California Attorney General seeks to limit scope of "public interest" releases in Prop. 65 settlements

California Attorney General seeks to limit scope of "public interest" releases in Prop. 65 settlements

California's Proposition 65 (Sections 25249.5 et seq Health & Safety Code) is an unusual regulatory scheme. Lawsuits may be filed by private individuals. Plaintiffs are not required to have standing. The law only addresses a warning requirement; it does not itself prevent or constrain the presence of any listed chemical. Thus, a product can contain, as we euphemistically say, methyl ethyl death, and so long as the product has the standard warning, there is nothing in Prop. 65 that limits the presence of said chemical. For an overview of Prop. 65, see http://www.rmkb.com/index.cfm/publications/publication-details/?pkid=253.

Unfortunately, the law has been subject to abuse in the past; some corrective measures have been enacted. Despite these measures, the law is seen as a tool used by some to extract "greenmail" from businesses; other view the law as providing an "incentive" to remove harmful chemicals from products sold not only in California, but elsewhere.

One of the abuses often noted by both the California Attorney General and those subject to such lawsuits is that plaintiff lawyers are more interested in generating fees than in achieving real change in the content of consumer products. Plaintiffs have been accused of exchanging very broadly worded releases as part of settlements in exchange for "generous" attorney's fees. Such settlements also often provide minimal return to the State of California, which is theoretically entitled to 3/4 of the penalties imposed.

In terms of addressing the release issue, the California Attorney General has now made known that it views any settlement release made in the "public interest" that is broader than the product(s) and listed chemical(s) set forth in the 60-day notice to be improper. This view was announced at a conference on Prop. 65 a couple of months ago, and has now been reiterated in a letter from the California AG to the usual cast of Prop. 65 plaintiff's lawyers. Thus, a standard, "public interest" release would be, in the California AG's view, short and sweet:

"Plaintiff acting on its own behalf and in the public interest releases Defendant [and other specified entities] from all claims for violations of Proposition 65 through the Effective Date based on exposure to [Covered Chemicals] from [Covered Products] as set forth in the Notice(s) of Violation. Compliance with the terms of this Consent Judgment constitutes compliance with Proposition 65 with respect to exposures to [Covered Chemicals] from [Covered Products or Covered Facilities] as set forth in the Notices of Violation(s)."

The terms "Effective Date," "Covered Chemicals," "Covered Products," and "Covered Facilities" would be defined with specificity in the settlement, or reference would be made to their exact nature in the relevant provisions.

The California AG also states that any individual plaintiff may itself include whatever release it wishes insofar as the defendant(s) are concerned, but that such a release is obviously limited to the plaintiff only; it is not a public interest release.

Ultimately, this will likely be set forth in the AG's "regulations" on Prop. 65, which have the legal impact only of guidance.

Given the budget crisis in California, one can also expect the California AG to be much more aggressive on the penalty aspect of settlements. The low amounts frequently seen in settlements may literally and figuratively be a thing of the past.

Because of the release "guidance" that is likely to come into play very soon, if it has not already, one can also expect to see plaintiffs filing more "follow-on" lawsuits against those who have come into their sights. Since an individual release may be stated broadly and prevent such activity, such a release will not prevent a different plaintiff (perhaps even fronted by the same lawyer) from filing another lawsuit against the same defendant involving a different product and/or listed chemical. This may force more companies to try Prop. 65 cases, especially since the law on what is an "exposure" and how it is scientifically determined is, even after 25 years, still undetermined. See, for example, the discussion at http://www.rmkb.com/index.cfm/publications/publication-details/?pkid=873.