Proposition 65 Primer: Three Views

I’ve been wanting to write an extensive post about California’s Proposition 65 ever since starting this blog, and so far have not been able to sufficiently check my cynicism at the door or find the time. But I’m going to give it a try now. Please remember, this blog is designed for businesses, and their lawyers, who aren’t so fortunate as to be involved in California litigation every day—i.e., readers for whom our mysterious litigation ways are a rare and strange adventure. So if you’re located in this state, or practice law here, your reaction to what comes next may be “so what?” or, if you favor the consumer side of things “so what’s wrong with that?”  If you’re part of the Proposition 65 Bar, on either side, you’ll not hear or learn anything new here.

For the rest of you, come with me for a tour on one of the strangest environmental protection schemes ever devised.

More after the jump

This post consists of three parts.  The first is historic, and addresses the question, “how did any state – even California – come to enact something so weird?”  The second will, I promise, be a fairy objective brief outline of how the statute is supposed to work.  I’m going to try really, really hard to make it objective.  I promise.  Really.  The third part is going to be by far the most entertaining, because I didn't write it.  It’s basically a long description of how the statutory scheme REALLY works.  And it’s written by, of all people, a sitting appellate court justice, Justice Sills from California’s Fourth Appellate District.  Justice Sills Clearly HATES Proposition 65, and is utterly and completely contemptuous of the Proposition 65 bar.  In fact, it seems pretty clear to me that he doesn’t think much more of the defense side than he does the plaintiff side.  This opinion, which got a fair amount of attention when it came out a year ago (see, for example, this post, this one, or this one) has to be one of the angriest, cut-loose opinionated judicial opinions I’ve ever seen.  If you can’t wait to get to part three, the entire decision in Consumer Defense Group v. Rental Housing Industry (2006) 137 Cal.App.4th 1185, 40 Cal.Rptr.3d 832 is available for your reading pleasure here. Also, our firm has a white paper on Proposition 65 here.  And if you want to read about the way we beat the State of California in a Proposition 65 dispute, read here (FindLaw login required).

I.    How Did This Happen, Anyway?

You may know already that California has a robust voter initiative process. Introduced as part of the progressive movement in the early part of the twentieth century, it was intended to provide an end-around to a corrupt or inertia-bound legislature and allow voters to put legislation on the ballot, then pass that legislation by majority vote. What has happened instead is that interest groups with large war chests hire paid petition circulators to ensure their pet laws go on the ballot, and spend millions more to fool the electorate into voting their way. Whether the outcomes are good or not is all in your perspective—many would argue that 2004’s Proposition 64 brought common sense to our Unfair Competition Law by imposing standing requirements, while others would argue that it was a bare-knuckle thrashing of consumer interests by deep-pocketed corporate interests. Personally, I favor the former view. But whichever side you favor, the process has way too much to do with money and politics, and not nearly enough to do with an informed electorate acting in its own best interests.

And Proposition 65, enacted in 1986, was no different. Billed the “Safe Drinking Water and Toxic Enforcement Act of 1986,” it was sponsored by a variety of environmental groups and passed by about 2/3 of the voters in the November, 1986 election. While I believe most voters saw this primarily as a clean water initiative, that has not been where the action is. Instead, as most often applied, the initiative requires that any business with more than ten or more employees give a “clear and reasonable warning” before “exposing” people to a chemical “known to the State of California” to cause cancer, developmental or reproductive harm.

II.  How Proposition 65 Works: The Objective (More or Less) View

First step: The state develops two lists.  One is of chemicals “known to the State of California” to cause cancer.  The second is of chemicals “known to the State of California” to cause developmental or reproductive harm.  A chemical can find its way onto one of these lists in any of the following ways:

    •    It can be listed by a vote taken by the “Science Advisory Board,” (”SAB”) which is, in turn, divided between the Deveopmental and Reproductive Toxicant (“DART”) Identification Committee and the Carcinogen Identification Committee (“CIC”).  These committees meet at very infrequent intervals and vote on presentations made by regulatory scientists from the state’s Office of Environmental Health Hazard Assessment (“OEHHA”).  Usually they vote on proposals to add chemicals.  Very rarelythey will vote to remove a chemical.  The standard for listing is that the toxicology has been established by scientifically valid testing according to generally accepted principles.

    •    Chemicals must also be listed if they have been similarly listed by agencies found by the STP to be “authoritative bodies.” These include the International Agency for Research on Cancer (“IARC”), US/EPA, National Toxicology Program,  National Institute for Occupational Safety and Health and the US Food and Drug Administration;

    •    Chemicals must be listed if they have been formally required by a state or federal government agency to be labeled or identified as causing cancer or causing reproductive toxicity.

