Cal Biz Lit

“…Ten or More Employees”

That Proposition 65 applies to potentially impose penalties on companies with ten or more employees is widely known. Recently the California Court of Appeal, in an unpublished (non-citable) opinion, clarified what that term means, as well as addressing the question of the time period when violations occur and thus for which liability can be imposed.

As opposed to the more common cases involving sales of goods, the issue in Mateel Environmental Justice Foundation v. Ukiah Rifle and Pistol Club was environmental, specifically water contamination, or potential contamination. Mateel alleged that the shooters on the 98 acre Rifle Club grounds used lead ammunition, which was allowed to remain on the land, and that when it rained, lead from the spent ammunition was leached out and flowed into an adjacent creek, and thus into the Russian River.

The Rifle Club brought a motion for summary judgment on the grounds that during the four days within the relevant time period before the Notice of Violation was issued, which were identified by Mateel as days when it was raining (thus allowing rainwater to leach lead into the creek), the Rifle Club did not have ten employees. The trial court granted that motion, entering Judgment on behalf of the Rifle Club. Mateel appealed, and the Appellate Court partially reversed, and sent the case back to the trial court level to ascertain further facts.
First of all, the Appeals Court held that the relevant time period during which a violation could occur was not just the four days when it was actually raining: Rather, the relevant dates were all times in which lead was deposited onto the land, where it could be leached into the water in the future. “No person in the course of doing business shall knowingly discharge or release a chemical known to the state to cause cancer or reproductive toxicity into water or onto or into land where such chemical passes or probably will pass into any source of drinking water, notwithstanding any other provision or authorization of law except as provided in Section 25249.9.” (emphasis added). In this case, given a Notice of Violation date in February of 2018, the relevant time period for which a penalty for violation of the law could be applied was the entire period from February of 2017 to the Notice date.

The next and more complicated issue was the question of “who is an employee”? The Rifle Club was more than a shooting range: it had several programs which Board members, and possibly others, oversaw. There were nine Board members during the time frame relevant to the action, and while not guaranteed, the Board members received waivers of the Club dues in exchange for the work that they did supervising the programs and managing the Rifle Club.. Using an admittedly broad interpretation of the term “employee” (mostly derived from Workers’ Compensation case law) the Court held that Board Members who work on behalf of the Rifle club in the anticipation that they might receive a fee waiver are, legally, employees of the Rifle Club. That was, by the way, a $150 annual fee.

The Appeals Court sent the case back to the trial court level for fact finding as to whether, during the relevant time in which spent ammunition was being left on the ground, there was one club member in addition to Board members who had their fees waived. If so, the Rifle Club will be subject to penalties under Proposition 65. Again, this case cannot be cited, but the laws and cases cited by the Court can be used in discussing future cases.

Regulations Did In Fact Increase the Cost to Resolve Proposition 65 Claims

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.

Be Careful With Those Short Form Warnings!

On August 31, 2018, the State of California enacted new regulations regarding the “Safe Harbor” warnings required of companies that sell products in California that contain chemicals that can expose consumers to chemicals at levels that can increase the risk of cancer, or of causing birth defects or other reproductive harm.

The changes generally required the warnings to be more specific, that a warnings include both the name of the chemical(s) in the product that would cause an exposure, as well as the particular risk (cancer or reproductive harm) that would result from the exposure. For example, that a warning state:

“⚠️WARNING: This product can expose you to chemicals, including[specific chemical], that is known to the State of California to cause birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov”.

One notable exception to the more onerous warning requirements in the  2018 amendments was the “short form” warning, found at This Short Form was first authorized in 2018, in Health and Safety Regulations, specifically 27 Cal.Code of Regs, Article 6, CRC 25603.  (All references to Regulations hereinafter refer to 27 Cal.Code of Regs.)

.  The “short form” requires only, for example:

⚠️WARNING: Reproductive Harm: www.P65Warnings.ca.gov.

The problem is that I have seen companies selling, for instance, food products, using the “short form” warning. This is not permitted by statute. 

The relevant Regulation authorizes the use of this Short Form warning starts with the phrase “Unless otherwise specified in Section 25607.1 et seq…”

When we go to Section 25607.1, it provides that the seller/manufacturer of food products must use the language from Section 25607.2.

