Presented by Star Lightner at the Prop 65 News Conference in San Francisco on March 29, 2004

Transcription

1 DIMINISHING RETURNS? Comparing Past and Present Proposition 65 Cases By Star Lightner Farella Braun + Martel LLP Presented by Star Lightner at the Prop 65 News Conference in San Francisco on March 29, 2004 In thinking about all the myriad reasons there could be for more contested cases these days, I talked to a number of other attorneys, and the phrase that people kept repeating was low hanging fruit that the so-called easy cases have all been brought. This is definitely a concept that had occurred to me, but my reaction was there has to be more to it than that! It made me wonder what exactly the concept of easy cases means and how were they different from the cases plaintiffs are pursuing now? Cases Then and Now I decided to look back about ten years at the types of cases that were being brought and settled in the early to mid 1990s. I m sure I ll be the envy of all when I say that I looked at literally hundreds of settlements, trying to get a sense of what types of cases were being brought then versus those being brought now. Many of the suits from the mid 90s are familiar because they are still considered seminal cases. Although the majority of suits brought back then were consumer product and environmental exposure cases, one of the most famous was People v. American Standard, where the California Supreme Court held that water faucets were a source of drinking water. Many of the consumer product cases also involved lead: leaded crystal, ceramic tableware and foil caps on wine bottles. The dental amalgam cases targeted mercury in dental fillings and are still on going, also started back in Some of the other cases involved TCE in correction fluid, toluene in spray paint and nail polish, and mercury compounds in personal care products. But there were also a large number of environmental exposure cases most involving ethylene oxide, methylene chloride, or lead emissions. The big cases from more recent years target a broader variety of chemicals and products. They include: Dowhal v. SmithKline Beecham Consumer Healthcare, involving nicotine patches, which was recently decided by the California Supreme Court in favor of the defendants (see Prop 65 News, April 1 & 15); Published in: Prop 65 News 1 May 1, 2004

2 vaccine cases, where defendants successfully argued preemption by the FDA (see Prop 65 News, June 1 & 15, 2003); Council for Education and Research on Toxics v. McDonalds, alleging acrylamide exposure from french fries and other food, which is currently on hold in the Los Angeles Superior Court (see Prop 65 News, February 1); American Environmental Safety Institute v. Mars, alleging exposure to lead and cadmium in chocolates, which settled recently (see Prop 65 News, January 1); PVC cases, targeting hundreds of different products-such as Christmas tree lights, tools with plastic coated handles and rain gear-manufactured by dozens of companies, which have settled with little or no opposition (see Prop 65 News, February 1, 2003); mercury in fish cases, which have resulted in warnings at supermarket fish counters (see Prop 65 News, December 1 & 15, 2003); and nutritional supplements cases, alleging exposure to lead and other heavy metals, which has been successfully challenged by manufacturers under Proposition 65 s naturally occurring exemption. In addition, there have been hundreds of secondhand smoke cases brought against hotel owners and apartment complex managers (see Prop 65 News, March 1 & 15). How Do The Cases Compare? What are the differences between the old and new cases, and is there something about those differences that is resulting in more contested cases now? To answer that question, I felt it was important to look at some numbers. Now, I know statistics are usually boring, but I actually think these are fascinating. The first thing that struck me when comparing the cases was the shift in the ratio of consumer product versus environmental exposure cases. According to the Attorney General s Proposition 65 Litigation Summary for 1994, in that year, out of 84 settled cases involving consumer products and environmental exposures, 31 were environmental exposure, 48 were consumer product, and 5 were discharge cases. 1 That translates to approximately 37% of the 1994 cases concerned environmental exposures, while approximately 57% involved consumer products. Of the consumer product cases, many were consolidated cases-spray paint cases, paint stripper cases, wine foil cap cases, ceramic tableware cases, and leaded crystal cases (being the largest)-accounting for 22 of the 48 consumer product suits. Thus, environmental exposure cases actually accounted for a significant portion of the Proposition 65 litigation being brought in the mid 1990s. By 2001, that ratio had changed dramatically. Out of 221 settlements, 56 were for environmental exposure versus 160 consumer product cases, while five were discharge 1 The figures cited in this paper are derived from the Attorney General s Proposition 65 Settlement Summaries ; Proposition 65 Litigation Summary, Prop 65 News, 12/1/94; and from research of individual settlements catalogued on the Prop 65 News website. See index.htm; The figures stated are approximate, based on available settlement information. Published in: Prop 65 News 2 May 1, 2004