Listing decisions are routinely made based on animal evidence whether or not there is evidence of human harm caused by the toxin.  There are presently more than 800 chemicals listed as carcinogens, reproductive/developmental toxicants or both.

Second Step: Once a chemical has been listed for at least a year, the warning requirements come into play.  It’s perfectly ok for businesses to expose anybody they want to as much of these chemicals as they want, so long as they precede the “exposure” with whichever of the following “safe harbor” warnings as may be appropriate:

“Warning, this product contains chemicals known to the State of California to cause cancer.”

or 

“Warning, this building contains chemicals known to the State of California to cause reproductive and developmental harm.”

        or, best of all,

“Warning, this product and building contain chemicals known to the State of California to cause cancer, reproductive and developmental harm.”

There are plenty of others as well, but you probably get the idea.  And a business can use a non-safe harbor warning as long as it the warning it uses is “clear and reasonable.”  The attorney general usually takes the position that to be “clear and reasonable” the warning must use the words "cancer" or "developmental or reproductive harm", whichever applies, and must state that the chemical causes the disease or harm, not that it might cause it, causes it in animals, etc.

As a practical matter, whether this warning matters to a company or not depends on the nature, and intimacy, of the company’s product.  If you sell turpentine or gasoline, you’re less likely to care about this requirement than if you sell make-up remover, over-the-counter nutritional supplements or medical devices.  Which takes us to the third step:

Step Three is Litigation.  Proposition 65 is the only public health or environmental statute in the United States that is enforced exclusively through law suits. These can be brought by the Attorney General’s office or a few other public prosecutors. But more often, they are brought by private citizens, or “bounty hunters” and their lawyers (who are often one and the same).  As attorney Roger Lane Carrick, a California lawyer who once primarily represented businesses in this litigation but later saw the money, err, I mean the light, once wrote:

“With a lawsuit-slinging style that is coupled with a unique set of financial incentives designed to promote a virtual bounty-hunter ambiance in its enforcement, Prop. 65 infuses a piquant flavor of vigilante justice from the old American Wild West into the dynamic economy of ultra-modern California.”

Carrick, The Proposition 65 Handbook, Page 1 (1998, Prop 65 News, American Environmental Institute).  (More about the 2005 version here.)

Before filing suit, a bounty hunter must give sixty days notice to the proposed defendant, to the attorney general and the district attorney, city attorney, or prosecutor in whose jurisdiction the violation is alleged to have occurred.  The bounty hunter must provide a “certificate of merit” and must provide the factual basis for the certificate of merit to the public prosecutors (but not the proposed defendant).  If none of the public prosecutors chooses to proceed with the case within sixty days, the bounty hunter may do so.

Whether the public prosecutor or the bounty hunter files suit, the defendant may itself be exposed – to penalties of up to $2,500 per violation per day.  If the company sold a product containing listed chemicals without the required warning, each individual sale may be a violation, so the dollars can pile up.  Oh – and of course, attorneys fees are also available under California’s private attorney general statute, Code of Civil Procedure section 1021.5.

But there are defenses. You can read about one of them we’ve had success with in a white paper here or in the case of Baxter v. Denton, here (FindLaw login required).

III.  How it Works in Real Life – Quotes from Consumer Defense Group v. Rental Housing Industry Members

The following is from the Rental Housing Industry Members opinion by Justice Sills:

"If an item is on the list, section 25249.6 (the central warning provision) requires that there be no “knowing and intentional” exposure “without first giving clear and reasonable warning.” If the section is violated, section 25249.7 (the enforcement provision) allows civil penalties not to exceed $2,500 per day “for each violation.”

"The critical part is in the burden shifting provision of section 25249.10, which states that “In any action brought to enforce Section 25249.6, the burden of showing that an exposure meets the criteria of this subdivision shall be on the defendant.” Leaving aside the problem of “knowing and intentional” as an element of the statute. . . . the burden shifting provisions make it virtually impossible for a private defendant to defend a warning action on the theory that the amount of carcinogenic exposure is so low as to pose “no significant risk” (see § 25249.10, subd. (c)) short of actual trial. There is no way a defendant is going to be able to carry its burden on demurrer based on allegations in the complaint, and a defendant will probably not be able to carry that burden on summary judgment either. . .Rather, in a case of a negligible, even microscopic “exposure” (say, to lead in non-friable dried paint), it may take a full scale scientific study to establish the amount of the carcinogen is so low that there is no need for a warning under section 25249.10. . . Needless to say, these provisions make the instigation of Proposition 65 litigation easy -- and almost absurdly easy at the pleading stage and pretrial stages. . . . 

