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Proposition 65

California Governor Targets Prop 65: A Nip or a Nod?

California Governor Jerry Brown has proposed Proposition 65 reforms to pare back misdirected use by plaintiffs’ attorneys. The governor’s attention is welcome, and his approach well intentioned. The measures he puts forward, however, barely scratch the surface if not simply affirm the status quo. Certainly, they don’t tackle the much larger issue of how Prop 65 has devolved into a virtual cottage industry for the plaintiffs’ bar.

Brown’s premise is strong – that some law firms “have abused Prop 65” by filing lawsuits against small retailers on iffy grounds. Legal actions can be “costly for small businesses to fight,” and if they settle out of court, the awards “generate attorneys’ fees but do not result in significant public health protection.”

However, the governor’s ideas for derailing the abuse may nip at Prop 65’s heels, but won’t soften its stride. In fact, his recommendations may actually give the nod to some of the law’s most troublesome provisions, if not make them more burdensome and less effective.

Brown Proposal
The governor’s approach focuses on trimming attorney incentives, raising the bar on allegations, changing warning parameters, and tightening the causation link for awards. Specifically, the governor is calling for:
• A cap or limit on attorneys’ fees, along with requiring a court finding of reasonableness and a five-year accounting of all awarded fees.
• Submission by the plaintiff of test results and other information relevant to demonstrating chemical exposure, as well as an exchange of supporting information with the defendant.
• Permission for the state’s Attorney General to present publicly the supporting information for a court review.
• Listing of the specific chemical, alleged harm and mitigation steps taken on the Proposition 65 public warnings.
• An accounting of specific activities to be funded by payments in lieu of penalties (PILPs) which must have a “clear and substantial” current connection to the basis of the allegations and cannot exceed the civil penalty.
• Easy access to a state-maintained website that provides more information about Prop 65 and chemicals commonly subject to warnings.

While Governor Brown’s proposals are well intentioned, they fall short of a significant impact on the abuse that he’s calling out. For example, while the proposals would require plaintiffs to do testing before filing suit, that’s something they must do anyway. Besides, there is plenty of published literature on chemical traces in foods, and so plaintiffs can get most of what they need.

Capping and scrutinizing attorneys’ fees may crimp the bottom line, but won’t undo the limitless availability of private actions based on the 800+ chemicals now on the Prop 65 list. The statute provided for private actions on the theory that the state would not have sufficient resources to prosecute deserving cases. However, private actions have become a tool for plaintiffs’ attorneys to skim large percentages from awards and settlements for their personal accounts.

Private actions continue to deliver disproportionate percentages to lawyers at the expense of state remediation programs. Since 2000, plaintiffs’ lawyers have reaped an average of 60% of total settlements. At its height in 2004, the attorneys’ cut reached 82%. From 2000 to 2011, settlements totaled $157 million, with lawyers taking about $96 million.

The governor’s proposal to require a five-year accounting of fees received by attorneys would simply measure the problem, not curtail it. To date, public awareness of the sums being reaped by plaintiffs’ attorneys appears to have had no chilling effect on lawsuits. A court finding of the reasonableness of fees, similarly, will not reduce the rampant practice of bringing suit against a virtually limitless pool of potential defendants.

Changing the warning signs also will have no impact on the inclination to sue or the outcomes of the suits. Prop 65 does not prohibit the sale of items containing listed chemicals, but rather requires consumer warnings in advance. That means liability hinges on the knowledge of the presence of a chemical in a consumer product presented for sale. A consumer warning clears a vendor of liability, while the state sets the rules about how the warning should read. Regardless of the nature or content of the warning, liability under the law does not change, and so the cause and motivation to sue remain exactly the same.

Where the money goes also has no bearing on the motivation to bring suit. Civil penalties in theory can total $2,500 per day per violation. Settlements to date, however, have never reached such levels. Requiring that payments in lieu of penalties (that is, settlements) not exceed the civil penalty, therefore, will have no impact on the settlement amounts. Nor will it reduce the percentage of the settlements that goes to the lawyers. Similarly, the “clear and substantial” connection to the basis of the allegations is a given – by definition, any lawsuit filed will be based on allegations that there’s been a failure to warn under Prop 65. In other words, on its face, each case has a “clear and substantial” connection to that basic legal fact.

