CALIFORNIA'S PROPOSITION 65:
THE ENVIRONMENTAL LONG-ARM STATUTE'S EFFECT ON INDUSTRY
MICHAEL J. VAN ZANDT, ESQ.
I. INTRODUCTION
Imagine receiving a notice from an environmental group in California accusing your company in Connecticut or Florida of violating California environmental laws regarding chemical exposures. The letter claims your company has not properly warned consumers about dangerous chemicals in your products and that your company may be guilty of discharging chemicals contained in the products to sources of drinking water in California. The environmental group states that you have 60 days to come into compliance with the law or you will be sued in a California State court. The letter also demands that you pay a penalty of $2500.00 per day for each product item which your company has shipped to or sold in California for the last five years. You quickly calculate that your monetary liability in the case could exceed $100,000,000.
On November 4, 1986, the voters of California passed an Initiative Measure called Proposition 65. The appeal of the proposition might have been in its title, which was "The Safe Drinking Water and Toxic Enforcement Act of 1986." With a name like that who could vote against it? The initiative was hotly debated with manufacturers, processors, distributors, and retailers understanding some of the ramifications of this sweeping initiative. The proponents beat the drum of toxic polluters, contaminated drinking water, harm to children and the environment, generally painting Proposition 65 as the panacea of all environmental laws. A decade later we have had an opportunity to assess the impact of Proposition 65 on California.
This paper will address the issues that have arisen in implementing Proposition 65 and their actual and potential effect on the industries across the nation. Although many of the cases brought under Proposition 65 have dealt with traditional "toxics," there is a disturbing trend in the cases which points to more and more emphasis on products which involve ingestion through the nose, mouth and skin. This trend is seen in cases such as the nail polish, ceramic ware, wine, lead fishing weights and faucet cases, which have recently been litigated or are being litigated in California Superior Courts.
As an introduction to this subject, we will first explore the basic provisions of Proposition 65 and trace its implementing history. Then we will look at some of the early cases which defined the parameters of the law and began the inevitable march towards the current attack on industries across the nation. Finally, we will leave you with some thoughts on how you can take steps to avoid embroiling your products and processes in Proposition 65 litigation.
II. SUMMARY OF PROPOSITION 65
The Proposition is divided into two distinct warning requirements and discharge prohibitions. The law requires the identification of certain chemicals which are known to the State of California to cause either birth defects or other reproductive harm or cancer. Once the chemicals are listed, then the manufacturers, distributors, and retailers are required to comply with the warning and discharge requirements.
1. Warnings
Section 25249.6 of the California Health and Safety Code requires persons in the course of doing business to provide clear and reasonable warnings to individuals whom they knowingly and intentionally expose to chemicals known to the state to cause cancer or reproductive toxicity. The provision is stated in the form of a prohibition that would prevent the introduction into commerce or even the manufacturing of a product which contains one of the listed chemicals if a warning is not given. However, the language of the initiative is so broad that it appears to apply not only to the products themselves but also emanations from the plants where goods are produced. The definition of "in the course of doing business" is very broad. It basically encompasses all persons employing ten or more employees, excluding city, county, state and federal employers and any entity operating a public water system.
The persons subject to the Proposition 65 warning provision must provide warnings within 12 months of listing of the chemical. The warning must be "clear and reasonable." Therefore, the circumstances surrounding the exposure dictate to some degree how the warning may be given. The word “clear” appears to refer to the language of the warning itself. The language must relate to the reader that the product contains a chemical and that the chemical is known to cause reproductive toxicity or cancer. There is no requirement to mention the chemical or even the mechanism by which the chemical may harm the individual.
For food, the warning must contain the following language: "WARNING: Chemicals known to the State of California to cause cancer, or birth defects or other reproductive harm may be present in food or beverages sold or served here." For fresh fruits, nuts, and vegetables, the warning is: "WARNING: This product may contain a chemical known to the State of California to cause cancer, or birth defects or other reproductive harm." Alcoholic beverages have their own warning and there are general warnings for other consumer products.
Warning provisions are also provided for the workplace and for environmental exposures. For purposes of the signage in the workplace, the sign should read: "WARNING: This area contains a chemical known to the State of California to cause cancer." ... [or cause birth defects or other reproductive harm"]. For environmental exposures, the language is the same as for the workplace.
The regulations under Proposition 65 also address the method of giving the warnings. This is to fulfill the "reasonable" requirement of "clear and reasonable" in the law. Warnings for consumer products must be by conspicuous methods calculated to make it likely a reasonable consumer will read the warning. Methods suggested in the regulation involve labeling products or their packages, placing warning labels in the packages, placing signs at retail stores, or creating a system of signs, public advertising identifying the system and a toll free information number. For food products, these general labeling requirements seem to apply.
For alcoholic beverages, the precise size of the signs to be displayed are regulated, including the type font and size. The warning may also be placed on the alcohol container or at individual tables if the serving establishment has them.