 Section 25607.2 says that the warning must say:

⚠️WARNING: Consuming this product can expose you to [chemical], which is known to the State of California to cause [for example]cancer and birth defects or other reproductive harm. For more information go to WARNING: Cancer- www.P65Warnings.ca.gov”. (The warning is to be adjusted, of course, based on the chemical involved and the hazards to be addressed.) 

So, while regular consumer goods can use a “short form” warning, looking at Sections 25607.1 and 25607.2, it is clear that food products require a long form warning.  Or, as clear as these Regulations get, anyway.

One significant down side is that if a company uses a short form warning on a food product, it serves as an admission that a Proposition 65 warning is required for that product.  Doing that and then using the wrong warning form is, simply, an invitation to litigation. 

Finally, as noted in a prior post on this site, in January OEHHA proposed adoption of a short form warning for food products, but that has not been adopted as yet.  If it is adopted, it will allow such warnings only on products for which:

(A) The total surface area of the product label available for consumer information is 5 square inches or less, and;

(B) the package shape or size cannot accommodate the full-length warning described in Section 25603(a).

In conclusion: Not all warnings are equal in terms of their effectiveness in satisfying the obligations of a company under Proposition 65.  Read the Regulations carefully!

PROPOSITION 65 NOTICES OF VIOLATION IN 2021 FIRST QUARTER

In many previous years, we have reviewed and reported on CalBizLit onthe number of notices as to each listed chemical.  In every year we reviewed, the most frequently noticed chemical was DEHP, and number two was usually lead (or lead and compounds).  While we were unable to take the time to evaluate and report on the 2020 numbers, we recently received an analysis of the first quarter of 2021 from Scott D. Dwyer, PhD, Consulting Toxicologist with Washington State’s ToxRisk Consulting LLC.  Thanks to Scott and to ToxRisk Consulting.  Their report shows the following:

Chemical	NOVs	Example Products
Phthalates (DEHP, DINP, DIDP, DBP)	413	Plastic bags, cases, totes, grips, steering wheel covers.
Lead (or lead and compounds)	232	Spices, dried and smoked fish, frozen and dried fruits and vegetables, glass and ceramic ware, fishing tackle, brass fittings, lead solder, plumbing fixtures, dietary supplements.
Acrylamide	109	Baked goods, including chips, crackers, cookies, and ready-to-bake doughs.
Bisphenol A	27	Phone cases, duck calls, face shields, food containers.
Cadmium (or cadmium and compounds)	24	Dried seafoods, fruits, and meats, and sunflower seeds.
Mercury	14	Seafood
Chromium (hexavalent)	12	Leather gloves
Furan	9	Pretzels, baked beans, and soy sauce.
Arsenic	8	Foods, including dried shrimp, seaweed, and spices.
Carbon monoxide	8	Fire starters
Asbestos	3	Construction materials
Soots, tar, and mineral oils (coal tar)	3	Fire starter, camp stove, and charcoal.
Diethanolamine	2	Face and neck cream, bath gel.
Pulegone	2	Peppermint extracts
Wood dust	2	Wood chips and pine bedding.
Marijuana smoke and THC	2	Foods and smoking products.
beta-Myrcene	1	Thyme leaves
D&C Orange 17	1	Vinyl arm and leg rests.
N-Nitrosodiethylamine	1	Workout bands
N-Nitrosodimethylamine	1	Workout bands
Silica, crystalline (airborne particles of respirable size)	1	Sand-blasting work

CalBizLit reviewed the notices for the different phthalates for the January through March of this year, and found the following:

 DEHP:  325 notices

DINP:  63 notices

DIDP:  15 notices

DBP: 9 notices.

As has been the case in many years, this shows DEHP as the most frequently noticed chemical.  For example, from January 1, 2020 through December 31, 2020, DEHP was a subject of 1,292 notices!

THE 2020 CONSENT JUDGMENT SETTLEMENTS

On February 12, we posted a summary of all of the Out of Court Settlements from last year, and that information is here.

As those who are active in the Proposition 65 settlement negotiations are aware, in court Consent Judgment settlements, required if the Private Party Enforcer has filed suit, are nearly always far more expensive then out of court settlements.  Last year, as we showed, there were 436 Out of Court settlements, averaging a total cost to the companies in question of $21,380 per settlement. 

