering solutions to problems such as how to test for compliance, what tests to apply, and how to interpret the test results, which would provide guidance for businesses seeking to comply with Prop 65, this proposal would further exacerbate the existing problems and invite an avalanche of new litigation over the content of Prop 65 warnings.

OEHHA is expecting to publish final regulations later this year. That is not likely to be the end of the story, however.