3 cases. Thus, the percentage of environmental exposure litigation had dropped to about 25%, while consumer product cases had increased to 72%, with fewer of those consolidated cases. This indicates that plaintiffs have shifted their focus from industrywide settlements to individual manufacturers agreements. In addition, the number of retail defendants settling had increased by more than 10% in Consumer Product Cases What does this sharp rise in the number and percentage of consumer product cases mean? It appears that plaintiffs have had to become more creative in the types of products they target, defendants now have fewer options in terms of how they respond to these suits, and plaintiffs assertion of public benefit resulting from prosecution of Proposition 65 has become diminished. As most Proposition 65 practitioners are aware, one of the biggest benefits of the initiative touted by plaintiffs is that consumers, and the public in general, are now being exposed to fewer chemicals. The mechanism for this result is twofold: reformulation of consumer products and reduction of emissions from facilities that emit listed chemicals. Rather than placing a warning label on a consumer product, or notifying nearby residents that a facility was emitting chemicals, defendants were frequently willing to reformulate their product or reduce emissions from their facilities. And when brass keys were reformulated to reduce the amount of lead in them, I think plaintiffs legitimately felt that Proposition 65 had positive effects on the world around us. But as the number of consumer products targeted by Proposition 65 has increased, the opportunity for making meaningful changes (and by that I mean something other than a warning) has decreased. Accordingly, I have categorized products that can be easily reformulated as the first type of easy cases. This is illustrated by the percentage of consumer products that were reformulated in older versus newer cases. Of the 48 consumer product settlements in 1994, 27 required reformulation of the product, while 19 required warnings alone. By contrast, of the 160 consumer product settlements in 2001, only 26 required reformulation-the other 134 only required warnings. This is a significant change. In 1994, 57% of consumer products were being reformulated, but by 2001, only 16%. Why? With many of the so-called easy cases settled, plaintiffs are now going after products that cannot be easily reformulated to address the chemical at issue. One reason reformulation may not be feasible is that the listed chemical is also a necessary ingredient. For example, in recent years plaintiffs have targeted nicotine patches, progesterone products, dandruff shampoo containing coal tar, anti-lice shampoo containing lindane, and vaccines containing thimerosal, to name a few. In each of these cases, reformulating to remove the listed chemical would also mean removing a key ingredient that makes the product work. If AZT, a type of nucleoside analogue that allegedly causes cancer (and one of the only effective AIDS drugs available) becomes a listed chemical, it will fall into this category (see Prop 65 News, February 1). Another obstacle to reformulation is when the listed chemical was not added by the manufacturer. Recent cases that fall into this category include those addressing lead and Published in: Prop 65 News 3 May 1, 2004