In 2020, there were fewer in court Consent Judgment settlements.  There were 179, with an average total cost of $56,236.00 each (penalties, attorneys' fees and additional payments.  With respect to the out of court settlements, the fees agreed to comprised 83.32%.  For the consent judgment settlements, excluding the one settlement by the California Attorney General's office (which does not include attorneys' fees), the fees were 62.35%

Here is the full chart of the 2020 Consent Judgment settlements:

THE 2020 PROPOSITION 65 OUT OF COURT SETTLEMENTS

Once again, CBL has reviewed all of the settlements of Proposition 65 matters last year, which are publicly available on the Attorney General's Web Site, examining the number of settlements, average total amount, lowest and highest amounts for all of the private party enforcers for last year.  The numbers for the out of court settlements in 2020 are right below.  Please note there is a certain amount of rounding up and down cents.  And clicking this chart pops it up larger.

OEHHA PROPOSES TO DRAMATICALLY CHANGE THE RULES FOR PROPOSITION 65 SHORT FORM WARNINGS

On January 8, California’s Office of Environmental Health Hazard Assessment (“OEHHA”), a part of California’s Environmental Protection Agency and the “lead agency” for Proposition 65, notified the public that it intended to make some major changes to the California regulations – California Code of Regulations Title 27, §25600 and following – particularly those concerning “safe harbor” short form warnings. 

The regulations set out the “safe harbor warnings,” meaning that while these warnings are not mandatory (because any “clear and reasonable warning” is potentially in compliance with Prop 65) if a company complies with the safe harbor warning regulations, no private party enforcer can contend they did not comply with the warning requirements.

The proposed changes are here. Primarily, these proposed changes will substantially change the permitted text and usage of the short form warnings.  Right now, those warnings can be used for any product and any chemical, and must be in a minimum six point font and a font no smaller than other “consumer information,” which is not well-defined in the regulations.  The text and appearance can be any of the following:

Pursuant to the new proposal, § 25602(a)(4) will be revised to provide as follows:

The short-form warning may only be used if:

(A) The total surface area of the product label available for consumer information is 5 square inches or less, and;

(B) the package shape or size cannot accommodate the full-length warning described in Section 25603(a), and;

(C) The entire warning is printed in a type size no smaller than the largest type size used for other consumer information on the product. In no case shall the warning appear in a type size smaller than 6-point type.

Even more significantly, the permitted text is revised in the proposed revisions to §25603(b), as follows:

(b) A short-form warning may be provided on the product label  . . .  using all the following elements:

(1) The symbol required in subsection (a)(1) [The exclamation point in the yellow triangle].

(2) The word “WARNING:” in all capital letters, in bold print.

(A) For exposures to listed carcinogens, the words, “Cancer Risk From [Name of one or more chemicals known to cause cancer] Exposure - www.P65Warnings.ca.gov”

(B) For exposures to listed reproductive toxicants, the words, ” “Risk of Reproductive Harm From [Name of one or more chemicals known to cause reproductive toxicity] Exposure - www.P65Warnings.ca.gov”

(C) For exposures to both listed carcinogens and reproductive toxicants, the words, “Risk of Cancer From [Name of one or more chemicals known to cause cancer] And Reproductive Harm From [Name of one or more chemicals known to cause reproductive toxicity] Exposure - www.P65Warnings.ca.gov”

(D) For exposures to a chemical that is listed as both a carcinogen and a reproductive toxicant, the words, “Risk of Cancer and Reproductive Harm From [Name of one or more chemicals known to cause cancer and reproductive toxicity] Exposure - www.P65Warnings.ca.gov”.

The new revisions (at §25607(a)) require the same revisions to short form warnings as to food, ending, as now, with the URL www.P65Warnings.ca.gov/food.  The revisions also require that “The warning must be set off from other surrounding information and enclosed in a box.

These are major changes:   The new regulations will severely limit the locations and uses of the short form warnings, and require the identification of the chemicals in question.

Another big set of changes is this:  pursuant to §§ 25602(b) and (c), Internet and Catalog warnings are still required to meet the safe harbor warning requirements, but only the long warnings – not the short warnings – will meet these requirements.

When or if this will take effect remains to be seen.  OEHHA has authorized comments to be submitted until March 8, 2021, with the deadline and submission methods set forth here.  After approval by OEHHA, if that happens, it will be submitted to the California Office of Administrative Law for review and approval.  That can be a really long process some times.  And as drafted, the OAL is asked to select an operative date one year after OEHHA approves the amendments. And the regulations provide that the changed provisions will take place on the operative date selected by OAL, with products manufactured before that date governed by the earlier regulations passed in 2016 and effective July, 2018.

