Proposition 65 – Twenty-Seven Years Later And Still No Observable Effect

Professor Michael L. Marlow of Cal Poly San Luis Obispo recently published a preview of his paper on cancer rates and Proposition 65 entitled, “Too Much (Questionable) Information?” See Wall Street Journal, page A13, January 21, 2014.

Proposition 65 is the popular name for the California Safe Drinking Water and Toxic Enforcement Act of 1986, codified at California Health & Safety Code section 25249.7, et seq. This now-infamous California voter initiative is why California residents and visitors alike are accosted by signage on physical locations such hotel lobbies and parking garages as well as on certain commercial items such as screwdrivers and soldering paste, threatening that they are exposed to toxic levels of carcinogens or reproductive toxicants by entering the property or using the product.

A robust “legal-industrial complex” has grown up around Proposition 65. It has morphed from a cottage industry to a full-fledged industry over the past 27 years. It has birthed law firms that are little more than a collection of bounty hunters who seek to extract painful statutorily-sanctioned “private attorney general” financial settlements from companies accused of violating proposition 65. It has also given rise to an equally large – or possibly larger – defense bar geared toward defending against such suits.

Professor Marlow has an interesting take on all of this. Aside from pointing out what any company or individual caught up a proposition 65 lawsuit already knows, i.e., that “the only winners from proposition 65 are the attorneys who bring lawsuits,” he also pointed out some additional facts that are not so commonly known. Chief among these are:

• Since Californians have been warned of possible carcinogens for the past 27 years, one would expect to see a decline in cancer rates compared to those states that did not adopt similar right-to-know laws. In fact, no such decline exists.

• “There isn’t a single medical study that demonstrates any public health benefits” of Proposition 65.

• There is no evidence that proposition 65 has lowered cancer incidence among Californians.

• Proposition 65 has been a bonanza for the bounty hunter law firms that drive such lawsuits using paid plaintiffs. Between 2000 and 2011 there were 2381 settlements that cost targets nearly $180 million – exclusive of plaintiffs legal costs and court costs.

Anyone familiar with Proposition 65 litigation can fill-in the blanks that Professor Marlow left out. Namely that attorney’s fees are often equal to – or in some cases more than – the settlement costs and penalties assessed.(Keep in mind that the “enforcers” routinely have their targets pay plaintiff’s fees on top of all defense fees that a target has to incur). It might not be an exaggeration to extrapolate that the financial toll on business created by Proposition 65 lawsuits since the time of enactment actually edges closer to half a billion dollars or more.

Professor Marlow suggests two common-sense reforms to help curtail Proposition 65 abuses. Those abuses amount to a tax on both in-state and out-of-state companies seeking to do business in California. These abuses also contribute to the perception (and reality) that California is a business-unfriendly state.

First, the professor argues that, “California lawmakers must change the burden of proof so plaintiffs must prove significant exposures.” Right now, enforcement groups that waive the Proposition 65 flag know that they can force companies to enter into quick and dirty settlements to avoid protracted litigation that is often a no-win situation given the huge penalties at risk ($2,500 per violation per day) and the vagueness of the exposure standards in the regulations.

Second, the professor argues that “it’s time to discontinue warnings for low probability risks.” Under present standards, warnings are required in some cases where consumers are theoretically exposed to even a .0001% chance of contracting cancer. As Professor Marlow points out, the reality is that such rampant over-warning “desensitizes individuals to warnings of actual threats to their health.”

Compared to the marginal benefits of Proposition 65 – and if one squints very hard he or she might conceivably find some supposed benefit – the reality is that Proposition 65 has been a problematic and poorly conceived voter initiative from the very beginning. After all, back in 1986, what voter could refuse the misleadingly-titled “Clean Drinking Water Act” as it was advertised at the time? In fact, Proposition 65 in the noxious form that it has now congealed, has become an advertising/disclosure/warning statute has precious little to do with drinking water or protecting consumer health.

To this end, Professor Marlow notes that the economic costs of Proposition 65 have been considerable: “businesses have had to bear testing and labeling costs, as well as lost sales from consumers spooked by warning signs, reformulated products, withdrawn products or bad publicity stemming from lawsuits.”

Indeed, the most recent trend among enforcement groups is an effort to dress-up their settlements by forcing real or token product reformulation. Such reformulation is not a statutory requirement, but is sought by bounty hunters who seek to establish to the State Attorney General (who might be looking over their shoulders), that some concrete “good” has come out of their efforts. In reality, this is onerous product legislation by other means that comes at significant cost to the target/victims of such lawsuits. In many instances, companies have simply decided not to offer products for sale in California that are perfectly legal and fit for use in other states — and that, in fact, have no observable carcinogenic or reproductive effect.

Sadly, the systematic legalized abuses surrounding Proposition 65 have resulted in all-too-real economic effects on individuals as well as their employers. Professor Marlow argues that, “workers suffer lower income or job security in affected businesses. And the California government has had to spend taxpayer money for administrative and court costs relating to the law.”

The take-away from all this is that while Proposition 65 has virtually “no observable effect” on the health and safety of Californians over the past 27 years, it has been an endless boondoggle for the lawyers — and not just for the legal bounty-hunter that bring such lawsuits. Many of the largest “Big Law” defense firms in the country now have practice groups dedicated, in various degrees, to Proposition 65. “Big Law” defense firms have even been known to team-up with bounty hunters to administer large multi-party lawsuits – for a piece of the action, of course.

A beginning of a possible solution to this never-ending legal quagmire is, at a minimum, (1) to accept and enact the reform proposals of Professor Marlow, and, (2) to expand the nascent protections that Governor Jerry Brown of California enacted into law in 2013. Governor Brown’s amendments to Proposition 65 gives certain businesses a two-week grace period to correct violations and caps fines at $500 per facility. This reform, however, by its terms, only helps restaurants and bars that serve alcohol or allow smoking, along with certain coffee shops and parking garages. It does nothing for large-scale businesses that provide a steady flow of goods into California, and that have therefore become lucrative targets for Proposition 65 banditry.

A better solution to protect all Californians is to cap all Proposition 65 lawsuits at $2,000 in fees, penalties and plaintiff’s fees, and to significantly raise the burden of proof on those remaining claims to make sure that they are legitimate and pass scientific muster. This would have the effect of maintaining certain incentives to true public interest law organizations (not the bounty hunters of today) while still providing warnings to the public on those products and locations that genuinely call for them.