A Publication of the Environmental Law Section of the State Bar of CaliforniaPrint This
Vol. 9, No. 2
Defense Strategies in Proposition 65 Litigation
By William W. Funderburk, Jr.* and Peter Muthig**
Commonly called the "toxic tort of the 21st century," California's controversial Proposition 65 has spawned lawsuits against several thousand companies that distribute, store, manufacture or sell products containing Proposition 65 chemicals. Everything from urinal disks and antacids to carpet, appliances, exhaust, solvents and tobacco smoke have been the subject of Proposition 65 litigation.
This article focuses on some of the more common defenses to liability under the California Safe Drinking Water and Toxic Enforcement Act of 1986 ("Prop. 65").1 The article is divided into the following sections: (1) Background on Law and Political Landscape; (2) Code Violations and Penalties; and (3) Defense Strategies.
I. BACKGROUND ON LAW AND POLITICAL LANDSCAPE
Prop. 65 was passed by an overwhelming majority of California voters in November 1986 through the ballot initiative process. Under California law, ballot initiatives may not be changed, revoked or modified unless a two-thirds majority of the California Assembly and California State Senate pass, and the Governor signs, a bill promulgating such a change. Such a change is unlikely because of the popularity of environmentally protective measures among moderate politicians. In fact, although the California legislature has attempted to amend Prop. 65 numerous times since its passage into law, no amendments have passed.2
Despite the obvious legislative obstacles, the regulated community has mounted numerous constitutional challenges to Prop. 65, based on separation of powers and due process, since the law's inception. In all, at least twelve actions have facially challenged Prop. 65. None has succeeded. Recently, the California Court of Appeal affirmed that private citizen enforcement of Prop. 65 is constitutional.3
This long history of failed efforts to challenge the law confirms that the judiciary will give great deference to initiatives such as Prop. 65, which have been adopted by popular vote. It follows that the courts will likely uphold any reasonable legal , interpretations by Prop. 65 plaintiffs, especially if brought by the California Attorney General or other public prosecutors. The ultimate consequence is that enforcement actions, whether brought by a public official or a private citizen, are settled in the vast majority of cases. Furthermore, companies are taking proactive and preemptive measures, in terms of their compliance with the law's mandates, auditing their facilities and attempting to shield themselves from attack. In any event, when defending a Prop. 65 case, the political landscape cannot be overlooked when mapping out defense strategies. In a high stakes game where "regulation by litigation" is the rule, discounting a prosecutor's political motivations can be fatal because prosecutorial action, as well as inaction, shapes the contours of how Prop 65 is interpreted.
II. CODE VIOLATIONS AND PENALTIES
Listed below are the relevant statutory sections that comprise Prop. 65's two principal provisions -- the warning requirements and the discharge prohibitions. Fundamentally, Prop. 65 prohibits a person from exposing others to certain chemicals without first providing a clear warning, and prohibits the discharge above qualitative or quantitative thresholds of these same chemicals into sources of drinking water. A thorough understanding of the applicable provisions is necessary to determine whether liability is even an issue and, if it is, to plan the most comprehensive defensive strategy.
A. Statutory Language
1. Warning Requirements
Section 25249.6 of the California Health & Safety Code governs exposure to and warning of exposure to toxic chemicals: It states:
No person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual, except as provided in Section 25249.10.
No specific warning language is required. However, the California Code of Regulations provides that the warning "must be reasonably calculated, considering the alternative methods available under the circumstances, to make the warning message available to the individual prior to exposure. The message must clearly communicate that the chemical in question is known to the state to cause cancer, or birth defects or reproductive harm."4
2. Prohibition Against Discharge or Release
Section 25249.5 of the California Health & Safety Code governs the discharge or release of chemicals into drinking water. It provides as follows:
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, notwithstanding any other provision or authorization of law except as provided in Section 25249.9.
3. Enforcement Provisions
The enforcement provision under Proposition 65 sets forth the penalties that may be imposed on an alleged violator, as well as the notice requirements for a private citizen suit:
(a) Any person violating or threatening to violate Section 25249.5 or Section 25249.6 may be enjoined in any court of competent jurisdiction.
(b) Any person who has violated Section 25249.5 or Section 25249.6 shall be liable for a civil penalty not to exceed $2,500 per day for each such violation in addition to any other penalty established by law. Such civil penalty may be assessed and recovered in a civil action brought in any court of competent jurisdiction.
