Prop 65 Food & Beverage 101: Defensive Strategies, Fictions And Facts

In most litigation, you face a known adversary on a defined battlefield and when it’s over, it’s over (e.g., a boundary dispute with an adjoining landowner). Prop 65, is entirely different: the food/beverage/supplement (herein, “food”) company faces a series of disconnected, independent gunfights with a stranger. Our firm has been defending Prop 65 food cases for over 20 years. Here are some common scenarios for business attorneys to understand and know whether they can be exploited.

1. Basic background

In this article, “food company,” refers to the entity supplying the food to the retailer. Prop 65 requires a consumer warning when food exposes the public to certain chemicals at or above specified levels. Failure to give the warning exposes the food company and retailers selling the food to monetary penalties. Prop 65 is most often enforced by private party bounty hunters called “Notifiers” who buy the food, have it tested, and send a “60-day notice of violation” (“60-Day Notice”) to the violating food company and often the retailer. This article uses “Notifier,” to refer to the Notifier and its attorney. All 60-Day Notices are available to the public online. Prop 65 only applies to product sales in California.

2. How Prop 65 Defendants Are Chosen And What You Can Do:

Notifiers select food company targets based on one of two criteria: Product type or an ingredient in the product.

Product type: Prop 65 enforcement began in 1988. The first seaweed cases were filed in 2019. Why the 21-year lag? Answer: No one thought to test seaweed before 2019. Since then, there have been over 200 seaweed filings because once the first few seaweed 60-Day Notices were filed, other Notifiers took note. Notifiers are copycats. Once a product gets on the Notifiers’ collective radar, it gets tested by many of them.

Choosing food company targets by ingredient: Cinnamon has been involved in over 200 Prop 65 cases due to high incidence of lead. If the product name calls out cinnamon (e.g., Banana Cinnamon Protein Shake) or the ingredient list declares cinnamon, Notifiers know to buy the product and test it. Most often with cinnamon, they’ll find more than 0.5 micrograms lead per serving (which is the threshold for reproductive harm) and they issue a 60-Day Notice.

How A Food Company Can Take Advantage:

Here’s a link to the California Attorney General’s Prop 65 filings search engine: https://oag.ca.gov/prop65/60-day-notice-search

The search engine is crude/antiquated, but you can exploit it before receiving a 60-Day Notice by focusing on one field: “Source/Product.” Let’s assume you sell canned beets. Put “beets,” in the Source/Product search field and you’ll see 20 60-Day Notices have been issued for lead exposure. This suggests you might want to test your product.

Let’s assume one of your product’s ingredients is chocolate. Putting “chocolate” into the Source/Product field yields over two hundred 60-Day Notices for lead. Once again, testing your product might be warranted. Your product might contain chocolate, but maybe not enough to require a Prop 65 warning. The only way to find out is to test.

If you search in the Source/Product field for both your product and your ingredients and get nothing, it tells you it’s less likely Notifiers will be testing your product. There are no guarantees, but we’ve found it to be a good data point.

3. I’m OK. I’ve Been In Business For 25 years With No Problems

I know a fellow who didn’t stop at a stop-sign on the way to work at 2:00 AM for 20 years with no problem until there was a police cruiser parked behind a tree. The fact that a product hasn’t been “caught,” by a Prop 65 Notifier doesn’t mean it won’t be. Over 90% of the companies we defend are first-time offenders. Most of the products have been for sale for more than 10 years.

4. How Much Will It Cost To Settle?

The single biggest determinant of settlement cost is the Notifier’s greed. We’ve opposed every Notifier on multiple occasions. Some are happy to take $40,000 to settle. Others want $150,000 or more and are willing to engage in expensive battles for a year or longer to get it. Our firm has a good idea of the settlement range as soon as we see who sent the 60-Day Notice. Once you know the adversary and their settlement parameters, you can set a strategy.

5. Settlement Pricing Based On Trial Costs

A particularly despicable practice comes into play when you prove to the Notifier (s)he’s wrong on their science. An example is when they’ve used the wrong test method to measure the chemicals in your product. Some Notifiers, knowing their case is invalid, will respond, “It will cost you $100,000 to go to trial and win. I’ll give you a bargain and settle the case for $50,000.” Then, the Notifier punctuates the conversation by running their word processor and serving “canned,” discovery that is cheap for them to send and expensive for the food company to answer. At that point, it becomes a test of will. If the food company stands its ground, sometimes the Notifier gives up. A Notifier has 200 to 400 cases percolating at any one time. (S)he will pay attention to the ones that have the best payoff for the least work. From the food company’s perspective, it becomes more like playing poker than practicing law.

