In 2004, the media buzzed with news of lawsuits filed by the California Attorney General and a private “public interest” group over alleged exposures to lead from costume jewelry – and the press continues today.
This case followed on the heels of an enforcement action brought by the Attorney General over mercury in canned tuna fish, and was followed by another case claiming that imported Mexican candy contained high levels of lead. French fries have been alleged to expose consumers to an obscure carcinogen called acrylamide, and even a common chemical such as naphthalene (found in mothballs). Hundreds of companies have been sued over lead and cadmium on the outside of glassware or ceramicware. The latest rage is a claim that lead leaches from the interior lining of vinyl food and beverage containers, contaminating children’s school lunches.
Although one might think these cases signal a wave of new dangerous exposures from ordinary products, they are not based on claims that the products violated health standards set by government agencies such as the FDA. Rather, the cases are based on California’s Proposition 65, a law which aims to “protect” California citizens from exposures to chemicals “known to the state to cause cancer or reproductive toxicity.” Proposition 65 turns ordinary regulation on its head, by setting extremely wide margins of safety, and then forcing businesses to prove – in lawsuits brought by private individuals and groups who get to keep part of the penalties and all of their attorney’s fees – that the claimed exposures do not exceed those standards.
Californians have long been known as environmental pioneers, demanding or inventing radical technologies and approaches that later became commonplace throughout the country. As a result, companies doing business or selling products in California are often caught off guard on the state’s peculiar, intricate, or obscure environmental requirements. These traps for the unwary can create a significant hidden tax on those who do business in the Golden State. On the other hand, companies that seek out opportunities to comply with unique California laws can enjoy a significant competitive advantage. This is most certainly the case with Proposition 65.
Proposition 65 — The Tail That Wags The Dog
Proposition 65 has certainly caught many businesses by surprise since its enactment in 1986. Formally known as “The Safe Drinking Water and Toxic Enforcement Act of 1986,” the Act requires that businesses provide “clear and reasonable warnings” before exposing individuals to chemicals “known to the state to cause cancer or reproductive toxicity.” Proposition 65 sprang from growing public dissatisfaction in the mid-1980s over the perceived lack of effort by state government to protect citizens from toxics.
The high cost of litigation, the potential for penalties (up to $2,500 per violation per day), the costs of reformulating products or re-engineering processes to resolve a case, and the ever-present demand by enforcers to have the company pay for their attorney’s fees under California’s “private attorney general” statute, create a significant litigation tax on business that can threaten the viability of small business and the profitability of product lines, but is ultimately borne by consumers across the country.
Businesses that can identify potential exposures to Proposition 65 listed chemicals, and reduce or eliminate those exposures, or provide a warning where feasible and necessary, can avoid the cost, uncertainty, annoyance, and other obstacles created by enforcement actions.
How does a company avoid being the next business to come within the Proposition 65 dragnet? Although nothing is for certain, a compliance program that includes an audit of potential liability and continued follow up will both reduce the potential for litigation and minimize the potential exposure should litigation ensue. A compliance program may not be inexpensive, but its cost nearly always pales in comparison to potential costs of litigation and liability if an enforcement action is brought.
Compliance Issues For Manufacturers
Manufacturers need to consider several different issues when addressing their compliance with Proposition 65. Those manufacturers located in California need to be cognizant of air emissions of listed chemicals, which can create exposures to employees, visitors, or in the surrounding neighborhood. Even more important are potential discharges or releases to groundwater (or onto land where such releases probably will travel to groundwater), as Proposition 65 expressly prohibits such discharges, and does not give the business an option to provide a warning.
Even if not located in California, a business that manufactures products that are sold to consumers or businesses for use in California, or incorporated as components in such products, should be aware of the use of listed chemicals in such products and assess their compliance with Proposition 65.
The Proposition 65 Compliance Audit
A Proposition 65 audit starts by identifying any use of a listed chemical in products, processes, components, and equipment. A comprehensive audit will look to information available to the manufacturer, but should also ensure that sources from which the enforcers have identified exposures that are targeted for enforcement actions are reviewed so that potential claims can be anticipated, even if they are baseless. These sources can include product labeling, material safety data sheets, medical literature, information on the internet, and publicly available databases, such as www.scorecard.org, which makes it easy for anyone to look up facility discharge and emissions data based on EPA and state databases.
Another good source is past Proposition 65 enforcement actions, especially the Attorney General’s web site (http://caag.state.ca.us/prop65), which has a database of all of the notices of violation served by private enforcers, and can be searched by product, chemical, business, plaintiff, and date.
If any listed chemicals are identified, consultants can help determine whether those chemicals are potentially exempt as “naturally occurring,” or whether exposure to the chemicals is likely, and provide a quantitative risk assessment to determine whether that exposure exceeds Proposition 65 warning levels.Jeffrey Margulies is a partner in the Los Angeles office of Fulbright & Jaworski, L.L.P., an international law firm that provides comprehensive litigation, transaction and regulatory services to the manufacturing sector. For more information, please visit www.fulbright.com.
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