Hope on the Horizon for Proposition 65 Reform?

Many Orange County businesses have experienced first-hand the frustration of receiving a 60-day (presuit) notice letter under Proposition 65 alleging that the business failed to provide legally-required warnings to its customers or the public. Recently introduced legislation hopes to alleviate much of that frustration.

Everyone is familiar with Proposition 65 warning signage at gas stations, hotels and manufacturing facilities. In addition, however, Proposition 65 also requires warnings at the point of sale for many common consumer products such as pharmaceuticals, home furnishings and retail apparel.  For example, many of the recent 60-day notice letters involve alleged exposure to tris (1,3-dichloro-2-propyl) phosphate (TDCPP), a flame retardant applied to products such as children’s car seats, and lead, which commonly is found in buckles on shoes and handbags.

The pace of these threatened lawsuits is incredibly robust — last month alone, the California Attorney General’s office recorded that environmental groups sent well over 100 60-day notice letters to California businesses. The amount of money businesses pay to settle these cases varies from case to case, but settlements in the $25,000 to $150,000 range are common (not including the legal and expert fees a company pays to defend these claims).

Very few Proposition 65 cases proceed to trial, principally (although by no means exclusively) for two reasons. First, the cases can be exceedingly difficult to win on the merits (that is, in the absence of a statutory exemption, such as federal preemption) because Proposition 65 contains a highly unorthodox burden shifting provision that requires a business to prove—scientifically—that it did not cause an exposure to a toxic chemical above legally allowable levels. California Health & Safety Code Section 25249.10(c) (“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”). Under traditional jurisprudence, the plaintiff ordinarily would bear the burden of proof to establish that an exposure above the legal level occurred.

Second, the theoretical amount of civil penalties that could be awarded for most violations is immense—penalties can be $2,500 per violation (meaning $2,500, multiplied by the number of days no warning was given, multiplied by the number of people exposed). So, for example, imagine that a hospital located near a residential area vented to the atmosphere trace amounts of a chemical used to sterilize medical equipment without giving nearby residents a written warning or publishing such a warning in a local newspaper. Conservatively, the potential penalty could be $2,500 x 1,095 (the number of days in the three-year statute of limitation) x 100 (the assumed number of residents living nearby) = $273,750,000. Although it is virtually assured that a Court would never impose such a penalty (at least in the absence of an extraordinarily egregious fact pattern), the potentially crippling penalty amount involved in Proposition 65 cases gives a plaintiff citizen’s group enormous leverage in exacting settlements from businesses which in fact may not have even violated Proposition 65.

Efforts to reform Proposition 65 in the past have been met with limited success. The statute was revamped in 2003 so as to require greater oversight by the Attorney General’s office over Proposition 65 suits and settlements. However, the amendments did not alter the fundamental nature of the liability or penalty scheme contained in the statute outlined above.

However, new legislation recently introduced by Assembly Member Mike Gatto (D-Los Angeles) would, if enacted, permit businesses real relief from the onerous provisions of Proposition 65. The new legislation, AB 227, would allow a business that receives a Proposition 65 60-day notice letter to correct the alleged violation within a certain period of time (currently, as proposed, 14 days). The Attorney General’s office (or another prosecuting attorney’s office) would be required to verify the correction. If the correction is verified, this would act as an absolute bar against enforcement by a citizen’s group under Proposition 65.

The specific amendatory language proposed by Assemblyman Gatto is as follows:

“A person who receives a notice pursuant to paragraph (1) of subdivision (d) that alleges the person is in violation of Section 25249.6 may, prior to the commencement of an enforcement action, correct the violation within 14 days after receiving that notice and demonstrate to the Attorney General, the city attorney, or the district attorney in whose jurisdiction the notice is filed that the violation has been corrected. An enforcement action shall not be commenced if the Attorney General, the city attorney, or the district attorney concurs that the violation has been corrected.”

There are a few details left unanswered by the bill, as currently drafted. For example, the bill does not address how a business demonstrates that it has corrected the alleged violation or how the government would verify the correction, especially in light of current state budgetary constraints. Additionally, it is often difficult for a business even to know the specifics of the allegations against it when it receives a 60-day notice letter in view of the relaxed standards governing the level of detail plaintiff citizen’s groups must provide in stating a claim under Proposition 65. For this reason, and absent a provision requiring that plaintiffs state their claims with greater specificity at the outset, the 14 days may not be adequate time to correct the alleged violation.

Still, and although the bill may not necessarily address all of the potential frailties of Proposition 65, it has the potential to become good legislation which could protect good and environmentally proactive businesses without undermining the legitimate goals of Proposition 65.

A copy of AB 227 can be found here.