(c) Actions pursuant to this Section may be brought by the Attorney General in the name of the people of the State of California or by any district attorney or by any city attorney of a city having a population in excess of 750,000 or with the consent of the district attorney by a city prosecutor in any city or city and county having a full-time city prosecutor, or as provided in subdivision (d).
(d) Actions pursuant to this section may be brought by any person in the public interest if
(1) the action is commenced more than 60 days after the person has given notice of the violation which is the subject of the action to the Attorney General and the district attorney and any city attorney in whose jurisdiction the violation is alleged to have occurred and to the alleged violator, and
(2) neither the Attorney General nor any district attorney nor any city attorney or prosecutor has commenced and is diligently prosecuting an action against such violation.
The California Attorney General is primarily responsible for enforcing Prop. 65, but an action may also be brought "by any person in the public interest. ..."5 This private enforcement provision has led to a rise in "bounty hunter" groups who bring lawsuits, purportedly in the public interest, but who are more likely motivated by the potential of recovering 25% of any penalties assessed and attorneys' fees.6
Bounty hunter groups often use their Prop. 65 claims as bases for claims under the Unfair Competition Act ("Section 17200"),7 which has a four-year statute of limitations. Business and Professions Code § 17208. (It is widely conceded that Prop. 65 has a one-year statute of limitations under section 340(i) of the California Code of Civil Procedure.) Violations of Section 17200 include any unlawful act conducted as part of a business activity. Thus, plaintiffs contend that violations of Prop. 65 are included. The practice of using a statutory violation as the basis for a Section 17200 claim has not been disapproved of by the courts.8 In fact, a recent decision in the San Diego Superior Court indicates that a Section 17200 claim may stand even absent a Prop. 65 violation where there are sufficient allegations of unlawful or unfair business practices.9
4. Exemptions from Warning Liability
There are several exemptions from the various provisions of Prop. 65. The burden is on defendant to prove the exemption. The exemptions from the warning requirements, as provided in Section 25249.10 of the California Health & Safety Code, are as follows:
Section 25249.6 shall not apply to any of the following:
(a) An exposure for which the federal law governs warning in a manner that preempts state authority.
(b) An exposure that takes place less than twelve months subsequent to the listing of the chemical in question on the list required to be published under subdivision (a) of Section 25249.8.
(c) An exposure for which the person responsible can show that the exposure poses no significant risk assuming lifetime exposure at the level in question for substances known to the state to cause cancer, and that the exposure will have no observable effect10 assuming exposure at one thousand (1,000) times the level in question for substances known to the state to cause reproductive toxicity, based on evidence and standards which form the scientific basis for the listing of such chemical pursuant to subdivision (a) of Section 25249.8.
In any action brought to enforce Section 25249.6, the burden of showing that a discharge or release meets the criteria of this subdivision shall be on the defendant.
5. Exemptions From Discharge Liability
The exemptions from the discharge prohibition, as provided in Section 25249.9 of the California Health & Safety Code are as follows:
(a) Section 25249.5 shall not apply to any discharge or release that takes place less than twenty months subsequent to the listing of the chemical in question on the list required to be published under Subdivision (a) of Section 25249.8.
(b) Section 25249.5 shall not apply to any discharge or release that meets both of the following criteria:
(1) The discharge or release will not cause any significant amount of the discharged or released chemical to enter any source of drinking water.
(2) The discharge or release is in conformity with all other laws and with every applicable regulation, permit, requirement, and order.
In any action brought to enforce Section 25249.5, the burden of showing that a discharge or release meets the criteria of this subdivision shall be on the defendant.
The definitions below are included for reference. They are significant, both in a plaintiff's argument for liability as well as the development of a defensive strategy.
