Cal Biz Lit

PROPOSITION 65: THE MOST COMMONLY NOTICED CHEMICALS IN 2019

Once again, CBL has reviewed the notices from the past year to assess which chemicals are most frequently the subject of Notices of Violation. And similarly to 2018, despite the more than 900 chemicals on the list, only 43 were the subject of notices in 2019 (there were 44 in 2018). And once again, DEHP was the most commonly noticed chemical by far. The thirteen most commonly noticed chemicals were these:

The following three chemicals were each the subject of nine notices: Bisphenol A (BPA), 1,1,1,2-Tetrachloroethane and Wood dust. These were each the subject of eight notices: Diethanolamine, Furfuryl Alcohol and styrene. Di-isodecyl phthalate (DIDP), Methanol, N-Nitrosodimethylamine and Nickel were each noticed three times. Noticed twice: Tobacco Smoke, Bromoform, Cumene, Demeclocycline hydrochloride, 1,4-Dioxane, Ethylene Glycol, Marijuana smoke, Naphthalene, Perfluorooctanoic Acid (PFOA), Polychlorinated biphenyls, Radionuclides, Residual (heavy) fuel oils and Toluene. Finally, noticed once each were All-trans Retinoic Acid, Asbestos, Ethylbenzene, Formaldehyde Gas, and Talc containing asbestiform fibers.

In many instances, more than one chemical appeared in the notices. For example, of the 1209 notices for DEHP, 1173 identified one or more other chemicals. Similarly for the lead, DINP and acrylamide notices, more than 91% contain an additional chemical.

 

And Now, Here are the 2019 Out of Court Proposition 65 Settlements

Last week, we provided a summary of the 2019 court-approved Proposition 65 settlements.  The consent judgment settlements are generally more expensive than the out of court ones in two respects.  If the parties immediately negotiate and agree to the filing of a suit, a consent judgment and a motion for court approval, the attorneys' fee element will just about always be somewhat more.  If suit is filed and served, and the case prosecuted to some extent before settlement, the attorneys' fee element of the settlement be much more. So while the average amount paid pursuant to a consent judgment settlement last year was $60,711 (penalties, attorneys' fees and costs, and a few additional payments), the average cost of an out of court settlement (fees and costs and penalties only) was $20,102.  Here are the two charts (as in the last post, you can see these larger by clicking them):

 

NEW OEHHA REGULATION INCREASES THE ABILITY OF COMPANIES TO SHIFT RESPONSIBILITY FOR PROPOSITION 65 WARNINGS DOWNSTREAM

Generally speaking, Proposition 65 and the related regulations issued by Office of Environmental Health Hazard Assessment (“OEEHA”) have sought to make the most upstream companies involved in selling products containing Proposition 65-listed chemicals primarily responsible for providing California consumers with cancer or reproductive harm warnings.  As regular readers of CalBizLit are aware, the regulations taking effect August, 2018, including 27 CCR Section 25600.2, provided that if it met certain notification and other standards, a manufacturer, importer, distributor or other company selling such a product could shift the responsibility to retailers by meeting certain requirements, including providing them with product-specific information and warning labels or other tools.

In November, 2018, soon after that regulation took effect OEHHA proposed a regulation that would allow companies to shift this responsibility to many companies other than retailers.  This new iteration of Section 25600.2 was recently approved by the California Administrative Law Department (always a requirement for issuing regulations), and will be in effect on April Fool’s Day (yes, April 1), 2020.  

Specifically, the new regulation allows a manufacturer, producer, packager, importer, supplier or distributor of a product to comply with the law by “providing a written notice directly to the authorized agent for the business to which they are selling or transferring the product or to the authorized agent for a retail seller,” so long as the business has ten or more employees.  As before, the written notice is to include the following:

• A statement that the product may result in an exposure to one or more listed chemicals;
• The exact name, description or specific identifying information for the product (the latter described as the Universal Product Code or other identifying designation); and
• All necessary warning materials, including labels, labeling, shelf signs or tags, and the warning products required for products sold in on the internet.

The notice must be renewed annually, and the sender of the notice must receive electronic or written receipt of the notice.  And it must be sent to and receipt provided for the “authorized agent,” for either the person to whom the sender provides the products, or the retail seller.  And this means a person designated as authorized agent by the company.  If the business has not designated an authorized agent, the company can serve the notice on the legal agent for service or process.

In a nutshell, if a product manufacturer, supplier, distributor or importer carefully complies with all the regulatory requirements, it can safely shift the entire Proposition 65 requirements to its customer if it chooses to do so.