6. Ingredient Supplier Guarantees, Warrantees and Believing In The Easter Bunny

Ingredient supplier Prop 65 guarantees fall into four categories:

1. Guarantees that the product satisfies all FDA and EU standards. Those standards have nothing to do with Prop 65 and are meaningless. This guarantee is worthless.

2. Guarantees about the ingredients being produced under the highest quality control and safety standards. Same as #1, immediately above.

3. Guarantees with a disclaimer at the bottom saying you should conduct your own testing. That is code for “this supplier won’t stand behind its guarantee.”

4. Guarantees promising a heavy metal level of less than some fixed amount measured in parts per million. This guarantee might have value, depending on how much of the ingredient you use in your product.

Bottom line: Don’t believe ingredient supplier guarantees without advice from an experienced Prop 65 defense firm or scientist.

7. Small Company Exemption and Retailers' Indemnity Requirements

Prop 65 only applies to companies with 10 or more employees. “Employees,” is expansively defined to include some 1099 contractors as well as corporate officers even if not working in the business. However, every online and B&M retailer’s vendor agreement requires the food company to defend and indemnify the retailer from Prop 65 suits. Thus, even if the food company has fewer than 10 employees, Prop 65 nonetheless applies to it through the vendor agreement indemnity obligation. This is non-negotiable for retailers and there is no way around it. Because of these indemnity provisions, 99% of all negotiations are conducted between the Notifier and the food company, without regard to the size of the latter.

8. Small Company Exemption and 21 CCR 25600.2(f): Drawing To An Inside Straight

The net effect of 21 CCR 25600.2(f) is that there is no Prop 65 violation by the retailer if it has removed the offending products from the store shelves and online webpage, or posts proper Prop 65 warnings, within 5 days of learning of the Prop 65 violation. The retailer most often learns of the Prop 65 violation when it receives the 60-Day Notice. Sometimes, the stars align. We had one case where the product was Christmas candy that was sold out by December 23rd. The retailer received the 60-Day Notice on January 20th, and therefore, was relieved of liability because all the offending products were off the shelf before January 25th. The food company was a 2-member, 2-employee LLC, and therefore, it had no Prop 65 liability other than the indemnity obligations, of which there were none because the retailer had no liability. The Prop 65 Notifier had no viable defendants and had to drop the case. Very satisfying. I love sending them away with empty pockets.

9. Notifier Strategy: Dragging More Retailers Into A Case; Counter-Strategy

Assume the food company is supplying a national retailer with a product that’s resulted in a 60-Day Notice to the retailer and to the food company. If the Prop 65 violation seems clear but negotiations aren’t progressing to the Notifier’s liking, (s)he may buy the same product from another retailer who is then dragged into the case to increase pressure on the food company to settle. The Notifier’s goal is to threaten disruption of the food company’s relations with its retailers. Food company counter-strategy: The food company’s attorney can write a letter to the newly-served retailer confirming the food company will handle the matter. This is consistent with the food company’s indemnity obligations and diffuses any pressure the Notifier might try to exert via the retailer. It’s a common scenario.

10. Doing Your Own Testing After You’ve Received a 60-Day Notice

Based on our 20+ years of defending Prop 65 actions, the face of a 60-Day Notice sometimes reveals to us that doing our own testing will be futile. A good example is plant-based dietary supplement powders. The dehydration/concentration of the plant material brings along with it, and concentrates, the lead, cadmium and other heavy metals in the plant material. This almost always results in a Prop 65 violation that Notifiers are quick to seize upon. In other situations, however, doing our own testing can uncover valuable flaws in the Notifier’s case. In a trial, most judges will combine the Notifier’s and food company’s test data to determine whether chemical levels are at or above the threshold requiring a Prop 65 warning. We are handling one large case now where data averaging took the wind out of the Notifier’s sails. Doing your own testing can also reveal whether it’s possible to reformulate the product to avoid putting a Prop 65 warning on it in the future. Testing is very case specific, but can provide valuable data points to the food company’s defense.

11. Prop 65 Warning: The Ultimate Prop 65 Defense

Some companies have concluded that a Prop 65 warning on the product label won’t harm sales and have put Prop 65 warnings on all their products, even if they have no reason to believe there is a likelihood of violation. Those clients are in a unique position to protect themselves from Prop 65 vultures.

Conclusion

There’s no one-size-fits-all solution to Prop 65 claims and an infinite number of scenarios can play out. The above are some of the most common. We’ve been doing this for 20+ years and every day we are still learning. And so are the Notifiers.