1. "Person" means an individual, trust, firm, joint stock company, corporation, company, partnership, and association.11
2. "Person in the course of doing business" does not include any person employing fewer than 10 employees in his business; any city, county, or district or any department or agency thereof or the state or any department or agency thereof or the federal government or any department or agency thereof; or any entity in its operation of a public water system as defined in Section 4010.1.12
3. "Significant amount" means any detectable amount except an amount which would meet the exemption test in subdivision (c) of Section 25249.10 (Section II a.iv. above in this report) if an individual were exposed to such an amount in drinking water.13
4. "Source of drinking water" means either a present source of drinking water or water which is identified or designated in a water quality control plan adopted by a regional board as being suitable for domestic or municipal uses.14
5. "Expose" means to cause to ingest, inhale, contact via body surfaces or otherwise come into contact with a chemical. An individual may come into contact with a chemical through water, air, food, consumer products and any other environmental exposure as well as occupational or work place exposures.15
6. "Knowingly" refers only to knowledge of the fact that a discharge of, release of, or exposure to a chemical listed pursuant to Health & Safety Code § 25249.8(a) is occurring. No knowledge that the discharge, release or exposure is unlawful is required. However, a person in the course of doing business who, through misfortune or accident and without evil design, intention or negligence, commits an act or omits to do something which results in a discharge, release or exposure has not violated Health & Safety Code §§ 25249.5 or 25249.6.16
7. "Water" includes both surface and ground water.17
8. "Probably will pass into any source of drinking water" refers to a discharge or release which more likely than not will pass into any source of drinking water.18
9. "Discharge or release into water or onto or into land" includes a discharge or release to air that is directly and immediately deposited into water or onto land. It also includes the direct or indirect transfer by any person in the course of doing business of any listed chemical to any person within the meaning of Health & Safety Code § 25249.11 (a) for the purpose of discharging or releasing the chemical to land or water in a manner which, if committed by the transferee, would violate Health & Safety Code § 25249.5.19
10. "Storm water runoff" from a place of doing business containing a listed chemical, the presence of which is not the direct and immediate result of the business activities conducted at the place from which the runoff flows, is not a "discharge" or "release" within the meaning of the Act. For purposes of this paragraph, "business activities" does not include parking lots.20
III. DEFENSIVE STRATEGIES
With a thorough familiarity of the statutory language and the definitions of its more critical terms, it is possible to interpret the requirements of Prop. 65 in order to determine if a violation has taken place and how to defend against accusations of violations.
Analytically, before reaching the issues of whether a defendant has a duty to warn or has violated the discharge prohibition, a court would determine whether the plaintiff's notice was proper. Adequate notice is a prerequisite for stating a claim under either the warning requirement or the discharge prohibition. The notice requirement prevents a private citizen, suing in the public interest, from filing a lawsuit before first giving notice to the alleged violator and the appropriate public officials, and then waiting a minimum of sixty days. The 60-day period enables the state enforcement authorities to decide whether they wish to pursue the matter. If they decide to do so, the private citizen no longer has standing to assert a cause of action.
Notices must be provided to the proper individuals including the attorney general, district attorney and city attorney in whose jurisdiction the violation is alleged to have occurred. Further, the notice must contain certain specified information, without which it is defective. Absent such proper notice, due process requires that any action based on such notice must be dismissed.21
A Prop. 65 notice may be defective in a number of respects. The notice may fail to provide a reasonably accurate time period during which the violation is alleged to have occurred.22 For alleged violations of the warning requirement, the notice may not properly link the listed chemicals to the products or services for which violations are alleged,23 may not properly specify all relevant exposures,24 or may fail adequately to identify the locations of the sources of the alleged exposures.25 For alleged violations of the discharge prohibition, the notice may fail to identify the type of discharge and/or the source of drinking water into which it is alleged to have occurred. Finally, plaintiff may have failed to provide the notice to the required public enforcement representatives as required by Section 25249.7(d)(2) of the California Health & Safety Code.
The above examples provide just some of the possible inadequacies that may be present in a plaintiff's Prop. 65 notice. Because the notice requirements are detailed and specific, inexperienced or careless Prop. 65 plaintiffs may leave themselves open to attack on this crucial prerequisite. Since the notice requirements are mandatory, any defects subject the Prop, 65 plaintiff to dismissal at the demurrer stage of pleading. Thus, the Prop. 65 practitioner must have a thorough knowledge and understanding of these requirements.
Assuming proper notice was given, a defendant may not have a duty to warn, or may not have discharged a Prop. 65 chemical in sufficient quantity to constitute a violation. Before any duty to warn or a discharge violation is found, a defendant bears the burden of proving one of the exemptions, including whether the alleged chemical exposure or discharge poses no significant risk for carcinogens or has no observable effect for reproductive toxins. The Prop. 65 exemptions apply in similar ways for both the warning requirements and the discharge prohibitions.26 Thus, an exemption can be claimed where defendant can show that an exposure or discharge poses no "significant risk" assuming lifetime exposure at the level in question for substances known to the state to cause cancer (the no significant risk level or "NSRL"'), or that the exposure or discharge will have "no observable effect" assuming exposure at one thousand (1,000) times the level in question for substances known to the state to cause reproductive toxicity (the no observable effect level or "NOEL"').
