California Proposition 65 - A Reminder For Foreign Manufacturers

Winter 2014 Article

CALIFORNIA PROPOSITION 65 -  A REMINDER FOR FOREIGN MANUFACTURERS

It has come to our attention that over the past months, several out-of-state manufacturers of a variety of products have received notices advising that their products are in violation of California Proposition 65. These notices might seem minor at first, however they can potentially impose significant liability on the recipients. The purpose of this article is to make readers aware of, and possibly to limit their exposure to, the risks associated with Proposition 65 for foreign and out-of-state manufacturers.

Proposition 65, officially called "The Safe Drinking Water and Toxic Enforcement Act of 1986", is a California law passed by direct voter initiative almost 30 years ago. The law provides that:

"No person in the course of doing business shall knowingly discharge or release a chemical known to the state to cause cancer or reproductive toxicity into water or onto or into land where such chemical passes or probably will pass into any source of drinking water..."[2] 

"No person in the course of doing business shall knowingly and intentionally[3] expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving a clear and reasonable warning..."[4]

Based on the language of the law, the two goals set by Proposition 65 are (i) to protect drinking water sources from toxic substances that cause cancer and birth defects, and (ii) to reduce or eliminate exposures to those chemicals in general. The law is clear that California manufacturers are not the only recipients of Proposition 65. It applies regardless of whether a business is located in California or out-of-state, as long as its products cause exposures to individuals in California. Normally out-of-state and foreign product manufacturers are not likely to discharge or release chemicals into water or land in California. On the other hand, they are expected to be concerned with respect to the public's exposure to those chemicals in connection with the sale of their products in California. This is the case, for instance, of consumer products such as soaps, food products, leather goods, jewelry, and so on.

The California Office of Environmental Health Hazard Assessment (OEHHA) keeps a list of chemicals known to cause cancer or birth defects[5] levels are exempt from the warning requirements of Proposition 65, discussed below.

Proposition 65 applies to both manufacturers and distributors. Therefore, foreign manufacturers selling their products in California through a distributor, such as large retail chains, should consider that the distributor itself will be subject to the application of the law. This aspect is important because large distributors will often include indemnity clauses in the distribution agreements with their suppliers making specific reference to Proposition 65. Therefore, in addition to its own defense costs and penalties, a foreign manufacturer may also have to indemnify its distributor for any costs incurred in connection with a Proposition 65 claim.

In order to protect against a Proposition 65 claim, a manufacturer can (i) reformulate the product by eliminating those chemicals; or (ii) place a warning on its product that must (1) clearly communicate that the chemical is known to cause cancer, and/or birth defects or other reproductive harm; and (2) effectively reach the consumer before exposure.

Proposition 65 is enforced in civil courts. The California Attorney General, any district attorney, certain city attorneys located in larger cities and, most importantly, private parties acting in the public interest[6] can all act as plaintiffs. As a consequence, several law firms throughout California specialize in these claims, representing associations of citizens or groups acting in the public interest. Private parties are entitled to attorneys' fees, which makes these lawsuits very attractive for law firms obtaining payment of their fees from the defendants.

Unfortunately, once it is established that a business violated Proposition 65, the defendant has no real defenses, safe for certain exemptions, discussed below. Given the steep penalties applied (up to $2,500 per day for each violation), most defendants simply find it more convenient from a business perspective to negotiate a settlement and to pay an amount smaller than the amount calculated based on the daily penalties. Generally, once a lawsuit has been filed these settlements must also be approved by the court where the lawsuit is pending, which will then issue a consent judgment. Depending on the entity of the violation, settlements can easily reach several tens of thousands of dollars. A large percentage of the settlement will go to the law firm representing the group of citizens, making these lawsuits even more enticing for plaintiff's attorneys.

The law sets a few exceptions to the application of Proposition 65, including exposures that pose no significant risk of cancer[7], exposures that will produce no observable reproductive effects at 1,000 times the level in question, and exposures to listed chemicals that occur naturally in foods. Another relevant exemption applies to businesses employing less than 10 employees.

Given the costs potentially associated with a Proposition 65 violation, it is important for out-of-State and foreign product manufacturers to familiarize themselves with its requirements, as well as with the chemical lists updated from time to time.

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Manufacturers and distributors of products intended for distribution and sale in California should become familiar with the requirements of Proposition 65. Our firm can provide adequate legal assistance in connection with claims pertaining to Proposition 65. Requests for information or insights on this issue may be addressed to stefano.abbasciano@vallalaw.com.

This article is for information purposes only and does not constitute legal advice. The information contained herein may be outdated or incomplete, and shall in no way be taken as an indication of future results. The transmission of this article is not intended to create, nor its receipt constitutes, an attorney-client relationship between sender and receiver. You should not act on the information contained in this article without first seeking the advice of an attorney.



[1] Stefano Abbasciano, Esq. (stefano.abbasciano@vallalaw.com) Associate Counsel at Valla & Associates Inc., P.C. (www.vallalaw.com). This article has been professionally translated into German and Italian from its original text in English.

[2] CA Health and Safety Code, Section 25249.5

[3] Please note that a seller needs not be aware that the exposure violates the law, or intend to violate the law or cause harm to be in violation. "Knowingly and intentionally" is referred to the sale itself.

[4] CA Health and Safety Code, Section 25249.6

[5] The most recent list as of this date can be found here:http://www.oehha.ca.gov/prop65/prop65_list/files/P65single062212.pdf

[6] Before they can file a lawsuit, however, these private parties must first send a 60-day notice of alleged violation to give the recipient businesses time to investigate the alleged violation and take corrective action.

[7] Not more than one excess case of cancer in 100,000 individuals exposed over a 70-year lifetime