California Proposition 65 — the Safe Drinking Water and Toxic Enforcement Act of 1986 — has spawned a cottage industry that profits from putting businesses on notice that they have products containing chemicals on the list of potentially hazardous substances.
But the mere presence of a chemical in a product doesn’t mean that there has been a violation, and there are steps you can take to protect your business when you receive a notice, says Thomas H. Clarke Jr., partner at Ropers Majeski Kohn & Bentley PC.
“Everyone seems to lose sight of what Prop 65 is about because the plaintiffs want you to see a list of chemicals in your product and think you’re a bad person. But the law is not about the chemical being present, it’s about exposure,” Clarke says.
No exposure above a specified level, no violation.
Smart Business spoke with Clarke about what you should know about Prop 65.
What is the main flaw with Prop 65?
The burden is placed on the defense. A plaintiff only needs to show that the chemical is present and there’s a reasonable exposure pathway. Then the burden shifts; the defendant must prove the exposure is below the warning threshold. If plaintiffs were required to prove exposure, all of the games go away because frequently the only exposure scenarios they present have nothing to do with product usage.
For example, a client was selling a keepsake binder and one of the plaintiff’s scenarios involved the binder being on the floor, and a baby crawling over and licking it. The regulations state that an exposure is determined by normal use by an average consumer. The thesis that babies licking binders happens frequently is ludicrous.
Plaintiffs exaggerate so that you are intimidated and will not contest the case. They want a settlement that pays them substantial sums. To justify their fees, they will impose some reformulation standard, but quite often there’s no evidence the reformulation has any beneficial affect on exposures.
Why do businesses agree to settlements rather than go to trial?
Plaintiffs know what it costs to defend these lawsuits and are clever about making a settlement offer. If it’s going to cost $150,000 to defend, they’ll seek $80,000 to $90,000.
Upon receipt of a 60-day notice that a lawsuit will be filed, be proactive — model the use of the product. Such evidence is not cheap. In the case of the binder, about $8,000 was spent to prove the exposure was under the threshold. Such evidence changes the dynamics of the case.
How should a business react when it receives a warning letter?
When a business receives a 60-day warning letter, it should take immediate steps to assess the product. Probably 90 percent of these notices are tossed. No one worries about them; it’s only when a lawsuit is filed that they realize they have a potential problem.
After assessing whether there is an exposure, you know if the case is defensible. If it is, that’s the posture to take. If not, then you need to settle, and one of the things you’ll need to do is change the composition of the product. If you assess early, then this process is in your control, not the plaintiffs.
What is being done to solve the ‘greenmail’ problem?
Assembly Bill 227 addresses the kind of shakedown lawsuits that get a lot of publicity. Plaintiffs review public records for violations, like allowing smoking near an ATM machine. Then they fire off letters stating the business is in violation of Prop 65, and demand money.
AB 227 covers those activities that are frequently exploited. If it passes, someone receiving one of these shakedown notices can cure the problem immediately because usually the only requirement is a warning sign. There is a small penalty provision, but most of the money goes to the state.
However, if you really want to eliminate abuse, demand that the law be amended to put the burden of proof on the plaintiff. There’s nothing wrong with warning people, but to associate the presence of a listed chemical in a product with an actual threat of real harm lacks merit.
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC