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Sacramento

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.

Band-Aid
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.

Solution
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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