AND NOW, HERE’S CBL’S REPORT ON 2018 CONSENT JUDGMENT SETTLEMENTS

Settlements of Proposition 65 cases can take the form of “out of court settlements,” such as those we reported on last month, or consent judgments. The latter are agreements between the parties that are in the form of judgments, that go to trial court for approval (after the Plaintiff files a Complaint and the Defendant an Answer). With rare exceptions, these are approved by the Court, and become both settlements and judgments.

Some bounty hunters mostly insist on consent judgment settlements for several reasons. One is that while agreed penalties are divided between the bounty hunter and OEHHA 25% / 75%, in a consent judgment, the parties can agree to additional payments -- “payments in lieu of penalty” -- that go 100% to the bounty hunters.

And some defendants insist on consent judgments as complete bars to other actions involving the same companies, the same products and different bounty hunters. California law establishes that a consent judgment entered into by a Plaintiff acting in the public interest against a Defendant company is res judicata protection for that company against others acting in the public interest so long as the same “primary rights” are at issue in both cases. Consumer Advocacy Group, Inc. v. ExxonMobil Corporation (2008) 168 Cal.App.4th 675, 688. While some bounty hunter lawyers resist these res judicata claims, some defendants are adamant that their settlements, for greater protection, should be in the form of consent judgments.

However, consent judgment settlements can be quite a bit more expensive than out of court settlements. By way of example, the average cost of an out of court Proposition 65 settlement in 2018 was $20,718, while the average cost of a bounty hunter consent judgment was $70,841.

And here’s something else that shouldn’t be too much of a surprise: Of the $30,385,439 in consent judgment settlements in 2018, about 14.5% went toward penalties, 6.35% to payments in lieu of penalties, and 79.15% to attorneys’ fees and costs.

As we mentioned in our February 11 post, the Attorney General’s data is available here. But we had some disagreements with some of the AG’s report. In some instances, its numbers don’t match the actual consent judgments. In others, they treated settlements and payments by multiple parties as if they were made by just one. So we did our best to unwind that, and we also took the Attorney General’s one settlement out, leaving for this reporting the 406 consent judgment settlements between private party enforcers / bounty hunters and companies..

And with that said, our entire report is right here. And as before, if you have trouble reading either half of the chart, click it and it will pop up bigger in a larger window.

 

 

HERE'S CBL'S REPORT ON 2018 OUT OF COURT PROPOSITION 65 SETTLEMENTS

The Attorney General has finished posting the data on all of 2018's Proposition Settlements.  As Cal Biz Lit often does, we've begun summarizing, and our summary of the out of court settlements is now complete. It's long been the case that out of court settlements are for lower amounts than settlements involving consent judgments, and last year was no different:  As is usually the case, the out of court settlements were all by private part enforcers / bounty hunters, none involving the Attorney General.  And of the 467 2018 out of court settlements, the average amount was $20,718.  By comparison, of the 367 2018 settlements with private part enforcers resulting in consent judgments, the average amount was $82,492. 

For the out of court settlements, 87.12% of the payments were for attorneys' fees and costs, with nearly all of the balance being for penalties. 

The Attorney General's out of court settlement data posting shows a total of 36 private party enforcers, plus, in two instances, bounty hunters who paired up. In this post, for each we will show the total number of out of court settlements, the predominant chemical, the average settlement, and lowest and highest settlements.  This makes for a rather long "summary." Someday soon, we will provide a similar report for the 2018 consent judgments. It won't be short either. 

If you have trouble reading this, just click it and it will pop up bigger in a larger window.  And the second half and totals appear after the break.

SUMMARY OF 2018 OUT OF COURT SETTLEMENTS

 

More after the break.

 

CALIFORNIA'S CHANGE TO THE LAW ON RELEASES AND UNKNOWN CLAIMS TAKES EFFECT

Going back to 1872, California Civil Code section 1542 has held that "A general release does not extend to claims that the creditor does not know or suspect to exist. . . ."  Case law going back many years establishes that this provision applies not just to monetary claims, but to workers' compensation, personal injury employment and just about all other cases.  Most significantly, also for many years, in releases and settlement agreements, the releasing party almost always explicitly waives this provision, typically with a precise quotation of the statute followed by language along the lines of "Plaintiff acknowledges that she has read this Civil Code Section and understands it. Claimant waives all rights and benefits which she may now have or may have in the future under this Section." 

Last summer, the legislature passed Senate Bill 1431, and it was signed by Brown.  The Bill took effect on January 1 of this year, and modifies the language of section 1542.  A red-lined showing of the changes is as follows:

A general release does not extend to the claims which that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, which if known by him or her, must would have materially affected his or her settlement with the debtor or released party.