"Now we deal with the question of fees, which were over $540,000 [in this case] even after Judge Dunning cut them down in the second action. One must ask, what did Graham & Martin actually do?

"Let’s illustrate just how little they did by illustrating just how simple it is for a hypothetical unemployed lawyer, eager to cash in on Proposition 65, to extract [footnote omitted] money from businesses using the initiative. Our scenario will basically parallel the facts of the case before us:

"First, go on the internet and find some common objects (e.g., furniture, paper, carpeting) which may “contain” a substance on the regulatory carcinogen list. As we have just noted, a common place item, like a chair, doesn’t have to contain any significant amount either, even a few molecules will do. Next, call up a local chemistry professor who will tell you that, at least in sufficient quantities, substances in those common objects will cause cancer, and are in fact on the list. It doesn’t make any difference that there may be no “significant” exposure -- remember the burden will be on the defendant to prove that. This phone call to your friendly professor will allow you to file the certificate of merit; it will be particularly helpful if your chemistry professor opines that as any substance “degrades” over time (and it can be a very long time indeed given that Proposition 65 puts the burden on any issue of amounts on the defendant), it will emit a few molecules of its constituents into the air -- that will allow you to claim “exposure” by inhaling or touching.

"Then, extrapolate your results to some “target” business. As we have seen in this case, businesses which are centered around structures make easy targets because at the very least they are going to have paint and furniture inside, and a place to park outside. Yeroushalmi, for example, involved a shake down of certain hotels and office buildings, and it is obvious from the notices here that they were used first against hotels with only the most clumsy adaptation for apartments (as shown by the references to dry cleaning facilities and nail salons, which are often found in hotels but are rare even in high end urban high rise apartment buildings).

"Third, develop (as here) a plenary omnibus “macro” notice form which guarantees that yes, somewhere on the premises, there will be a molecule of a substance listed as carcinogenic. Then send your notice in the stentorian Wizard-of-Oz-berates-Dorothy legal style of an indictment (“You (hereinafter ‘Violator,’ are hereby informed that you have exposed the following [long list of categories of sorts of people who might happen onto your property] to Designated Chemicals”). This notice will be intended tofrighten all but the most hardy of targets (certainly any small, ma and pa business [footnote omitted]) into a quick, settlement when they get it. (Note, you prepare your macro first and then go looking for a target. Here, . . . the macro used by Graham & Martin for their notices was obviously . . . tested on hotel targets first.)

"The next step is to visit the premises and look around for any prominent Proposition 65 warning signs. If you don’t see any, or if what you see is not sufficiently conspicuous in your opinion, you now have your victim in your sights. You send your macro notice. But you are smarter than to just send one notice -- the Attorney General might intervene and cause any legitimately required remedial provisions to be taken without litigation, and thus steal your thunder, i.e., your fees. So you send out a slew of notices, thus overwhelming the capacity of the Attorney General to do anything meaningful in 60 days.

"The Attorney General having been thus pinned down, you enter settlement discussions. You have the bargaining chip that Proposition 65 provides for civil penalties for up to $2,500 per day for each violation (§ 25249.7, subd. (b)), but of course that can be traded for . . . fees to you. You can also hide money that goes to yourself by calling them charitable contributions to a “consumer” organization that you of course control. . . .

"Besides the stick of civil penalties that you can give up, you have a carrot as well. You can be willing -- in exchange for big bucks by way of attorney fees of course -- to extend to your victims the maximum future immunity for your agreement to go away. So you can (as here) be quite agreeable to giving the maximum arguable res judicata effect to the settlement; after all, if you are going to receive big fees for settling litigation based on dried paint, the defendant is going to want value for money."

Well, I don't know why he couldn't tell us what he really thought . . . . .

IV.  Conclusion

So there you have it.  Three different views.  The more or less objective one in Part II above.  The view in our white paper, which is rather cynical.  And the very, very cynical view of Justice Sills. Which view is the correct one?  It depends.  I think there are plaintiff’s attorneys in this business who really believe their prosecution of Proposition 65 litigation makes the world a better place, a position that’s pretty hard to defend.  Contrary to Justice Sills’ lament, we know from our own experience that some of these cases can be defended, although the process is an expensive one.  We’ve taken the position before that businesses ought to be a little less anxious to settle these cases, and a little more willing to try them.  But every company has to make its own business decisions in the face of what often amounts to litigation extortion.