We will be closely watching what happens with OEHHA and the OAL, and provide further reports.

HERE ARE THE 2019 PROPOSITION 65 CONSENT JUDGMENT SETTLEMENTS

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As we do every year, CalBizLit has reviewed all of the 2019 Proposition 65 settlements, which are posted on the Attorney General’s web site. Today, we will be posting summaries of the court approved consent judgment settlements. In the next few days, we will do the same thing as to out of court settlements.
Almost all of the consent judgment settlements involving products and alleged failure to warn of chemical exposure include the following elements:

• Agreement by the defendant, and a court order, to either reformulate a product category or to provide warnings that comply with the Office of Environmental Health Hazzard Assessment’s (“OEHHA’s”) “Safe Harbor Warning Regulations.”
• Payment by the defendant of an agreed penalty amount, with 25% going to the plaintiff and 75% to OEHHA, as required by Proposition 65; and
• Payment by the defendant of the plaintiff attorney’s fee and cost claim, in an amount agreed to by the parties.

Our calculation of the number of settlement judgments is slightly different than the Attorney General’s. That office’s calculation is 284, we calculate 281. The total amount of settlement payments for 2019 in court approved settlements was $17,059,870, meaning that the average payment per settlement was $60,711. Of the $17 million+, $3,003,490 was for penalties, $1,572,592 was for “additional settlement payments” which must meet certain requirements, must be approved by the Court, and need to be shared with OEHHA. And $12,483,788, or more than 73% of the total settlement amounts went to attorneys’ fees and costs. The entitlement to attorneys’ fees does not appear in Proposition 65, but is permitted under California Code of Civil Procedure section 1021.5, permitting an award of attorney’s fees to attorneys prevailing in a matter serving the public interest. Proposition 65 having been enacted by the voters in 1986, it is generally deemed by the courts to serve the public interest.

The following chart shows the number of consent judgment settlements, average amount of settlement, highest and lowest settlement for 18 of California’s Proposition 65 Plaintiffs (also known as “Private Party Enforcers”):

To see information on the 2019 settlements by other plaintiffs, click right below:

REMOTE MEDIATION DURING THE PANDEMIC SHELTER IN PLACE PERIOD

 

 

 

By Bruce Nye, www.BruceNyeMediation.com

During this current era, in many parts of California (and in many parts of the United States) arranging court appearances, live discovery, group meetings and mediations ranges from difficult to impossible.  Many courts have used telephone participation or website appearance programs for the parties’ appearances.  Some attorneys have used Zoom or a few other video services for depositions.  And some mediators have been using Zoom or other video services to lead mediations.

I am happy to state that three times in two weeks I have successfully used BlueJeans.com to lead mediations that resulted in settlements.  This helped to continue my success rate in mediations to above 80%, and as a guy to whom statistics are essential, that is great news to me.  Here is what I have learned:

1. It is still important to have pre-mediation conferences separately with each side before the mediation itself. This provides an essential opportunity to make sure that both the lawyers and their clients get a chance to meet the mediator and gain a full understanding of the process before it takes place. Before the pandemic crisis, when mediations were all conducted live and face-to-face, we often conducted the pre-mediation meetings by conference call.  We can still do that, but it sometimes works to conduct them by Zoom or another type of remote video. It is absolutely best to have the parties present for the pre-mediation conference, and not just the lawyers, so that the parties have a full understanding in advance. Also, this is a good time for the mediator to get a commitment when possible  that the individuals attending will be those with full settlement authority.

2. When, as is currently the case, the mediation is conducted by remote video, the pre-mediation meetings are even more important. It will normally be my practice to first send a letter to the parties explaining the remote on-line process and how they should connect once they receive the link I will send them by e-mail.  A part of the pre-mediation conference that is unique to the current situation involves teaching the parties and lawyers the technical aspects of participating in the mediation. For this, a conference call may be better than a Zoom meeting.

3. It is not uncommon for mediations to take place when a party’s principle with full authority is not present. While the mediator will always prefer having the decision-makers present, the mediator will understand that the in lawsuit world because of distance away, schedule, or other matters, sometimes not everyone will be able to attend.  In those instances, it is not unusual to speak with decision-makers by telephone during the process.  However, during the Shelter in Place Era, with nobody attending the mediation live and in person, Zoom or another remote video program makes it easier for all parties and their decision-makers to attend.  Recently, I have successfully helped settle a case where a primary decision-maker attended via remote video from across the country. 

