California’s Governor Brown earmarks funds for Prop 65 regulations but the threat of unnecessary litigation remains

by DLA Piper

California’s Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986, finally has the attention of legislators and the governor’s office and is undergoing key changes. 

But significant reforms  – to balance evidentiary burdens, discourage “shakedown” litigation and otherwise aid retailers and manufacturers – appear to have been tabled for this fiscal year.  Achieving those reforms looks to be slow-going, and may get slower.

In May 2013, California Governor Jerry Brown proposed a slate of general revisions to Proposition 65, the majority of which were met with favor by manufacturing and retailer interests.  The governor proposed stakeholder meetings to discuss:

  • Capping or limiting attorney’s fees in Proposition 65 cases
  • Requiring stronger merit demonstrations by plaintiffs before litigation begins
  • Requiring greater disclosure of plaintiffs’ information
  • Setting limits on using payments in lieu of penalties in settlements
  • Providing the state with greater ability to adjust safe harbor levels for chemicals that cause reproductive harm
  • Requiring more useful information to the public on what they are being exposed to and how they can protect themselves.   

If pursued, such amendments could have material impact on the perception in the business community that many Proposition 65 enforcement actions are settlement shakedowns that do little, if anything, to protect the public.  But progress on these proposals was sidelined last year, leaving the business community hoping for renewed momentum in 2014.

Instead, California passed AB 227.  The new law provides needed relief to small businesses, restaurants, bars, hotels and parking garages through 14-day safe harbors and significantly restricted penalties.  But AB 227 provides little relief for the majority of consumer product manufacturers and retailers.

The governor acknowledged that Proposition 65 has “resulted in unnecessary litigation,” and Governor Brown’s 2014-15 draft budget proposal does give attention to Proposition 65, but it ignores the reforms the business community was hoping for. 

The draft allocates US$785,000 to Proposition 65’s governing agency, California EPA’s Office of Environmental Health Hazard Assessment (OEHHA), for four extra staff positions.  These additional personnel will perform two tasks: (1) revise “existing regulations to take into consideration technological advances made over the last 25 years” and (2) develop a website that will contain "detailed information regarding listed chemicals as well as exposure pathways, risks, and avoidance measures.”

Rather than reduce Proposition 65 costs for industry, new regulations from new staff may increase compliance costs.  More detail and process surrounding Proposition 65 warnings probably will lead to increased costs.  It is too early to predict OEHHA’s vision for a new Proposition 65 website, but interactivity for consumers could require industry defendants to post content information on the website and respond to consumer comments and inquiries.  For instance, OEHHA could order that settling defendants embed QR code in warning labels, linking to more robust websites that describe chemicals and alleged exposures.

Ironically, California’s well-intentioned policy and budget proposals may ultimately increase the costs and burdens of Proposition 65 private enforcement actions for manufacturers and retailers that the Governor has expressed desire to reduce.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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