The California Attorney General has proposed amendments to regulations implementing the state’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Prop. 65), in an effort to address her “significant ongoing concerns with respect to private enforcement actions under the statute.” The Attorney General’s proposed amendments appear to stem from similar concerns previously raised by Gov. Jerry Brown in his attempts to encourage Prop. 65 reform. While these amendments seem intended to benefit businesses targeted in Prop. 65 litigation, by requiring private plaintiffs to provide greater justification for certain monetary settlement terms, they will not likely reduce the number of Prop. 65 private enforcement actions and may result in higher settlement demands by plaintiffs.

The main emphasis of the Attorney General’s proposed amendments is to create greater accountability for private plaintiffs who funnel to themselves Prop. 65 settlement payments, under the guise of “payments in lieu of penalties,” that might otherwise go to the state’s Office of Environmental Health Hazard Assessment (OEHHA). Specifically, the proposed amendments are designed to:

1. ensure that the state’s Office of Environmental Health Hazard Assessment (OEHHA) receives civil penalty payments specified in the statute;
2. limit the ability of private plaintiffs to keep “in lieu of penalty” payments for themselves, defined in the amendments as “Additional Settlement Payments;”
3. require entities receiving Additional Settlement Payments to show that those payments are spent to further the environmental and consumer protection goals of the litigation being settled and of the State of California; and
4. reduce private plaintiffs’ financial incentive to prosecute Prop. 65 cases that do not confer a substantial public benefit.

If the Attorney General’s amendments are adopted, the regulations would cap Additional Settlement Payments at the amount of civil penalties that OEHHA receives under the settlement. Settlements including Additional Settlement Payments would have to specify the activities to be funded with such payments, and such settlements would require judicial approval. Recipients of Additional Settlement Payments would also be required to document how those funds are spent and provide such documentation to the Attorney General upon request. The amendments also propose other changes to the Prop. 65 regulations, such as adding a rebuttable presumption that reformulation of a product confers a significant benefit on the public, and explicitly requiring settlements obtained without court approval to be served on the Attorney General.

However, without addressing any requirements for private plaintiffs to make a prima facie demonstration of the merits of their claims, the amendments are unlikely to reduce the number of Prop. 65 actions brought in California. Businesses faced with Prop. 65 notices of violation should also not expect these amendments, if adopted, to mean private plaintiffs will settle for less money over the long term. Rather, private plaintiffs will likely “adapt” to the new regulations by increasing their demands for civil penalties to be paid to OEHHA to match the Additional Settlement Payments they seek to recover in settlement.

The proposed amendments can be found here. Written comments are due to the Attorney General’s Office on November 9, 2015.

A recent California trial court ruling has the potential to increase the risk of Proposition 65 liability for businesses that rely on regulatory “safe harbor” levels in their compliance programs.

California voters adopted Proposition 65 through the initiative process in 1986. The law requires companies with 10 or more employees doing business in California to either ensure their products do not exposure workers or consumers to unsafe levels of substances that cause cancer or reproductive harm, or provide a warning that such exposure may occur.

The California Office of Environmental Health Hazard Assessment (OEHHA) identifies “listed” chemicals subject to Proposition 65 warning requirements. In addition, OEHHA is authorized to establish “safe harbor” levels—concentrations below which a listed chemical does not cause cancer or reproductive harm. These safe harbor levels provide an affirmative defense in Proposition 65 enforcement actions.

One of the most important provisions of Proposition 65 is its “private Attorney General” provision, which allows members of the public to enforce the initiative and entitles prevailing private plaintiffs to 25% of the civil penalty assessed and attorneys’ fees. The attorneys’ fees provision in particular has attracted an active plaintiffs’ bar that specializes in Proposition 65 litigation.

Mateel Environmental Justice Foundation, one of the more active plaintiffs, is at the center of ongoing litigation in Alameda County Superior Court challenging the safe harbor level for lead that OEHHA established in 1989. Mateel filed a petition for writ of mandate and complaint alleging that the safe harbor level lacked a sound scientific basis and seeking to compel OEHHA to rewrite the safe harbor regulation.

In moving for judgment on the pleadings, OEHHA argued that Mateel’s claims were untimely, given that they were filed 13 years after the three-year statute of limitations for challenging an administrative action expired. The court disagreed, however, holding that Mateel’s challenge to the safe harbor regulation created a “present controversy susceptible to declaratory relief.” The court cited Mateel’s interest as a private enforcer of Proposition 65 as a basis for classifying Mateel as an “interested person” for purposes of obtaining declaratory relief.

The trial court’s ruling has no precedential impact, but if sustained, it could increase uncertainty for manufacturers and retailers that rely on established safe harbor levels to protect themselves against Proposition 65 claims. We will continue to monitor developments in the trial court and in any appeal of the court’s ruling that could impact companies doing business in California.