CalChamber-Supported Prop. 65 Litigation Reform Passes Policy Committee

A California Chamber of Commerce-supported bill that improves transparency and reduces litigation costs in Proposition 65 cases against California businesses passed an Assembly policy committee this week.

AB 1583 (Chau; D-Monterey Park) won unanimous support from the Assembly Environmental Safety and Toxic Materials Committee.

Proposition 65 was designed to protect California’s drinking water from chemicals known to cause cancer or birth defects, and to warn members of the public about the presence of those chemicals in their environment to help them avoid exposure. Since its enactment, Proposition 65 has helped protect the public by encouraging businesses to reformulate their products and to eliminate the use of listed chemicals.

Proposition 65 Warnings

Proposition 65 requires, among other things, that private businesses with more than 10 employees post warnings when they knowingly expose workers or the public to listed chemicals. These warnings can take the form of placards in business establishments where listed chemicals exist or are released into the environment, or as part of the labeling of a consumer product that contains a listed chemical.

Before a plaintiff can proceed with a Proposition 65 lawsuit in court, he/she must serve the alleged violator with a 60-day notice of intent to sue. The 60-day notice must be supported with a certificate of merit; however, under current law, the factual information supporting the certificate of merit is not discoverable by the defendant during litigation.

Unfortunately, because Proposition 65 incentivizes individual legal pursuits by entitling private enforcers to 25% of the penalty collected for successful enforcement in addition to legal fees, certain plaintiffs have engaged in shakedown lawsuits against small businesses over the lack of a sign. These lawsuits can easily cost several thousands of dollars to litigate, causing many small businesses to settle out of court regardless of whether they were required by law to provide a warning.

Indeed, as stated in the AB 1583 Fact Sheet, the average settlement is more than $44,000 and, in 2014 and 2015, in-court settlements annually totaled $29,482,280 and $26,266,261, respectively.

Without access to the factual information and basis supporting the certificate of merit, small businesses are left in an untenable position—deciding whether to spend significant funds responding to burdensome discovery and costly litigation (and being able to ask the court to determine whether there was a credible factual basis for the lawsuit only after a prevailing defendant has litigated the case), or settling for an amount to avoid costly litigation in the absence of knowing whether the lawsuit had any merit in the first place.

AB 1583

AB 1583 does the following:

• Allows the Proposition 65 alleged violator to obtain the factual basis for the certificate of merit through normal civil discovery procedures;

• Requires the Attorney General, if he/she determines, after reviewing the certificate of merit and the supporting factual information filed under Proposition 65, there is no merit to the action, to serve a letter on the noticing party and the alleged violator stating there is no merit to the action;

• Requires the Attorney General to maintain a record of any letters served and to make the information available to the public on its website, including the total number of letters served annually and the names of the noticing parties and law firms; and

• Requires the Governor’s Office of Business and Economic Development to post on its internet website information relating to a business’s obligations under Proposition 65.

Making such information available to the alleged violator during litigation and requiring the Attorney General to notify the alleged violator when there is no merit to the action will assist in reducing litigation costs and dissuade frivolous lawsuits.

Key Vote

AB 1583 passed Assembly Environmental Safety and Toxic Materials on April 4, 7-0.

Ayes: Arambula (D-Kingsburg), Chen (R-Walnut), Dahle (R-Bieber), Friedman (D-Glendale), C. Garcia (D-Bell Gardens), Holden (D-Pasadena), Quirk (D-Hayward).

The bill goes next to the Assembly Judiciary Committee; no hearing date has been scheduled.

Staff Contact: Louinda V. Lacey