In the workplace, warning methods consist of the following alternatives: 1) a warning on the label of a product or substance present or used in the workplace; 2) a warning that appears on a sign in the workplace; or, 3) a warning which fully complies with the Hazard Communication Standard under the Occupational Safety and Health Act. For environmental exposures, the warnings may be given by signs posted in the affected areas, by mailing notices to affected individuals, or by making media announcements. These latter methods must be reaccomplished every three months.
No warnings need be given if the exposure levels to individuals do not exceed either the levels set by the regulations or the levels do not exceed the no significant risk levels for cancer or the no observable effect levels for reproductive toxicants. The levels are set based generally upon laboratory studies where animals have contracted cancer or shown evidence of reproductive harm after being exposed to the chemical.
2. Discharges
The other major area of regulatory concern in Proposition 65 involves the discharge of chemicals to sources of drinking water. The law prohibits the discharge of listed chemicals into water or upon the surface of the land above the threshold limits in such a manner that they pass or could pass into sources of drinking water. Sources of drinking water are defined as including both surface and groundwater. The source does not have to be an actual drinking water source but could be one which is designated by a water resources board as having the potential to be a drinking water source. The discharge prohibition addresses the "midnight dumper" and industrial polluters that release chemicals from their operations in such an uncontrolled manner that the chemicals may contaminate these drinking water sources. However, plaintiffs are getting creative in applying the discharge prohibition to other receptacles which could either discharge their content to a drinking water source or which act as a "source" themselves.
Like the warning provisions of Proposition 65, the discharge prohibition is based upon a level of exposure. For those chemicals which have a level listed in the regulations or may have a level promulgated under federal or state law, the proposition prohibits discharges at or above those limits. For those chemicals which have no level set, the regulations provide that the chemical cannot present a significant risk if it is cancer causing or cannot create an observable effect for reproductive toxicants. As a further safety measure, the no observable effect level is divided by 1000.
3. Exposure to Chemicals Naturally in Food, Drugs, Cosmetics & Medical Devices
The regulations make a special exception for chemicals naturally occurring in food. Under this exception, there is no exposure under Proposition 65 if the exposure to a chemical occurs as a result of a naturally occurring chemical in the food. A naturally occurring chemical is caused by absorption or accumulation of the chemical which is naturally present in the environment. The chemical is naturally occurring only to the extent that human activity was not involved in its presence in the food. Where a chemical contaminant is contained in food it is naturally occurring only to the extent that it was not avoidable by good agricultural practices.
4. Enforcement Mechanisms
The primary enforcer of Proposition 65 is the Office of the Attorney General. However, the initiative also gives authority to district attorneys and to certain city attorneys in cities with over 750,000 population. The proposition also allows private citizens to bring suit after a 60 day notice requirement. The private plaintiffs are acting as private attorneys general but the initiative allows these plaintiffs to collect 25% of the fines levied in the case. This unusual provision has spawned a new breed of plaintiffs, called "plaintiffs for profit." There are still a number of environmental groups who are not suing for money, but there is a growing number of the profit plaintiffs. As a further incentive to these groups, attorneys fees and costs are awardable.
The penalties assessable under Proposition 65 for either a warning or a discharge violation are $2,500 per day, per violation. This means that for every individual piece of merchandise or food product which is in the stream of commerce, the producer, distributor, or retailer can be liable at $2,500 per day, per piece. The plaintiffs may also seek equitable remedies such as injunctions.
If the Attorney General or a district or city attorney elects to sue after a private plaintiff's group has given notice, the private plaintiffs are still pressing their suit. This happens in one of two ways. They may carve out a niche which is not covered by the state suit, such as distinguishing products used for domestic and commercial use. They may also try to sue under California's Unfair Competition Act, alleging a violation of Proposition 65 as an unfair business practice. So far defendants have been successful in keeping these plaintiffs out of suits where they merely use the unfair competition to circumvent the primacy of the Attorney General in Proposition 65 suits.
III. HISTORICAL DEVELOPMENTS
When Proposition 65 was first passed, the Governor was obligated to list the chemicals which would be regulated under the law. Then Governor Deukmejian listed only those chemicals which were known to cause reproductive harm or cancer. He was sued and the outcome was the court's decision that the initiative required the listing of over 200 chemicals, then known and suspected of toxic harm. There are now almost 400 chemicals on the list. These chemicals range from heavy metals, pesticides, hazardous waste, drugs, tobacco and tobacco smoke.
The next area of interest for Proposition 65 was whether the new law would apply to the workplace. Unions in California challenged a determination by the state that Proposition 65 would not apply in the workplace because the federal and state occupational health laws already governed these areas. The California courts disagreed with this interpretation and decided that Proposition 65 requirements, especially warning requirements would apply to workers.
Another area of interest was whether Proposition 65's requirement for warnings was preempted for pesticides under federal law. Basically the argument was that the Federal Insecticide, Fungicide, Rodenticide Act had so invaded this field that state requirements for a new warning would conflict with the strict federal labeling requirements for pesticides. Again, the courts held that Proposition 65 was not preempted by federal law because there was no actual requirement to place labels on the pesticide packages. The law allowed other methods for giving the warnings that did not conflict with federal law.
