Proposition 65 Private Party Settlement Guidance Provides Clarity and a Limitation on Releases in the Public Interest

[author: Heather Zinkiewicz]

In January, the Attorney General released a guidance document that details what the state will and will not approve in future private Proposition 65 lawsuit settlements[1]. This guidance provides clarity to both plaintiffs and businesses and is intended to limit the scope of any “public interest release” that plaintiffs can offer.

Proposition 65 Background[2]

Proposition 65 ("Prop. 65"), the Safe Drinking Water and Toxic Enforcement Act of 1986, was a ballot initiative intended to protect California drinking water from carcinogens and reproductive toxins, and to inform California citizens about exposure to such chemicals. Prop. 65 requires the Governor to publish, and update at least annually, a list of chemicals that are known to cause cancer or reproductive toxicity. The list includes approximately 800 chemicals that are both naturally occurring and synthetic. Prop. 65 is more of a "right to know" law than a pure product safety law; in theory, Prop. 65 allows consumers to make informed decisions when deciding if they want to purchase or use a product.

Prop. 65 can be enforced by any individual acting in the public interest. Prop. 65 has prompted thousands of lawsuits since 1986. Industry groups often argue that many lawsuits are frivolous and are brought by plaintiffs' lawyers who are more interested in receiving attorney's fees than in accomplishing environmental change.

Prop. 65 has increased public awareness about the adverse effects of exposure to the listed chemicals and has created an incentive for manufacturers to remove listed chemicals from their products. However, Prop. 65 has also imposed high costs on businesses. Companies have incurred expenses to test products, develop alternatives to the listed chemicals, reduce discharge, provide warnings, and otherwise comply with the law.

Settlement Guidance

On January 10, 2012, the Attorney General's ("AG") office released a guidance document detailing the scope of releases in private Prop. 65 lawsuit settlements. The AG's office is concerned with the types of releases that private parties claim to give "in the public interest" in Prop. 65 private settlements. Plaintiffs have been accused of trading broadly worded releases for larger attorney's fees. The releases are often problematic when they attempt to combine the public interest release with the private party release. According to the AG, the releases are often "overbroad, meaningless, or affirmatively misleading." The releases have become more "convoluted" as defense attorneys attempt to maximize protection for their clients against future lawsuits.

The release by a plaintiff in the public interest can only be for Prop. 65 violations that are alleged in the corresponding Notice of Violation. The AG is troubled since some releases attempt to cover alleged Prop. 65 violations that are outside the scope of the Notice of Violation. The AG provided sample release language that is "succinct and offers the maximum protection a private party suing in the public interest is authorized to give." The AG suggests using the following release language in future settlements and consent judgments:

Plaintiff acting on its own behalf and in the public interest releases Defendant [and other specified entities] from all claims for violations of Proposition 65 up through the Effective Date based on exposure to [Covered Chemicals] from [Covered Products or Covered Facilities] as set forth in the Notice(s) of Violation. Compliance with the terms of this Consent Judgment constitutes compliance with Proposition 65 with respect to exposures to [Covered Chemicals] from [Covered Products or Covered Facilities] as set forth in the Notice(s) of Violations.

The AG suggests providing this release in a separate paragraph. The release should define or list the actual chemicals, products, and facilities intended in the release. The release should also identify the effective date as well as the Notices of Violation that are at issue. The release ought to utilize the statutory terminology and state that it is "in the public interest," and not "on behalf of the general public" or "the People."

The AG emphasized that its suggested release provides the "full extent" of the release that a plaintiff acting in the public interest is allowed to confer. The suggested release provides full protection to the defendant for past violations and bars private parties from asserting actions in the future based on the conduct sanctioned in the consent judgment, to the extent that the agreement constitutes res judicata.

The private plaintiff acting on its own behalf can negotiate and provide an additional release. The AG instructed that the release being provided by the plaintiff in its individual capacity should be stated in a separate paragraph or section so it is not confused with the public interest release. The AG specifically stated that it takes no position on the proper scope of a private entity release.

Private plaintiffs must serve settlements on the AG. The letter warns that the AG intends to carefully examine the language of future settlements. The AG will consider filing an objection if the release language is ambiguous or if the release attempts to bestow a more comprehensive release than the private plaintiff suing in the public interest is allowed to confer.

The AG does not plan to advance the guidance document as a formal regulation, but the document will operate as a recommendation to private Prop. 65 attorneys on the scope of release.

Effect of Guidance

This guidance letter is only applicable for releases given in the public interest. Private party plaintiffs in Prop. 65 cases may continue to provide a release in the public interest, but the new guidance should be followed. Put simply, any release in the public interest that is broader than the products and chemicals set forth in the Notice of Violation is improper.

Clarity

The guidance letter more clearly defines the parameters of settlement negotiations in private Prop. 65 lawsuits. The guidance will provide clarity and guidelines for how plaintiffs and defendants settle cases. Defendants should continue to negotiate for broad protective language, but releases cannot include unlawful conditions. For example, a release cannot include language restricting the plaintiff from bringing future Prop. 65 cases or prosecuting future violations in return for a larger settlement.

Limiting the Scope of Public Interest Releases

The intent of the guidance is to limit the scope of the public interest release that a plaintiff can offer. For instance, it is common for a plaintiff to offer a broad release to a defendant for all products manufactured by that defendant, even if the plaintiff’s Prop 65 notice did not specify each covered product. The guidance reflects that the AG will no longer approve such a broad release because the AG wants the flexibility to bring a claim if new issues arise. The AG letter clarifies that the AG has the right to review and comment on all settlements, and that the AG can, and will, intervene if there are unlawful settlement terms. The guidance may result in more lawsuits if releases are narrowed and provide less protection for businesses.


[1] The letter can be found at http://oag.ca.gov/sites/all/files/pdfs/prop65/prop65releases_cases.pdf

[2] Office of Environmental Health Hazard Assessment, Proposition 65 in Plain Language, http://www.oehha.ca.gov/prop65/background/p65plain.html

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