California Gov. Brown Proposes Prop 65 Reforms

SACRAMENTO, Calif.California Governor Edmund G. Brown, Jr. on Tuesday announced proposed reforms to California's Proposition 65, the 27-year-old law that requires warnings before consumers are exposed to dangerous chemicals.

"Proposition 65 is a good law that's helped many people, but it's being abused by unscrupulous lawyers," Brown said in a statement. "This is an effort to improve the law, so it can do what it was intended to doprotect Californians from harmful chemicals."

Some of the governor's proposed changes include imposing limits on attorney's fees, requiring a stronger showing by plaintiffs that they have evidence to support claims before commencing litigation, and giving the State of California flexibility to adjust the levels at which warnings are required for chemicals that cause reproductive harm.

The Center for Environmental Health expressed concerns "that allowing higher levels of some chemicals that can cause reproductive health problems would lead to more harmful products in our homes."

Passed in 1986 by California voters, Prop 65 requires businesses to "provide a 'clear and reasonable' warning before knowingly and intentionally exposing" individuals to a list of chemicals that are known to cause cancer, birth defects or other reproductive harm, according to the Office of Environmental Health Hazard Assessment (OEHHA), an agency in California's Environmental Protection Agency.

Roughly 800 chemicals are subject to the warnings, and the law has led to 16,000 lawsuits and nearly $500 million in settlements, according to Alston & Bird, LLP, a national law firm.

The warnings are not required if exposure to a chemical doesn't present a significant risk of cancer or is well below levels that are known to cause birth defects or other reproductive harm, OEHHA explains.

Prop 65 constituted an amendment to California's Constitution so any changes to the law must be "made in furtherance" of it, said Melissa Jones, a Stoel Rives, LLP trial lawyer who has defended Prop 65 cases on behalf of companies.

"I think overall the approach the governor is taking is a good one," Jones said in a phone interview. "There are plaintiffs who are very legitimate organizations who are doing work they believe in. There are other examples of potential abuses."

For instance, Brown's office cited dozens of Prop 65 notices of violation actions filed against banks based on second-hand smoke that was found near ATMs or entrances to the financial institutions. The state Attorney General found the claims were baseless and could "'constitute unlawful business practices,'" the governor's office said in the statement.

The governor's other proposals include establishing limits on the amount of funds in an enforcement case that can be earmarked for settlement funds in lieu of penalties; and providing the public better information concerning what substances individuals are being exposed to and how to protect themselves. Brown also has proposed requiring "greater disclosure of plaintiff's information." His office did not respond Wednesday to an emailed request for clarification on the latter proposal.

Commenting on the governor's proposals, Morrison & Foerster LLP lawyers noted the "payments in lieu of penalties" measure is one that plaintiffs often employ in settlements. It directs funds to plaintiffs or related parties, circumventing the law's directive, which earmarks 75% of penalties to the state and the rest to plaintiffs, according to the lawyers in a memo Wednesday to clients.

Brown's proposed reform on this issue "merely requires the plaintiffs to make a clearer showing that these 'in lieu of' payments to private organizations have a closer nexus to the 'specific basis for the case,'" the lawyers, Michael Steel, Michele Corash and Robert Falk, wrote. "Very few Proposition 65 cases actually entail harm to anyone, and in most cases, these payments should be simply banned."

In a Prop 65 lawsuit, plaintiffs must submit to the California Attorney General what's known as a "certificate of merit", certifying they have consulted with experts and have reason to believe they have a legitimate case, Peg Carew Toledo, an appellate specialist with the law firm Mennemeier, Glassman & Stroud LLP, said. Although Prop 65 requires that a plaintiff attach facts in support of the certificate of merit, the information is not shared with the defendant.

The certificate of merit, which became a requirement about a decade ago through amendments to Prop 65, "was supposed to be a tool to weed out meritless litigation," Toledo, who counsels companies and represents them in appeals on the law, said. "It curbed some of the abuses that were going on at that time but it's such a low threshold there is a lot of notices that really are unsupported."

A proposal by Brown would make the certificate of merit "somewhat more available for review", according to Morrison & Foerster. The California Attorney General currently keeps the certificates confidential, the lawyers said.

Earlier this year, California Assemblyman Mike Gatto introduced an amendment that would give businesses 14 days to cure violations of Prop 65 before being subject to fines. Gatto, a Democrat representing Los Angeles, said the bill would help small businesses avoid the expenses of litigation.

California lawyers who represent companies in Prop 65 litigation maintain complying with the law is difficult and expensive for small businesses. Prop 65 sets out complicated formulas for determining whether companies must provide warnings. Making these determinations requires experts such as scientists and toxicologists, lawyers said.

In one case illustrating the complexities of the law, a number of baby food companies have been in trial, defending themselves against allegations that they failed to provide lead warnings.

As reported by The Associated Press, the defendants have argued trace levels of lead found in the food is naturally occurring. Their argument, if found credible by the judge, is important because naturally occurring substances are excluded from the complex calculations of whether a substance is subject to a Prop 65 warning, Toledo, the lawyer, said.

Earlier this year, a California trial court judge recognized dietary supplement companies could assert the naturally occurring defense, although his decision isn't binding on other courts.

Judge Steven Brick of the Alameda Superior County Court in Oakland, Calif. will decide the baby foods case, which was filed two years ago by the Environmental Law Foundation (ELF).

Attorney James Wheaton, ELF's legal director, did not immediately respond Thursday to an emailed request for comment on the status of the trial and the governor's proposed reforms to Prop 65.