The price of settling a Proposition 65 case has increased significantly since October of 2016. The reason why October of 2016 is notable enough to be a measuring point, is because that is when the Attorney General’s change to regulations on private enforcement took effect. Before diving deeper into this, a quick background on the types of payments that are part of Proposition 65 settlements or consent judgments is in order. To resolve a matter a defendant has to typically pay the enforcer’s attorney fees and investigation costs, a civil penalty (25% of which is kept by the enforcer and 75% of which is paid to the California Office of Environmental Health Hazard Assessment), and common prior to October of 2016, a “payment in lieu of penalty” (which the enforcer would keep 100% of). The Attorney General astutely observed that amounts that would have otherwise been penalties were diverted into payments in lieu of penalty, depriving the state of its 75% cut of those funds, and all an enforcer needed to vouch for to do that was that the monies would be used to enforce Proposition 65. In other words, the enforcer would have funds to purchase many products and pay for the lab testing of them, looking for something else in violation, thereby continuing to move the gears of the litigation machine.
The October 2016 regulation that has likely driven up the cost of resolving a Proposition 65 notice of violation the most is a provision that required that payments made directly to a private enforcer, now called “additional settlement payments,” be used in a way that has a nexus with the subject of the notice of violation. So now rather than being able to use that money to fund continued Proposition 65 investigation costs and testing for anything and everything, the money would have to be used to address an issue relating to that particular chemical, product, or impacted group. Whatever the use of the funds, the use now has to be explained to either a judge approving a consent judgment and the State Attorney General, or if an out of court settlement, the State Attorney General. The State Attorney General will ask the enforcer what the funds are to be used for and may go after an enforcer not properly using funds. Rather than trouble themselves with coming up with programming or causes connected to the notice of violation, with limited exceptions, enforcers have largely ditched the additional settlement payment. They now just demand a much heftier civil penalty payment, so their 25% cut of that amount is substantial enough to keep moving the gears of the litigation machine. Even for those that develop programming or a connected use of the funds, the “additional settlement payment” cannot exceed 75% of the civil penalty, also likely pushing civil penalty amounts higher.
While blog posts by their nature may be more anecdotal, I decided to secure some, though also admittedly anecdotal, empirical evidence to support my experience in defending and resolving Proposition 65 cases. One enforcer’s average civil penalty was $6,435 in 2015 (the last full year before the new regulations took effect), and in 2016 there was a small uptick to $6,521 (the regulations took effect in October 2016). It was then off to the races, with that enforcer's average civil penalty amount ballooning to $11,466 in 2017, and $16,838 in 2018. The amount of civil penalties demanded by an enforcer is largely dependent on who that enforcer is. So numbers in the foregoing range are not always the end result, but it has clearly become a more costly proposition to settle a Proposition 65 case since October of 2016.