The Prop. 65 regulations set forth numerical exposure standards for some of the more than 600 listed chemicals. For the balance (those without quantitative standards), the regulations provide wide latitude for determining the exposure risk by reference to qualitative standards. The methods for calculating the exposure, whether it results from occupational, consumer product or environmental activities, are set forth in regulations.27 Hence, many subjective factors can determine whether a duty to warn exists. Consequently, because the burden of proof is on the defendant to prove the exemption, many practitioners counsel their clients to warn if any plaintiff could make the technical case that a duty exists.
Further complicating matters in the context of the discharge prohibition, however, is whether the measurement for the chemical is made at the point of discharge or the point where a human may be exposed to it. The discharge prohibition appears to require measurement of the chemical in question at the point of discharge, not where a person is ultimately exposed to it. On the other hand, with regard to the warning requirement, it seems absurd to argue that the measurement could be made at any point other than where a person is exposed. This dichotomy has created a tension in the law which may be used as a defense to liability.
One line of reasoning suggests that the statutory language should be read literally and thus, the release of a listed chemical should be measured at its precise point of discharge. The statute provides in pertinent part that "no person...shall knowingly discharge or release a chemical...into water or onto or into land where such chemical passes or probably will pass into any source of drinking water " This language appears to mandate that measurement of a discharge or release be made at the point where a chemical either enters water or is deposited onto land.. This was one of the arguments made in the pending water meter litigation entitled Natural Resources Defense Council, et al. v. Badger Meter, Inc., et al.28 In that case, plaintiffs argued that the language "into land, where such chemical...will probably pass into any source of drinking water" means that the only way to measure a discharge into or onto land is at the point of discharge and not at some downstream point when the chemical actually reaches a source of drinking water.
Plaintiffs' argument in the water meter litigation appears to ignore a crucial portion of Prop. 65's exemption provisions. Specifically, section 25249.9(b)(1) of the California Health & Safety Code provides an exemption where "the discharge or release will not cause any significant amount of the discharged or released chemical to enter any source of drinking water." Read In conjunction, the prohibition of discharge provision together with the exemption that allows discharges, so long as they are in an insignificant amount, argues in favor of a "pathway of discharge" concept. Such a concept would allow for the dilution of the discharged chemical along the so-called pathway before it actually enters a source of drinking water. This idea was proposed in 1988 by the California State Water Resources Control Board in its "point of application/mixing zone policy." The idea of a "mixing zone" allows for the discharge of a listed chemical in a significant amount as set forth in Prop. 65, so long as dilution or "mixing" causes the concentration of the chemical to fall below the significant amount level once it has passed beyond the mixing zone. Both federal and state regulations have been proposed to implement such a measurement methodology in California.
Based on the foregoing interpretation, two types of analyses may be applied in order to establish this exemption. First, a defendant may not even be releasing, or exposing persons to, a chemical in sufficient quantity to subject it to Prop. 65 requirements. Second, even if there is a sufficient release at the point of origin (arguably on the defendants' property), this quantity obviously dissipates as it becomes further removed from the property. Consequently, by the time an individual is exposed, or any chemical reaches a source of drinking water, the chemical may be so attenuated that it is essentially undetectable.
As outlined above, critical to this analysis is the point where the concentration of the release is to be measured. For the warning requirement, it seems indisputable that the measurement should be made at the point of exposure to a person. For the discharge prohibition, it appears a testing location would have to be agreed to and established, and an analysis made as to whether detectable or "significant" quantities of the chemical are present. If the quantities fall within the exemption parameters, this may be the end of the matter. However, because the legal standard interpreting the exact location of the point of "discharge" has not been established, a defendant's success in asserting and proving these defenses (the burden of proof is on defendant to establish the exemption) is highly fact dependent.
C. Citizen Suit Bar
The private citizen acting in the public interest may pursue a Prop. 65 lawsuit only if no public enforcer has commenced and is diligently prosecuting an action against an alleged violation.29 After giving adequate notice, the private party must wait sixty days to allow the public enforcers to take action. Defendants may wish to use this "window of opportunity" to approach one of the public prosecutors who has jurisdiction, and request that they sue within the sixty-day period. While this obviously does not prevent the legal action, it pre-empts the citizen from suing. The benefit to defendants is generally more even-handed prosecution, particularly where the citizen or citizen's group is not credible, reputable or sufficiently established to understand the contours of Prop. 65.