So, kudos to Governor Brown for taking action and for a valiant attempt at reform. But, undoing the Proposition 65 cottage industry will take much, much more. Chipping away at the motivation of plaintiffs’ attorneys will take nothing short of a revamp of the statute’s procedural provisions. fundamental reform of the statute itself.

And, then there’s the substance on which the procedures and their abuse are built. Finding violations based on the presence of minute traces of chemicals in food is an essentially limitless playing field. And that playing field is being widened daily by advanced scientific techniques in molecular measurement.

Which one of the 800+ Prop 65 substances may be found in your product next? Will you be fully aware before knowledge is imputed and you’re hauled into court or forced to settle to avoid the costs of litigation?

Defusing this business-chilling dynamic will take a major overhaul of Proposition 65 itself. And, under California law, that would take a new public referendum or two-thirds of both houses of the state legislature.

It’s a major undertaking, but one that needs to be addressed. The National Coffee Association continues actively to explore ways to help that process begin. In the short term, perhaps Jerry Brown can use the governor’s pulpit to marshal public opinion against abusive tactics. He might also parlay his commitment and influence to spur action in Sacramento.

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Weak Anti-Proposition 65 Measure Gets Weaker

A California bill to open a narrow escape path from frontal assaults under Proposition 65 has faltered in the committee review process. A bill introduced by Los Angeles-based Assemblyman Michael Gatto would have given defendants a 14-day period during which they could “remedy” alleged violations and avoid threatened lawsuits by plaintiffs’ attorneys.

The bill passed the legislature’s Environmental Safety and Toxic Materials Committee in a unanimous, bipartisan vote. However, the political realities of confronting an uphill battle in the Judiciary Committee compelled Assemblyman Gatto to water down the bill. As presented for review by the Judiciary Committee, the bill is now restricted to allowing a 14-day remediation period where a listed substance is presented to the public in alcohol, tobacco smoke, or engine exhaust, or where formed on the premises in the process of food preparation.

Band-Aid Measure
To put the measure and its surrounding issues in perspective, here’s a typical scenario that the original bill was drafted to address. A plaintiffs’ attorney files a 60-day notice to sue, as required by law for private actions. (The state’s Attorney General does not have to give such advance notice.) The attorney then approaches the prospective defendant and proposes a settlement in lieu of filing the lawsuit. Particularly for small businesses, such as local coffee shops, the prospects of the cost of defending a lawsuit are unthinkable, and in many cases so are the sums demanded as a settlement. Moreover, the vendor is also typically required to comply with the “injunctive relief” of the statute, that is putting up a warning sign or labeling the product.

The Gatto bill, as originally drafted, would have given the prospective defendant 14 days to come into compliance by issuing a warning to customers along with paying a $500 fine. That would give a relatively easy out to the accused, saving the outlays of money that could make or break the business.

However, it should be noted that the relief would have been merely a temporary band-aid at best to provide a short-term “out” to the immediate, untoward circumstances. In many cases, such as with coffee, the industry maintains that no such “injunctive relief” – that is, posting a warning sign or label – is necessary at all. In the case of coffee, the traces of acrylamide formed from naturally occurring components in the roasting process do not trigger the statute’s requirements. That position is being put forward in the defense of two major lawsuits against the industry.

While the posting of signs or affixing of labels by some vendors does not create a legally binding precedent for others, it puts into play an unnecessary and unwarranted example that is out of step with the industry’s position. In other words, it muddies waters that should be clear. And, it subjects the defendants to burdens and costs associated with warning measures they should never have had to incur.

Toxic Climate
The scenario targeted by the Gatto bill is part of a larger, unfortunate picture. Proposition 65, or the Safe Drinking Water and Toxic Enforcement Act, was passed in 1986 to prevent businesses in the state from exposing individuals to certain chemicals without first giving warning. It was supported by a number of environmental groups, and passed as a public referendum garnering 2/3 of the popular vote.

