You’ve likely seen the retail signs and product labels telling you something like this: “WARNING: This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.” Those warnings are the result of efforts by businesses to comply with California’s Proposition 65 – and to avoid expensive enforcement actions. The Proposition requires businesses to provide “clear and reasonable” warnings to individuals prior to exposing them to specified carcinogens and reproductive toxicants. In the 25 years since Proposition 65 was enacted by California voters, those enforcement actions have mostly missed Santa Barbara County businesses. But it looks like that’s changing, and local businesses should beware: Proposition 65 enforcement is coming to your town.
Thousands of cases have been prosecuted since this law’s enactment, with recent cases targeting businesses located in the Santa Barbara County area. Private plaintiffs bring most of these civil lawsuits and it’s not hard to see the financial motivation: 25% of civil penalties (up to $2500 per day for each alleged violation) as well as attorneys’ fees. Proposition 65 enforcement thus has become a cottage industry in California, with millions of dollars changing hands every year, almost entirely through settlements. The Attorney General’s office, which publishes Proposition 65 statistics, reveals that in 2012 (the most recent year for which data are available), businesses paid over $22 million dollars to a relatively small handful of plaintiffs, with about 70% of that amount in plaintiffs’ attorneys’ fees. There’s more money changing hands: in 2013, almost 1100 notices of intent to sue were served on companies.
What kind of products are Proposition 65 enforcement targets? Think of anything that can be bought or used in California, and you’ve got the list of potential targets. Dietary supplements, upholstered furniture, french fries, placemats, power tools, nail polish, vinegar, paper clips, and coffee have been targets. Hospitals have been targeted over emissions of the sterilizing gas, ethylene oxide. Hotels, restaurants and bars have been targeted over second-hand tobacco smoke.
Litigating Proposition 65 enforcement actions on the merits is an expensive prospect for a number of reasons. First, the statute shifts the burden to the defendant to prove that no warning is required for the alleged exposure. Second, meeting the defendant’s burden requires experts. Third, discovery can be unusually expensive and disruptive, with the plaintiff seeking information about suppliers and customers and serving third-party discovery on them. All told, a full defense on the merits can cost several hundred thousand dollars, and possibly more than $1 million.
There is no one-size-fits all approach to managing the risk of being sued. But businesses first must understand that there is a risk. With enforcement activity reaching closer to home, don’t let your business become an enforcement target.
For more information please visit www.carnaclaw.com
Ziyad Naccasha is a partner and co-founder of Carmel & Naccasha, LLP which serves clients in and outside of Santa Barbara County. He counsels domestic and international companies, their shareholders and officers in a variety of matters. Ziyad can be reached at ZNaccasha@carnaclaw.com or 805-546-8785.
Ann Grimaldi practices environmental law at Grimaldi Law Offices. Her practice focuses on federal and state chemical and product regulation, including California’s Proposition 65 and the California Green Chemistry Initiative. Ann can be reached at firstname.lastname@example.org or 415-463-5186.