D. Prima Facie Case
Assuming notice by plaintiff was proper and no exemptions can be stated, a plaintiff still must establish the various elements of the alleged Prop. 65 violation.30
1. Targeted Chemical Requirement
Prop. 65 does not apply unless a chemical in question is on the list of carcinogens and reproductive toxins established by the Government of California. In addition, under the previously mentioned exemption, the statute does not require warnings for exposures that take place less than twelve months subsequent to the listing of a chemical and does not penalize any discharge or release that takes place less than twenty months subsequent to the listing of a chemical in order to give adequate time to confirm use of the chemical in question to meet Prop. 65's dictates. However, for practical purposes, notices being served and actions being filed today involve chemicals that have been listed for more than the minimum statutory periods.
2. "Person" Requirement
Before the Prop. 65's duty to warn comes into issue, it is required that the conduct which leads to the violation of the statute is performed by a "person." As indicated above for purposes of Prop. 65, the term "person" is given a broad and straightforward definition, including an individual, trust, firm, joint stock company, corporation, company, partnership and association. Thus, in addition to a natural person, practically any commercial organization may be subject to attack on Prop. 65 grounds.
3. "In the Course of Doing Business" Requirement
While the requirement that the exposure arise "in the course of doing business" has not been discussed in any detail by the courts and is less than perfectly clear, the regulations provide some general insight. According to 22 Cal. Code Reg. §§ 12000(c) and 12601 (c), "in the course of doing business" includes:
(a) Any act or omission of any employee which furthers the purpose or operation of the business;
(b) Any act or omission of any employee which is expressly or implicitly authorized; and
(c) Any personal use, conception or production of listed chemical by an employee on the business premises or while performing activities for the business if the employer knows or should know of such use, consumption or production and knows or should know that such use, consumption or production will expose other individuals.
Therefore, Prop. 65 regulations contain a very broad definition of "in the course of doing business," in that most acts by a business or its employees fall into the covered category, except where specifically excluded by Prop. 65 itself.
4. "Knowingly and Intentionally" Requirement
As demonstrated by the definition set forth in the regulations, "knowingly" refers to knowledge of the fact that a discharge of, release of, or exposure to a listed chemical is occurring. No knowledge that the discharge, release or exposure is unlawful is required. But, "knowingly" does not include "discharges through misfortune or accident and without evil design, intent or negligence."31 That this portion of the regulation is written in the conjunctive is significant because it strongly implies that such things as "negligent accidents" or "accidents by design" could be viewed as Prop. 65 violations. Thus, this appears to be an extremely limited exception that applies only to persons who are not at fault and who have not acted negligently with respect to a discharge or exposure.
Beyond the exemption for accidents, the "knowingly" requirement of the Prop. 65 discharge prohibition, and its counterpart the "knowingly and intentionally" requirement of the warning provision, are not clearly defined, either by statute or case law. It has been questioned whether the requirement was to be read as closer to a negligence standard, or closer to a strict liability standard. The idea of a strict liability standard has not found support with public enforcement authorities. In fact, such an interpretation would appear to render the knowledge and intent requirements superfluous, an absurd outcome that could not have been intended. Thus, what the Prop. 65 practitioner is left with is a statute that requires some type of awareness, as well as a state of mind with regard to alleged violations, but that does not usefully define the term "knowingly," and does not define "intentionally" at all. Interpretation of this requirement is therefore limited to an analysis of the regulations, opinions of regulatory agencies and a relatively sparse body of case law.32
Further insight into the interpretation of Prop. 65's knowledge requirement can be found in the "Final Statement of Reasons" ("FSR") issued by the California Health & Welfare Agency ("Cal/HWA").33 In 1987, Cal/HWA was designated by Governor George Deukmejian as the lead agency for implementation of Prop. 65. Cal/HWA's FSR summarizes the recommendations and objections made regarding the Prop. 65 regulations.
With respect to the "knowingly" requirement, the FSR states that "knowledge of" refers to both knowledge of the fact that a discharge, release or exposure is occurring and to knowledge that the chemical in question is on the Governor's list. In adopting this "knowledge of" standard, Cal/HWA rejected recommendations that "knowingly" should include a person's knowledge that a discharge, release or exposure poses a significant risk, knowledge that a discharge or release probably will pass into a source of drinking water and knowledge that an exposure occurred without warning. Cal/HWA also rejected the idea that knowledge of each element of a Prop. 65 violation be required.
Thus, if the courts in subsequent Prop. 65 cases adopt Cal/HWA's interpretation of "knowingly," that interpretation will include only knowledge that a discharge is occurring and that the chemical is on the Governor's list. Given this limited interpretation of the "knowingly" requirement, it would be difficult to argue that a facility that regularly works with a chemical that is listed under Prop. 65, and that is required to report releases of that chemical, did not have knowledge of the releasOur Practice Areas