It seems fairly clear that the purpose of this is to avoid confusion as to parties, particularly self-represented, who might not understand that the terms "creditor" and "debtor" applied to everyone in litigation.  But most importantly is the fact that when the statute is quoted in releases and settlement agreements, the updated version of the statute must be used. 

 

Proposition 65: The Most Commonly Noticed Chemicals in 2018

Proposition 65 provides that "the governor shall cause to be published a list of those chemicals known to the state to cause cancer or reproductive toxicity."  It is failure to provide a "clear and reasonable warning" before exposure to those chemicals that subjects a company to Proposition 65 liability.  While there are more than 900 chemicals on the list, the vast majority are never the subject of a Proposition 65 claim. 

From time to time, Cal Biz Lit surveys the years' notices to determine which chemicals are most often the subject of notices.  And now, we've done our full review for 2018. And the result is this: 

In other words, 92.8% of the noticed exposures involved one or more of ten chemicals, and 64.5% involved DEHP and lead or lead compounds.

Of the other chemicals noticed, the following were noticed ten or more times: styrene (23), wood dust (22) ethylbenzene (21), benzene (19), nickel (18) benzofuron (17), quinolone and its strong acid salts (17) and polychlorinated biphenyls (10).

And the following were noticed between two and five times: Marijuana smoke, Di-isodecyl phthalate (DIDP), benzophenone, Chromium (hexavalent compounds), formaldehyde, Tetrochloroethylene (Perchloroethylene) and toluene.

And finally, twenty-seven chemicals were noticed only once: flame retardants Tris(1,3-dichloro-2-propyl) phosphate (TDCPP) and Tris(2-chloroethyl) phosphate, 1,1-Dichloro-2.2-bis(p-chloropheny)ethylene (DDE), 1,4-Dioxane, Bromodichloromethane, Carbon disulfide, Chloroethane (Ethyl chloride), Chloroform, DDE (Dichlorodiphenyl-dichloroethylene), Trichloroethylene, Vinyl chloride, 1,3-butadiene, acetaldehyde, benz[a]anthracene, benzo[a]pyrene, soot, benzo[b]fluoranthene, dibenzo(a,h)pyrene, benzo[k]fluoranthene, carbazole, chrysene, chloroform, furan, napthalene, dichloromethane, and indeno[1,2,3-cd]pyrene.

Note that many of the infrequently noticed chemicals have been noticed only in connection with airborne exposure, the majority allegedly caused by charcoal and “steam stones” in hookah bars.

There have been some changes in frequency, but not that many. When we analyzed the 2016 notices, the ten most frequently noticed chemicals were Lead or lead compounds, DEHP, DINP, Cadmium, Carbon Monoxide, Acrylamide, DBP, Benzophenone, Coal tar, DBP and BPA.

We previously analyzed notices for the first five months of 2017, in the same post as the 2016 ones.  We noted then that the most frequently noticed chemicals were DEHP, Lead or lead compounds, DINP, Marijuana Smoke, Acrylamide, Cadmium, DIDP, BPA, Myclobutanil and Carbaryl. The latter two are pesticide / fungicides that were allegedly being found in cannabis edibles sold at medical marijuana dispensaries. For unknown reasons, the attorney general strongly objected to the many notices of these pesticide /fungicides. The private party enforcer did not proceed with them, and they haven’t been noticed since.

The fact that the most frequently noticed chemicals are those shown in our 2016, 2017 and 2018 analysis is not a guaranty that other chemicals won’t be the subjects of Proposition 65 notices and litigation. Ideally, companies doing business in California should be aware of the risk that their activities or products in California may be alleged to cause exposures to any of the listed chemicals without required warnings. However, the “top ten chemicals” for each of the past three years certainly constitute a starting point for any risk management efforts.

OEHHA PROPOSES TO MODIFY SAFE HARBOR WARNING REGULATIONS YET AGAIN

As known by just about every business aiming to comply with California’s Proposition 65, and to avoid enforcement actions by bounty-hunters, OEHHA issued dramatically changed its safe harbor warning regulations recently, completely replacing the traditional, historic “WARNING, this product contains chemicals known to the State of California . . . “ etc. with a much more complex set of warning text and transmission requirements that must be met if companies want their warnings to be deemed “clear and reasonable” and essentially immune from enforcement litigation. The new regulations were issued in 2016, revised in November, 2017, and were effective as to any products manufactured on or after August 30, 2018. Cal Biz Lit’s full discussion of the most recent version of the regulations can be found here and in the posts that follow.

