Vol. 9, No. 2
A Publication of the Environmental Law Section of the State Bar of CaliforniaDefense Strategies in Proposition 65 Litigation
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.
Section 25249.6 of the California Health & Safety Code governs exposure to and warning of exposure to toxic chemicals: It states:
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
Section 25249.5 of the California Health & Safety Code governs the discharge or release of chemicals into drinking water. It provides as follows:
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:
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
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:
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.
The exemptions from the discharge prohibition, as provided in Section 25249.9 of the California Health & Safety Code are as follows:
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.
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.
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.
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
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.
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.
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:
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.
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 release. Although not explicitly stated, the Cal/HWA interpretation appears to presume that any business that knows it is releasing a listed chemical into the environment is not also required to know that the discharge poses a significant risk, or that it probably will pass into a source of drinking water.
Recent developments in Prop. 65 litigation regarding exposure and the duty to warn shed further light on the "knowingly and intentionally" requirement. In the Tobacco II litigation,34 defendants Philip Morris, Inc., Brown & Williamson Tobacco, Inc., Lorillard Tobacco Company and R.J. Reynolds Tobacco Company ("defendants") filed a motion seeking to dismiss the case with regard to the Proposition 65 claims. The defendants contested their duty to warn third party non-smokers of the emissions of second-hand smoke as a prerequisite to violating Prop. 65. The court found the duty to be legally untenable. The duty to warn is contingent upon "knowing and intentional exposure." The court interpreted this narrowly, stating that the element, which is written in the conjunctive, requires "more than a mere knowledge of foreseeability on the part of a manufacturer that an exposure may at some unknown time, place and circumstance be occasioned by the ultimate consumer's customary use of the product."
The court relied on Corporation for Clean Air in finding that "knowingly and intentionally" requires the exercise of control over the usage of or release from the consumer product manufactured and/or distributed that causes the exposure. The court also found support in the regulations and the historical prosecutorial actions of the Attorney General. Moreover, the abundance of published cases in the parties' briefs all pertained to the imposition of a duty to warn only to consumers, not nonconsumers who may be ultimately exposed to the product by consumers. The evidence offered was undisputed and established defendants' "wholesale lack of control" over the exposure of second hand smoke to nonconsumers. Thus, as a matter of law defendants owed no duty to warn nonconsumers because defendants could not have knowingly and intentionally exposed such persons.
The Prop. 65 regulations provide a straightforward definition of the term "expose" as "to cause to ingest, inhale, contact via body surface or otherwise coming into contact with a chemical."35 The regulations further provide that "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."36
For an "exposure" to be covered by Prop. 65, it must be exposure at a "significant" level or beyond the "no observable effect level." Any chemical discharged has the potential to disperse and attenuate the further it is removed from its source. Thus, the relevant questions are (1) whether the so-called exposure is measured close to the source or at some remote spot where it may come into contact with numerous members of the public, and (2) depending on where the exposure is measured, are the chemicals in question present in sufficient quantities to trigger a duty to warn?
As in the Tobacco II litigation, the Prop. 65 plaintiff may attempt to allege that an exposure was caused because members of the public were exposed to a product, such as a cigar being smoked by a third party, which product caused the release of the Prop. 65 chemical in question. This theory of recovery was rejected by the San Francisco Superior Court in the context of claims against diesel-fueled vehicle manufacturers.37 The Court ruled that Prop. 65 does not impose a duty upon manufacturers to provide warnings to the general public of exposures from their products. This is because the statute does not apply where a third party beyond the manufacturer's control actually causes the "exposure."
In the Tobacco II litigation, the issue of defendants' duty to warn was decided based, in part, on the court's view that defendants' could not have knowingly and intentionally caused the exposure in question. Thus, consistent with Corporation for Clean Air, the court found no duty on the part of the manufacturer defendants to provide warnings to nonconsumers of their products. By defining the Proposition 65 duty to warn narrowly, the Tobacco II court refused to extend a duty to tobacco manufacturers for exposures of secondhand smoke to nonconsumers.
Whereas the Tobacco II cases are limited to tobacco-products' manufacturers, the court's reasoning could similarly apply to any Prop. 65 consumer warning case. By the court's interpretation, the threshold duty to warn element is not sparked by the "mere knowledge or foreseeability" that an exposure may at some unknown time, place and circumstance occur through the customary use of a product. Thus, because a retailer generally has the requisite "lack of control" over nonconsumers' exposure to its products, their duty to warn is, at best, tenuous.
Where a person is exposing others to chemicals pursuant to Prop. 65, that person must provide a warning that is "clear and reasonable."38 The Prop. 65 regulations provide general criteria for meeting the warning requirement. In addition, the regulations also provide for specific "safe harbor" methods for providing warnings for occupational exposure,39 consumer products exposures,40 and environmental exposures41 such that, if met, would be deemed adequate warning for the corresponding types of exposures.