Finally, there was a challenge to California's determination that food products are exempt from many of the requirements of Proposition 65 because there were already stringent controls on the levels of substances which could be in food. The plaintiffs argued that there was no specific exemption in Proposition 65 and therefore the state was without authority to exempt food products. The court held that Proposition 65 recognized in its balloting argument that food products would be treated differently. Proposition 65's purpose was fulfilled by only regulating food products if the levels of substances exceeded the mandated state or federal levels.
IV. IMPLEMENTATION
The Initiative was passed in November 1986 as the panacea for correcting many environmental problems in California. No longer would each individual source of individual media be regulated. Now there was a comprehensive scheme which regulated the toxics at their real source, the manufacturers. Moreover, businesses would be motivated to reformulate their products because consumers would judge them by their warnings, warnings which revealed for the first time the existence of dangerous chemicals in the products. It did not turn out that way.
The regulations were promulgated a short time after the initiative passed. The first list of chemicals was published in February of 1987. Warnings for these new chemicals had to be given within 12 months of listing. The discharge prohibition took effect 20 months after listing. The law also provided for a Scientific Advisory Panel which would advise the governor on the listing of chemicals. There was also a mechanism for individuals to obtain regulatory guidelines and safe use determinations for their products and processes. Basically these are in the form of advisory determinations by the agency as to whether Proposition 65 applied to your particular activity.
V. CASE LAW TRENDS
The first cases brought to enforce Proposition 65 seemed to focus on traditional chemicals and their exposure to individuals. Early on, mantles from lanterns, commercial paints, typewriter correction fluid and sterilizers got most of the attention. This was in keeping with a traditional notion of what Proposition 65 was supposed to do.
The next spate of cases demonstrated a disturbing trend. Plaintiffs turned on the wine industry and filed a series of lawsuits, not to address alcohol, but to address lead. The cases started out with plaintiffs claiming that the foil wrappers which covered the tops of wine bottles were laced with lead and that some of the lead was actually getting into the wine as it was being poured. This was causing an exposure to lead for which the wineries were not warning. After litigating and settling on the issue of lead foil, the plaintiffs then began to claim to the same defendants in another set of lawsuits that the wine itself had lead in it.
With the first cases involving ingestion of a substance on the books, the plaintiffs turned to other receptacles for their lead content. Cases appeared which attacked ceramic ware, table ware, crystal decanters, china and finally faucets. The only difference between all these cases was that the faucet cases involved the discharge provision as well as the warning provision of Proposition 65.
VI. POTENTIAL IMPACTS ON INDUSTRY
As has been seen, the plaintiffs have targeted and have successfully litigated on the warning issue for a variety of products. Clearly, the ingestion pathway is popular with these plaintiffs mainly because the exposure is very easy to prove. The plaintiffs are also targeting lead. Again this is no accident because lead is ubiquitous and the threshold level (0.5 ppb) is very low. The question is how long will it be before these groups identify products distributed on a national basis that have the potential to expose persons in California to listed chemicals.
Food products provide an environment which could be ripe for attack because the industry uses so many products which are highly regulated. Preservatives, additives, production chemicals, pesticides, herbicides and unknown contaminants provide a wealth of material for the plaintiffs in these cases. As long as there is a level set by state and federal government for these substances, there is a fighting chance of defending the lawsuit. In a particular case, however, this exemption could be lost if there is an indication that chemicals regulated under Proposition 65 are in the food supply. Of course the exemption involves only the warning provision.
Other industries manufacturing durable goods, such as appliances, household goods, residential housing construction material, school and office products, etc. are all vulnerable under Proposition 65 because these products may contain listed chemicals or they may use chemicals in the manufacturing process. With the minimum levels of exposure promulgated under California law, a manufacturer cannot be certain its products meet California exposure limits without conducting extensive and expensive chemical testing. In other words, California is regulating these chemicals at such minute amounts that traces of them which may be present in a manufacturing process can cause a violation of the statute.
There are many other areas in industrial activities which could be targeted by Proposition 65 plaintiffs. There are many steps in material selection, refining of raw materials, finishing of goods, packaging, and shipping products and where Proposition 65 would apply directly. Most obvious is the application of Proposition 65 to the workplace. Is the industry currently in compliance with worker warning requirements for all the Proposition 65 listed chemicals? Second, there may be stormwater runoff issues at the manufacturing plant where the runoff may contain chemicals and these chemicals may be passing to a source of drinking water. There may also be production wastewater discharges which contain some of these chemicals.
In order to protect itself, industry needs to scrutinize its operations to ensure that there are worker exposures to chemicals or discharges are limited. There also must be diligence in the quality control of chemicals used in the manufacturing of components as well as the finished products. Industries in the United States have the highest standards for protection of health and safety. Proposition 65 is fast becoming an important part of the regulatory control of manufacturing and production processes.
VII. CONCLUSION
This paper has looked at some of the aspects of California's Proposition 65 that may affect industry. Obviously, the subject of Proposition 65 is very complex and this paper only begins to scratch the surface. This paper is no substitute for good legal advice. Should you have a particular issue which you believe involves Proposition 65 or other environmental law subjects, you should consult with your attorney.