4. There are typically two meeting elements of mediations: Joint mediation meetings, and separate caucuses.  Under California State laws, all information exchanged during the joint meeting is confidential, meaning that mediation communications made may not be offered in evidence at trial. And by terms of the Agreement to Mediate that the parties and their attorneys sign, communications by a party during the caucus is also confidential, meaning that it cannot be communicated to the other side, or to anyone, without the permission of the party in the caucus.   Remote video programs work very well for both.  They are, of course, set up to allow everyone to be present on line and on either their cell phones or computer monitors for the joint programs.  Most of them also permit establishing “breakout rooms,” meaning electronic online rooms to which individuals can only participate if I invite them.  These work perfectly for the mediation caucuses, ensuring participation and confidentiality.

5. Finally, so far the remote video mediation process has been very effective. The parties just about always seem comfortable speaking to all participants in the joint sessions, and talking to the mediator during the caucuses. We all look forward to the complete end of the Covid-19 pandemic and the Shelter in Place requirements.   When they end, I suspect that some attorneys and parties will want to continue with the remote video approach.  If that is possible and desirable, I will continue to make that available. My best bet is it will be both.

OEHHA Issues Safe Use Determination as to BPA in Polycarbonate Glasses

Approximately seventeen years ago, the Office of Environmental Health Hazard Assessment (“OEHHA”), the lead agency for Proposition 65, issued a regulation (now in 27 CCR 25204) stating that

As a part of its overall responsibility to provide guidance to persons or organizations that are or may be affected by the Act, the lead agency will consider the applicability of the Act or the exemptions specified in the Act to business activities or prospective business activities. A safe use determination issued by the lead agency represents the state's best judgment concerning the application of the Act to the particular facts presented in the request.

Just as it can be very expensive for a company to defend a Proposition 65 suit by proving that the exposure level is below the No Significant Risk Level for listed carcinogens (“NSRL”) and/or below the Maximum Allowable Dose Level for reproductive toxicants (“MADL”), obtaining a Safe Use Determination (“SUD”) isn’t easy either. First of all, it can’t be done by a company that has received a notice of violation for the product and chemical in question.

And secondly, the expense can be high: The submitting party must provide scientific evidence in support of its request, which is not inexpensive to obtain and assemble. The current version of the regulation must first be accompanied by a $1,000 non-refundable processing fee. But next, “the requester shall be assessed a charge in the amount of any costs to the lead agency or other state agency which are necessarily incurred in considering the request and which exceed $1,000.” And these costs just about always exceed $1,000 by a great deal, although probably less than defending enforcement litigation.

Nonetheless, it can make a great deal of sense when the SUD is requested by and successful for an industry organization.  This is what was successful for "The Vision Council" after it requested a SUD as to exposures to BiPhenol A ("BPA")  from certain polycarbonate prescription glasses and sunglasses, over-the-counter reading glasses, non-prescription sunglasses, and safety glasses.

BPA is listed as a female reproductive toxicant. And under the regulations setting maximum allowable dose levels (i.e., "MADL," the safe harbor levels for listed reproductive toxicants), the MADL for BPA, for dermal exposure from solid materials, is 3 micrograms per day of exposure. In undertaking its SUD analysis, OEHHA drew these conclusions:

Based on OEHHA’s screening-level analysis of the information and data provided by TVC, the upper-end estimate of dermal exposure to BPA for users of certain polycarbonate eyewear products (prescription glasses and sunglasses, OTC reading glasses, non-prescription sunglasses, and safety glasses) manufactured, distributed, or sold by TVC member companies, with acetonitrile extractable concentrations of BPA as specified above, is 0.53 µg/day.  This exposure estimate falls below the "Maximum Allowable Dose Level (MADL)” for BPA (dermal exposure from solid materials) of 3 µg per day.  The MADL is defined as the level of exposure that corresponds to the “no observed effect level” divided by 1000.  Thus, exposures to BPA from use of such eyewear products, under the conditions described in OEHHA’s assessment, would not require a Proposition 65 warning. 

So, to make a long story short:  No Proposition 65 warning about BPA is required for plastic-framed glasses. This suggests that a SUD can be useful at times for an industry.