And now, OEHHA has proposed additional amendments that substantially increase the ability of businesses to shift warning responsibilities to others. The full proposed changes can be seen here. OEHHA’s Initial Statement of Reasons is here.

It’s hard to tell when these will become effective, but if they do, it will be next year sometime. Public comments can be made until December 31. If anyone wants a public hearing, they have until December 17 to request it.

The most significant changes are these:

As originally in effect in the new regulations as of August of this year, a manufacturer, distributor or importer could shift the burden of warning only by directly providing notice to retailers with ten or more employees, together with a warning shelf sign or warning labels. The detailed and specific requirements are in 27 CCR § 25600.2. The shifting could only be achieved by sending the required items to retailers. But now, OEHHA proposes to make the following change (underlined) to §25600.2(b):

The manufacturer, producer, packager, importer, supplier, or distributor of a product may comply with this article either by providing a warning on the product label or labeling that satisfies Section 25249.6 of the Act, or by providing a written notice directly to the authorized agent for the business to which they are selling or transferring the product or to the authorized agent for a retail seller who is subject to Section 25249.6 of the Act [meaning it has ten or more employees] .

More after the jump.

A FEW OF THE NEW CALIFORNIA RULES OF RESPONSIBILITY GOVERN MEDIATORS AND ARBITRATORS

 

Most California lawyers know that after many years of work by the State Bar Commission for the Revision of Rules, The Cal Supremes approved 69 new /rules of Professional Conduct on May 10, 2018 and they become effective November 1, 2018. All the new rules are here.  But as CBL publisher Bruce Nye devotes more of his time to providing mediation service, CBL wants to focus briefly on some rules that have received very little attention, relating to mediators and other third party neutrals.

First, there is new Rule 2.4, “Lawyer as Third-Party Neutral.”  The key elements are these:

(a) A lawyer serves as a third-party neutral when the lawyer assists two or more persons* who are not clients of the lawyer to reach a resolution of a dispute, or other matter, that has arisen between them. Service as a third-party neutral may include service as an arbitrator, a mediator or in such other capacity as will enable the lawyer to assist the parties to resolve the matter.

(b) A lawyer serving as a third-party neutral shall inform unrepresented parties that the lawyer is not representing them. When the lawyer knows* or reasonably should know* that a party does not understand the lawyer’s role in the matter, the lawyer shall explain the difference between the lawyer’s role as a third-party neutral and a lawyer’s role as one who represents a client.

Then, there is new Rule 2.4.1, addressing temporary judges, referees and court-appointed arbitrators:

A lawyer who is serving as a temporary judge, referee, or court-appointed arbitrator, and is subject to canon 6D of the California Code of Judicial Ethics, shall comply with the terms of that canon.

Section 6D of the California Code of Judicial Ethics is quite exhaustive. And exhausting. And interestingly, the comments to the new rule state that the intention is to permit the State Bar to discipline lawyers violating the Code of Judicial Ethics while working as temporary judges, referees or court-appointed arbitrators, and also state that the rule doesn’t apply to a lawyer “serving as a third-party neutral in a mediation or a settlement conference, or as a neutral arbitrator pursuant to an arbitration agreement.”

And finally, there is the new Rule 1.12, indicating that judges, arbitrators, mediators and other third-party neutrals can’t later on represent one of the parties in the same matter, or seek employment in the matter in which the third-party neutral served substantially.

These rules are all a matter of common sense. But this is the first time the California State Bar has been able to discipline third-party neutrals for anything.

MEDIATION: GOVERNOR BROWN SIGNS NEW LAW GOVERNING ATTORNEYS’ OBLIGATION TO INFORM CLIENTS OF MEDIATION CONFIDENTIALITY RULES

 

Since 1997,  California Evidence Code section 1119  and following have barred the admissibility, discovery or compelled disclosure of statements, admissions or writings made “in the course of, or pursuant to, a mediation or mediation consulting” with only a few exceptions largely involving the parties’ consent, and further providing that “communications, negotiations or settlement discussions by and between participants in the course of a mediation or mediation consultation shall remain confidential.”

For a long time, it has been the practice of mediators to so notify the parties to a mediation and, often, to require them to sign a confidentiality agreement. A typical example of one of these agreements (the one used by Bruce Nye Mediation) is here.

On September 11, Governor Jerry Brown signed Senate Bill 954, effective January 1, 2019, which is designed to increase the likelihood of confidentiality rules being followed.

 

More after the jump.