By now, many commercial enterprises in California that permit the legal sale or use of tobacco on their premises have been confronted with 60-day notice letters and civil complaints for allegedly failing to post required warnings, in violation of California Health and Safety Code §25249.5 (“Proposition 65”).
Passed into law in 1986, Proposition 65 was designed to limit the California public’s exposure to possibly hazardous chemicals–those that might cause cancer or reproductive toxicity. It is essentially a “right-to-know” law that seeks to provide consumers with information.
The measure authorizes “private enforcers” to pursue civil penalties against businesses that choose settlement over a cost-prohibitive legal challenge. Some private enforcers have been very successful in these efforts–even though they have not visited the properties at issue or sought or obtained technical support to show that exposures to second-hand smoke have occurred at levels requiring the posting of Proposition 65 warnings.
When Proposition 65 was passed, most observers believed the law contained sufficient procedural protections against enforcement abuses. Before commencing an action and filing a settlement in court, for example, private enforcers were required to give notice of the alleged violation to the Attorney General, the district attorney, any city attorney or prosecutor in whose jurisdiction the violation was alleged to have occurred, and to the alleged violator. The Attorney General was afforded 30 days within which to review any proposed settlement.
Nevertheless, concerns developed that plaintiffs were bringing frivolous suits. Moreover, some worried that defense counsel, along with certain plaintiffs, were achieving settlements perceived as not protective of the public interest.
California Senate Bill 471, which took effect January 1, 2002, provides additional requirements to fend off frivolous private enforcement actions by imposing additional pre-filing requirements on private enforcers, establishing criteria for the assessment of civil penalties, and increasing the roles of both the Attorney General and the courts in the settlement process.
While these new measures may work to stem abuses, they may also increase the burdens imposed on those unfortunate enough to be caught in the crosshairs of the Proposition 65 enforcer.
Certificate of Merit
The new law gives the Attorney General 60 days within which to review allegations of violations of the Proposition 65 warning requirements. The private enforcer will be required to include in its notice of alleged violation a “certificate of merit” attesting to the seriousness of the allegation.
The certificate must indicate that:
(1) the person executing the certificate (either the attorney for the noticing party, or the noticing party) has consulted with one or more persons with “relevant and appropriate” experience;
(2) this person has “reviewed facts, studies, or other data regarding the exposure to the listed chemical that is the subject of the action”; and
(3) this person believes there is a “reasonable and meritorious case” for the private action.
Factual information in support of the certificate must be attached to the certificate and forwarded to the Attorney General.
If the defense is ultimately successful and the court, based on its review of the certificate, concludes “there was no credible factual basis for the certifier’s belief that an exposure to a listed chemical had occurred or was threatened,” then the court may deem the case frivolous and order the private enforcer, his or her attorney, or both to pay reasonable expenses, including attorneys fees, to the successful party.
The legislature decided to make the certificate of merit off-limits to the special discovery provisions of the Health & Safety Code. Therefore, only by engaging in the time-consuming and perhaps costly traditional discovery process, which the certificate of merit provision does not affect, may a defendant be in a position to demonstrate the case is frivolous.
It remains to be seen whether the Attorney General will have sufficient staff and level of interest to become embroiled in disputes over the merits of a proposed enforcement action based on a deficient certificate of merit.
New penalty criteria
Proposition 65 states that a violator of its provisions shall be liable for a civil penalty not to exceed $2,500 per day for each violation. If the complainant and alleged violator reach a settlement, one of the parties simply files with the court the stipulation for entry of consent judgement, order approving the stipulation, and proposed judgment. The court typically approves the judgment.
Senate Bill 471 inserts penalty-assessment criteria patterned after several environmental statutes and regulations. In its assessment of the penalty, the court is required to consider:
- the nature and extent of the violation;
- the number and severity of the violations;
- the economic effect of the proposed penalty on the violator;
- whether the violator took good-faith measures to comply with Proposition 65 and when those measures were taken;
- the willfulness of the violator’s misconduct;
- the deterrent effect the imposition of the penalty would have on both the violator and the regulated community as a whole; and
- any other factor justice may require.
While it is unknown how these new criteria will affect the settlement process, one can reasonably expect that applying all of the statutory criteria to the settlement determination will increase the amount of final settlements.
New roles for court, attorney general
Senate Bill 471 requires that the plaintiff submit any proposed settlement to the court for approval upon noticed motion, whereas Proposition 65 itself allowed either party to submit the settlement stipulation to the court for approval. The new law also requires that the court make specific findings once a proposed settlement is filed; present practice allowed the court to approve the stipulation for entry of judgment by simple order.
The new law requires that the court’s findings include:
(1) that all warnings required by the settlement comply with Proposition 65;
(2) any award of attorneys’ fees is reasonable under California law; and
(3) the penalty amount is reasonable based on the statute’s criteria for penalty assessment.
The law places the burden on the plaintiff to produce evidence sufficient to sustain the required findings.
Where the private enforcer and defendant seek to settle the case without hearing, the parties will need to provide the court proposed stipulated findings demonstrating that the statutory criteria have been properly structured into the settlement. Otherwise, the court is required to conduct a hearing in order to make the required statutory findings.
These new procedures will place additional burdens on defendants seeking to reach settlement with private enforcers. It is unclear how involved the courts will be in reviewing a proposed Proposition 65 settlement.
In addition to providing courts with new responsibilities in reviewing Proposition 65 settlements, the Attorney General is provided the opportunity to appear at and participate in any proceeding on the merits of the settlement without intervening in the case. Again, it remains to be seen what criteria the Attorney General will employ in evaluating the adequacy of proposed settlements and what level of participation his office will choose in a particular case.
Defendants’ position little improved
Only time will tell whether the changes to Proposition 65 will have the desired effect of reducing frivolous lawsuits. There is reason to doubt, however, that the impact of the new law will favor defendants.
The non-disclosure provisions of the certificate of merit serve to undercut the effectiveness of what might otherwise be a strong deterrent to litigation abuse. Moreover, the civil penalty assessment criteria and the requirement for court findings create a burden on those defendants attempting to enter into a straightforward settlement under Proposition 65.
Rather than affording defendants protection against unjustified enforcement actions, the Proposition 65 revisions leave defendants in roughly the same position they presently find themselves in . . . with the added concern that whatever they agree to in settlement, may or may not meet with the approval of the Attorney General and the court.
Dan Hanket is a partner in the Land Use, Environment & Energy Department of the law firm Jeffer, Mangels, Butler & Marmaro LLP. Hanket has worked extensively on various legal matters associated with federal and state Superfund programs, including the negotiation of consent orders and decrees, agency oversight cost demands, and cost allocations.