4 cadmium in chocolate, and lead in Chinese herbs. Similar cases are those in which the listed chemical is not actually contained in the product at issue, including the acrylamide cases in which the listed chemical is a by-product of cooking, and cases involving dietary supplements that boost the body s testosterone levels. The result is that defendantsparticularly those that sell food or personal care products-do not want to place warnings on their products, but may not be able to reformulate. This is the frustration that causes defendants to fight Proposition 65 cases, and some of the big current cases-acrylamide, chocolate, Chinese herbs-are classic examples. Environmental Exposure Cases A second shift I noticed, when comparing the settlements, relates to the types of environmental cases being brought. As with consumer product cases, there can be benefits from reducing exposures to listed chemicals, as when grocery stores with large diesel fleets switch to alternative fuel trucks. Indeed, in 1994, many of the cases being brought involved factories that emitted certain listed chemicals as part of their production process. The primary chemical emissions targeted in 1994 were ethylene oxide, methylene chloride, and lead emissions. Of the 29 environmental exposure settlements with injunctive relief, only four provided for warnings alone. The other 25 required a reduction in emissions, meaning that 82% of the environmental exposure cases in 1994 resulted in fewer emissions of listed chemicals. By contrast, only 12 of the 56 environmental exposure settlements involving injunctive relief in 2001 related to the more traditional environmental exposure scenario of a manufacturing facility of some sort emitting listed chemicals. The remaining44 all related to hotels that allowed smoking and were therefore alleged to be exposing customers and employees to secondhand smoke. Even so, only 35 settlements or 62% required reduced exposure to listed chemicals. But that figure includes every hotel that agreed to limit the number of smoking rooms it offered. If only those settlements requiring hotels to eliminate smoking are included, the number drops to 25, or45%just over half the percentage from While the plaintiffs bar may not agree, I think there is a significant difference between targeting a facility emitting ethylene oxide and targeting a hotel because some of its guests smoke cigarettes. In the former example, the facility owner has much greater control over the processes creating the emissions, and those processes do not involve controlling the behavior of other human beings. I was struck by this quote from Jim Lofgren, executive director of the Rental Housing Association of the Sacramento Valley, which has been hit with similar lawsuits over secondhand smoke in apartment complexes: It isn t like we re an industry that tries to hide that it spews harmful chemicals into the air. We rent apartments (see Prop 65 News, January 1). Clearly, the type of cases being brought has changed, and as a result, significant reductions in environmental exposures are simply not possible with some of these new cases. Discharge Cases The final category of cases is discharge suits. I have not included those cases in my statistics because so few have been brought compared to consumer product and Published in: Prop 65 News 4 May 1, 2004

5 environmental exposure cases. For example, in 1994, there were five discharge cases, and most involved lead in brass water faucets. However, without commenting on whether this should legitimately constitute a discharge under the statute, I think it is at least arguable that if the water in your glass comes out of a faucet that contains lead, the water might end up with lead in it as well. In other words, there was a recognizable public policy behind the allegations. Although the American Standard case continues to be a seminal case in the Proposition 65 context, very few discharge cases were brought after American Standard until Communities for a Better Environment v. Tosco, a case that targeted more than 3,000 underground storage tanks. In this case, and others like it, CBE alleged that over the years chemicals from leaking USTs were migrating towards groundwater sources even the companies were already remediating and monitoring their tanks under government agency supervision. The UST cases prompted a huge reaction from defendants because the plaintiff s position was that even if corrective action was proceeding under the oversight of regional water quality control boards or the Department Toxic Substance Control, a Proposition 65 violation would still exist. Thus, defendants who were in good faith remediating their property-often at great expense-would be liable under Proposition 65 while the cleanup was actually underway. Unlike American Standard, where at least the brass faucets could be reformulated to reduce the lead content, there appeared to be no additional public benefit produced by plaintiffs bringing these UST discharge cases under Proposition 65. I know from representing a defendant in a similar discharge case that nothing, other than the corrective action already underway at the time the Proposition 65 suit was brought, was achievedexcept, of course, attorneys fees for the plaintiff. The result in the Tosco case was a successful challenge of CBE s passive migration argument by a joint defense group comprised of some very large oil companies (see Prop 65News, November 15, 2002). An appellate court also ruled the same way in a similar case brought by Consumer Advocacy Group (see Prop 65 News, December 15,2002). New Regulations Another factor that is probably contributing to the increase in contested cases is the new regulations that were implemented in Given that those regulations require plaintiffs to certify the merits of their allegations, one would think that defendants would be more likely to settle. Yet instead of more settlements, there appear to be more contested cases. I think the new regulations were seen as a victory by defendants, and that defendants are now feeling more empowered, for lack of a better term. A related phenomenon is the fact that the new regulations have led to something of change in focus for the Attorney General, from simply prosecuting Proposition 65 cases to now also having a much greater role in the settlement process. That role has resulted in more alignment with defendants to the extent the Attorney General is watch-dogging plaintiffs. For example, the Attorney General has sent letters that could be interpreted as expressing doubt about the validity of the case in response to a variety of 60-day notices, including those targeting chocolate, acrylamide, auto manufacturers, and products Published in: Prop 65 News 5 May 1, 2004

