CaliforniaIf you live in California, you have probably seen the warnings, signs or labels informing you that chemicals "known to the state of California to cause cancer and birth defects" are present in a given location or product. These signs are required by the California Safe Drinking Water and Toxic Enforcement Act of 1986 (the "Act"), commonly known as Proposition 65, and pop up seemingly everywhere: at the gas station, in the parking garage, at your hotel, or even at the grocery store.

Under Proposition 65, the state of California generates a list of chemicals "known" (according to standards established by the Act) to cause cancer or birth defects. If a company manufactures or distributes a product that contains a chemical on this list, the product must include a warning that meets the Act's guidelines, unless the average daily exposure (calculated using reasonable exposure frequencies, durations and intensity) is below a "safe harbor exposure level" established by the Act's regulations.

prop-65-signWEBEnforcement of the Act is accomplished primarily through a civil private attorney general provision contained within the Act, although it can be enforced by state officers, such as the Attorney General. Proposition 65 even provides a financial incentive for private individuals to bring such suits, allowing them to recover their litigation costs and to retain for their own personal benefit 25 percent of the money obtained in each lawsuit. This provision is often referred to as the "bounty hunter" provision, and has made Proposition 65 ripe for abuse, particularly because the burden is on the product manufacturer, not the plaintiff, to show that the product does not contain dangerous levels of the specified chemicals.

For businesses facing a Proposition 65 lawsuit, the consequences can be far reaching.  Beyond just the financial burden of the litigation, which can be substantial, businesses also face the prospect of losing good-will and reputation.  Those businesses that are ultimately required to place a warning label on their products also face a competitive disadvantage in the marketplace where other competing goods may not bear such a warning because their manufacturers have not yet been the target of a Proposition 65 bounty hunter.  For these reasons, few Proposition 65 cases go to trial, with most defendants opting to settle with "bounty hunter" plaintiffs to avoid the costs of litigation and potential negative publicity and damage to reputation.

This is precisely what makes the recent Alameda County Superior Court decision in Environmental Law Foundation v. Beech-Nut Corporation, et al. so interesting.  In 2011, the Environmental Law Foundation ("ELF") filed a lawsuit against numerous producers, distributors and sellers of various canned or packaged fruit products, fruit drinks and baby food.  ELF alleged that these products contained lead at levels that required a warning under Proposition 65, and that none of the products had such warnings.  Rather than settling, the defendants proceeded to trial, arguing that their products did not require warnings for three reasons.  First, the defendants argued that Proposition 65 was preempted by Federal Law.  Second, they asserted that the lead in their products was naturally occurring and so did not constitute an "exposure" within the provisions of Proposition 65.  Third and finally, the defendants argued that the levels of lead in the products resulted in exposures which fell below the regulatory "safe harbor" level of 0.5 micrograms per day.

The five week bench trial involved extensive expert witness testimony.  Plaintiff's experts argued that "exposure" caused by the products should be calculated as if the products were consumed daily, and that such calculations resulted in an exposure level above the permitted safe harbor levels.  By contrast, the defendants' expert argued that actual frequency of the average user's consumption should be considered in making exposure calculations.  Judge Steven Brick ultimately agreed with the defendants, and ruled that no warning label was necessary.

Although unconvinced by the defendants' preemption and natural occurrence arguments, Judge Brick found that defendants had satisfied their burden of proof with respect to the "safe harbor" provision.  Judge Brick noted that, "it is scientifically appropriate not to treat exposure to Defendants' products as if exposure occurred every day, but instead to determine the average user's frequency of exposure." When such analysis was performed, the results showed that "Defendants' products satisfy the exemption" under the safe harbor provision of Proposition 65.

Because most Proposition 65 cases settle early, parties on both sides have had little opportunity to see how different defenses play out before a judge or jury.  This adds to the uncertainty of proceeding with litigation and, ultimately, fuels the cycle of early settlement.  Although not binding on other courts, the decision in Beech-Nut, sheds some light on this murky area.  Where a defendant has a strong "safe harbor" defense and credible expert, it may be advantageous to proceed to trial instead of feeding into the predatory settlements encouraged by the "bounty hunter" provisions of the law.  Still, this is but one decision, and only time will tell if more judges will be persuaded by sound science to prevent predatory bounty hunters from feeding off California businesses.

Note:  As of the date of this article, the time to appeal this decision had not yet expired.

Rudy R. PerrinoAlex F. PevznerFeel free to contact the authors with any questions:  

Partner - Los Angeles
Rudy R. Perrino at
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Senior Associate - San Francisco
Alex F. Pevzner at
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