While many companies targeted with Prop 65 notices end up settling because they cannot afford to mount a defense, a significant proportion of cases filed by one key plaintiff have been dropped when companies have chosen to defend themselves, says the Alliance for Natural Health USA (ANH-USA).
Executive director Gretchen DuBeau, who gave a presentation about prop 65 at Expo East last week, said that since April 2010, more than 350 60-day notices have been filed against firms by one particularly zealous plaintiff: The Environmental Research Center.
More than 100 notices were withdrawn
However, while at least 61 of these cases have been settled with penalties topping $1.9m (averaging out at $31,150 a case), more than 100 notices were withdrawn when companies chose to defend themselves, claimed DuBeau.
“There have been quite a few cases where the defendants have conducted their own tests and they have come back negative and the cases have been dropped as ERC was unable to substantiate its claims."
However, when cases do proceed, many firms are “choosing to settle as they are thinking I can pay $20-30,000 now or I can spend $500,000 on fees [mounting a defense]”, she said.
Constant threat of litigation
Prop 65 requires manufacturers selling products in California to give warnings if their products expose consumers to any detectable amount of hundreds of chemicals believed to cause cancer or reproductive toxicity.
While the legislation is not new, firms in the food and dietary supplements sector have recently found themselves at the receiving end of a tidal wave of prop 65 notices filed by a handful of plaintiffs including the Environmental Research Center (ERC), the Center for Environmental Health/Lexington Law Group, and clients of a small coterie of Prop 65 ‘bounty hunter’ law firms, said DuBeau.
And while Prop 65 has the laudable aim of protecting consumers, it has in practice exposed even the most responsible firms to the constant threat of litigation, she added.
Although defendants may make ‘payments in lieu of civil penalties’ for activities that limit toxic exposure, in practice, these are often made to the very parties bringing the suits - and used to fund new Prop 65 claims, she added.
Costs of mounting a defense can be prohibitive
While ‘safe harbor’ thresholds have been set for about a third of the Prop 65 chemicals, all plaintiffs have to do in the case of the rest is show that a detectable amount is in the targeted product.
After that, the burden of proof is entirely on defendants to prove that this level is safe – with all the associated costs – or apply a label saying the product contains chemicals ‘known to the State of California to cause cancer and birth defects or other reproductive harm’.
Given the lack of safety thresholds, proving that the amount of a Prop 65 substance you are potentially exposing consumers to is safe is very challenging and very expensive, she said.
We believe the law is being significantly abused
While firms should do as much as they can to protect themselves by making sure they apply rigorous checks and controls throughout their supply chains and routinely test for substances commonly cited in Prop 65 claims (lead, pcbs, arsenic etc), there is only so much they can do, she said.
“We believe the law is being significantly abused and we’d like to see a new proposition on the ballot to replace prop 65 in 2014.”
Prop 65 is not going to go away, but if the ANH-USA and others can build support for something that is in furtherance of the original intent of the law, it might be possible to get something on the ballot that is in consumers’ interests but does not provide a feeding frenzy for opportunistic plaintiffs’ attorneys, she argued.
“We’re talking to a lot of people about how to progress this.”
Who is liable?
Meanwhile, just because small companies with fewer than 10 employees are exempt from prop 65, doesn’t mean they are not affected, as they frequently supply manufacturers or retailers with more than 10 staff, who are not exempt, said DuBeau.
“A retailer with 50 staff might say to the small supplier, I’m not stocking your products unless you can indemnify us.”