However, the measure included a provision for private citizens and groups to bring suit under the statute. The reasoning was that the state may not have adequate resources to enforce the measure. This provision has given a green light to the plaintiff’s bar in the state to turn Proposition 65 into a cottage industry. Setting up shell organizations ostensibly devoted to environmental causes, they file suit against industries whose products contain trace amounts of Proposition 65-listed chemicals. (From the original 29, there are now over 800 chemicals on the list, designated by the state’s Office of Environmental Health Hazard Assessment, or OEHHA, as causing cancer or reproductive harm.) Most of the suits never go to trial, but are settled out of court. Historically, about 75% of the proceeds go to plaintiffs’ attorneys, rather than to the state for environmental uses as intended.

Alternatively, the plaintiffs’ attorneys approach prospective defendants, demanding out-of-court monetary and injunctive penalties, as described above. The Gatto bill aimed to give vendors an out, even though it did nothing for the industries struggling under such suits. The watered-down version will do even less, and nothing at all for coffee companies of any size, shape or form.

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Proposition 65: Health Measure or Cottage Industry?

In 1986, California voters passed a public referendum that offered security against toxins in their drinking water. Who could argue with keeping contaminants away from the kitchen faucet? You didn’t need to be a rabid environmentalist to support a measure aimed at protecting your health.

Today, Proposition 65 bears little resemblance to what Californians voted into law. Protecting water has morphed into hunting down chemical traces in everything people eat, drink, touch or breathe. Procedural steps designed to give science the upper hand in tagging substances that cause cancer or reproductive harm have been distorted by political agendas. Worst of all, the business of protecting health has given way to a cottage industry of legal actions by plaintiffs’ attorneys.

Acrylamide is one of the chemicals on the list of substances deemed a carcinogen by California’s Office of Health and Hazard Assessment (OEHHA). Acrylamide arises spontaneously when foods containing certain sugars and asparagine, a protein building block, are cooked at high temperatures. It is found in many foods including bread, breakfast cereals, crackers, potato chips and crisps, cooked asparagus, olives, and to a much lesser degree coffee.

As a natural cooking byproduct, acrylamide has been in these foods since humans began cooking with fire. Levels increase as the cooking process proceeds, and then drop off. If you made your toast darker this morning, you created and consumed more acrylamide than if you ate light toast instead.

In these foods, a sheer accident of chemistry gives rise to the basic chemical makeup of acrylamide in its singular form. What is formed in this way is something different than polyacrylamide, which is comprised of many acrylamide molecules linked by special chemical bonds. Polyacrylamide is an industrial chemical used in grouts, sealants and permanent press clothing.

As one of the 1,000 chemicals on the Proposition 65 list, acrylamide can trigger the statute’s consumer warning requirement when over certain threshold amounts. Similar applications of Proposition 65 have resulted in consumer warnings on fast-food walls for acrylamide in French fries, in supermarket aisles due to mercury in fresh fish, and even on souvenirs bearing lead paint.

Coffee under Siege
Coffee’s involvement with Proposition 65 provides a strong example of how the once popular health measure has become a cottage industry for plaintiffs’ attorneys. Two lawsuits are currently pending against roasters and retailers based on the absence of consumer warnings prior to making coffee available for sale. The industry has mounted a vigorous defense, with a well-supported position that acrylamide in coffee does not call for Proposition 65 consumer warnings.

In both cases, plaintiff Council for Education and Research on Toxics (CERT) brought suit under Proposition 65’s provision for private actions. Originally part of the law because of concern that the state lacked adequate funds for enforcement, private actions have become a common tactic to secure the statutory fines. Reaching as much as $2,500 per day per sale, a significant percentage of any judgment goes not to the state, but to the attorneys who bring the suit. This dynamic is what has turned the once well-intentioned health measure into a cottage industry for the plaintiff’s bar.