6 containing formaldehyde. The Attorney General has also objected to a number of settlements, including the global hotel settlement, as well as settlements involving bleach products, diaper powder, and carbonless copy paper, among others. These actions are important because I believe that when the Attorney General turns his attention away from prosecuting Proposition 65 cases in order to send scolding letters to plaintiffs attorneys, defendants see the playing field as more level. Who Is Suing? I noticed one more phenomenon that is worth mentioning, and it relates to who is bringing suit. As I mentioned earlier, according to the Attorney General s litigation summary for 1994, in that year there were a total of 79 settlements for consumer and environmental exposures. Of those, 34 were suits brought by private plaintiffs, while the number brought by the Attorney General-either alone or in conjunction with private plaintiffs-was 45. By contrast, there were 217 of the same types of settlements in 2001, with 211 private plaintiff settlements compared to six settlements to which the Attorney General was a party. What this means is that the percentage of suits either brought by the Attorney General or in which the Attorney General intervenes has dropped from approximately 57% in 1994 to approximately 6% in 2001 almost ten times fewer suits. This figure does vary slightly from year to year, but in 2002 Attorney General cases were 19% of the total, and in 2000 that number was less than 5%. Thus, overall, the number of cases in which the Attorney General participates has declined dramatically. To the extent that the Attorney General s involvement is seen as a measure of the gravity and validity of the allegations, I think the Attorney General s decreased involvement in cases coupled with increased watch-dogging of plaintiffs has signaled to defendants that many current cases may be less meritorious than in the past. Settlement Figures Finally, I wanted to comment on the money being paid to settle these cases. Before doing any research, I thought that settlement demands might be part of what is prompting defendants to litigate rather than settle. What I discovered was surprising. In 1994, the total value of the settlements for consumer product and environmental exposure cases that year was more than $14 million. If you compare that to 2001, the total value of settlements for those types of cases was just over $10 million. The decrease in total settlement amounts seems odd, especially in light of the fact that there were only about 79 settlements in 1994 compared to 217 in But if settlements with private plaintiffs alone are analyzed, the figures tell a slightly different story. In 1994, private plaintiff settlements totaled approximately $3 million but in 2001 that figure more than tripled, to more than $9 million. The 1994 figure comes from only 34 settlements, however, while the 2001 figure comes from 211 settlements. Thus, while private plaintiffs are clearly more active now than 10 years ago, the average settlement amount has dropped from approximately $92,000 to approximately $46,000. Conclusion So what do all these statistics mean? The message I see is that as the public benefit of Published in: Prop 65 News 6 May 1, 2004

7 the injunctive relief sought by plaintiffs diminishes, and defendants are left with only the choice of putting warning signs on everything and paying plaintiffs, they are starting to put up more of a fight. With the exception of the recent UST discharge cases, most of the current contested cases seem to be coming in the consumer product context. With cases like Dowhal or the vaccine cases, defendants have focused on the impossibility of complying with both state and federal regulations, and that is the basis for these new preemption challenges. Other cases, like the chocolate and acrylamide cases, have resulted in more challenges to the science behind plaintiffs claims whether there is an exposure, and whether that exposure poses a significant risk. The new regulations and the Attorney General s lack of involvement in current cases may also be contributing to defendants perception that these cases are worth fighting. The result is that in the last couple of years, we have seen more preemption challenges and cases invoking res judicata. Everything from the statute of limitations, to occurrence of an exposure, to the significance of that exposure is being challenged. As the number of published cases has doubled from 18 prior to 2000, to 32 now, it looks like defendants are finding both more motivation and more ammunition to fight. Published in: Prop 65 News 7 May 1, 2004