Beyond those who have been sued, moreover, many additional coffee proprietors are finding themselves ensnared by Proposition 65. Attorneys around the state are approaching individual shops and small chains with the threat of a lawsuit unless they agree to monetary settlements. For large companies, the sums involved would be minimal, but for these proprietors they can pose a significant burden. However, the significantly larger amounts threatened by Proposition 65 penalties and legal fees court could be a make or break proposition for their businesses.

Growing Problem
Coffee is not the only consumable under the Proposition 65 sword. Breakfast cereal makers also face lawsuits based on acrylamide, while orange juice manufacturers are fighting allegations based on lead from the soil in which the oranges were grown. Nor will future suits be limited to acrylamide, mercury or lead given the statute’s ever-growing litany of listed substances.

Adding fuel to the fire, as science methodologies become more sophisticated, ever tinier traces of substances can be isolated in foods. As science “chases zero” in its detection capabilities, the number of substances that may be newly detected could be limitless.

With plaintiffs’ attorneys on the prowl for Proposition 65-listed substances on which to hang new lawsuits and settlement offers, the dangers for food manufactures increase exponentially. It’s a challenge that can easily spin out of control. While legal relief may be in the wings for the coffee industry, a comprehensive solution may need to emerge from the chambers of the California legislature.

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Science + Law = New Breed of Business Challenge

Business challenges wax and wane – sometimes stiffer, sometimes less tough. They come in many forms and from different sources. After all, they’re part of, well, business.

For coffee, though, there’s a new breed of challenge that’s upping the ante. It’s a hybrid of sorts, kind of a cross between food safety and product liability.

Like most consumables, coffee comes from an agricultural product that must be processed into a safe and wholesome product. The process involves import/export, transportation, cooking, packaging and delivery. Problems can arise in one or more of these areas, and each step attracts government oversight and action in the interest of protecting public safety and health.

Recently, however, steady advances in scientific methods are fueling new legal and regulatory attention and action, giving rise to the new breed of business challenge. Science and law are becoming flip sides of the same regulatory coin, creating new potential liabilities and more complex compliance demands.

This conflation of law and science is putting serious pressures on coffee companies. They are getting sued under California’s Proposition 65 for a previously undetectable substance, acrylamide, which is naturally formed in the cooking process. They are struggling to comply with unfolding new federal regulations under the Food Safety Modernization Act (FSMA) to prevent foodborne illness, taking them into the weeds of food science and technology. And, with advancing techniques, scientists continue to “chase zero” to find minute molecular structures that happen to spell out still new chemical compounds in many foods.

Law & Science Symposium
It’s a mounting issue that will only get bigger over time. How can industry members prepare? By gaining at least a working knowledge of the science and the law, and how these two otherwise disparate disciplines overlap to challenge business. An MBA alone will no longer go the distance without at least some a little Ph.D. and Esq. blended in.

NCA works hard to keep its members and the entire U.S. coffee industry up to speed and ahead of the curve. That’s why we’re prefacing the 2013 NCA Convention with a special Symposium to help bridge the gap. Coffee at the Crossroads of Science and Law will bring together prominent industry scientists and attorneys to help attendees understand the essentials of science and law for navigating the new challenges.

Coffee at the Crossroads of Science and Law will cover challenges arising from California’s Proposition 65 and its application to acrylamide as well as other heat-formed toxicants already uncovered and still others yet to be detected and regulated. The symposium will also detail the complex new requirements of the Food Safety and Modernization Act, such as recently released draft regulations on hazard assessment and preventive controls that many say go beyond the original statutory mandate. The symposium will also cover how and to what extent health claims run afoul of legal and regulatory dictates.

Coffee at the Crossroads of Science and Law will be held on Thursday, March 21, 2013 at the Palace Hotel in San Francisco. The 2013 NCA Convention carries on from March 21 to 23 also at the Palace. Registration is now open.

Knowledge as Guide
The challenges posed by science-based legal and regulatory action will only increase over time. Scientists will inevitably uncover more heat-formed toxicants and other chemical traces in foods, and public policy will undoubtedly keep pace with laws and regulations to uphold food safety and integrity. For coffee companies and other food manufacturers finding their way around the crisscrossing maze of compliance, knowledge will be their most sure-footed guide.

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