Under the regulations' general criteria', in order for a warning to be deemed clear and reasonable, the method employed to communicate the warning must be reasonably calculated to make the warning message available to the potentially exposed , individual prior to exposure.42 The message must also clearly communicate that the chemical is known to the State of California to cause cancer, or birth defects and/or other reproductive harm. While the specific "safe harbor" criteria with regard to warnings for occupational, consumer, and environmental products exposures will meet the clear...and reasonable warning requirement, alternative methods of communicating warnings for those and other products exposures will be deemed clear and reasonable as long as they meet the general criteria.43
The regulations define "occupational exposure" as "an 'exposure in the work place of the employer causing the exposure to any employee."44 As stated above, Prop. 65 provides safe harbor warning language for the various types of exposures. For occupational exposures, this includes the prominent labeling of products or substances in the work place, posting of signs in conspicuous places, and compliance with informational requirements pursuant to applicable federal and state laws.45
Prop. 65's requirements for warnings in the occupational setting have now been incorporated into California's occupational safety and health program ("Cal/OSHA").46 Federal OSHA statutes coin, in some instances, preempt state "right to know" laws such as Prop. 65, particularly where state requirements conflict with federal requirements. Fed/OSHA has promulgated a federal Hazard Communication Standard ("HCS")47 which potentially conflicts with Prop. 65's incorporation into Cal/OSHA. However, any state may submit a plan promulgating its own standards which, if approved, operate to displace federal standards so long as they are deemed to be "at least as effective as" the federal standards. California's own Prop. 65 inclusive HCS was approved by Fed/OSHA on June 6, 1997.
One result of, the Fed/OSHA approval of the Cal/OSHA plan is that promulgated state standards, including Prop. 65 in its occupational aspects, may not be enforced against out-of-state manufacturers. Thus, out-of-state manufacturers selling products in California need not comply with Prop. 65.48
The regulations define "consumer products exposure" as an exposure which results from a person's acquisition, purchase, storage, consumption or other reasonable foreseeable use of a consumer good or any exposure which results from receiving a consumer service.49 The safe harbor warning requirements for consumer product exposures include labeling of the product itself, identification of and warning about the product at its general sales location and public warnings through the use of signs, advertising, toll free telephone numbers and the like. Specific warning language is also identified and should be used to meet the statute's minimum requirements.50
The regulations define "environmental exposures" as any exposures to persons that may foreseeably occur as the result of contact with an environmental medium (e.g., air, drinking water, running water, soil, vegetarian, solid or hazardous waste, etc.), and include all exposures which are not occupational exposures or consumer product exposures.51 This means that environmental exposures are extremely broad and would include any exposures in the work place to nonemployees, such as visitors or trespassers, and would also include exposures to the general public outside of the work place and in the surrounding communities.
The regulations specify that environmental exposure warnings, in order to meet the specific criteria, shall be provided in a conspicuous manner and under such conditions as to make it likely to be read, seen, or heard and understood by an ordinary individual in the course of normal daily activity, and such warning should reasonably be associated with the location and source of the exposure.52 The method employed to communicate the warning must include the most appropriate of the following alternative methods given the circumstances:
While many suggested that Prop. 65 warnings would prove to be an enormous burden for businesses required to give such warnings, reasonable methods of warning, less than an implementation strategy intrusive on the businesses, have passed muster in California.
As the definitions attempt to make clear, the type of discharge or release required in order to cause a Prop. 65 violation includes not only direct discharges into water or onto land, but also discharges into the air that are "immediately" deposited into water or onto land. The term "immediately" may be subject to some interpretation. Further, transfer of a listed chemical to another person for the purpose of. discharging it into water or onto land also constitutes a violation.
This element requires proof of the passage of chemicals into sources of drinking water. The first portion of the requirement is straightforward in that a chemical either passes or does not pass from one place to another. The second portion, however, is more onerous in that it looks at whether, given time, a chemical may pass to a location where it will cause a violation. The term "probably" is defined to mean more likely than not.54 This element is problematic since it necessitates proof that a chemical will stay at a specific location after it is discharged, or that it will migrate to an area where it may cause harm. As with other areas for investigation, this issue generally requires consultation and analysis by an environmental consultant. The obvious questions are (1) will this migration take the chemicals to a source of drinking water, and (2) if so, will the chemicals enter the water in concentrations sufficient to establish a Prop. 65 violation.
An important area of analysis is the determination of whether any alleged discharge is actually finding its way to a true source of drinking water. Prop. 65 defines a source not only as a present source (one which may be readily identified as providing water for human consumption), but also as any water identified or designated by a regional water quality control board as being suitable for domestic and municipal use.
What constitutes the definition of a "source of drinking water" has been considerably broadened by the California Supreme Court in People v. Superior Court (American Standard).55 That case primarily held that the phrase "source of drinking water" could include water faucets. The Court further held that Proposition 65 is a remedial statute and not a penal statute.56 The Court stated:
Based on this broad interpretation to be given to Prop. 65, the definition of source of drinking water could encompass almost any body of water, no matter how unlikely it is that people will eventually consume water from that source.
Often, it is necessary to review various documents on file with the Regional Water, Quality Control Boards. For instance, the Regional Water Quality Control Plan for the Los Angeles region (the "Plan") designates water bodies in the Los Angeles region in terms of their beneficial uses. The most relevant designation for purposes of a Prop. 65 action is the "Municipal and Domestic Supply" (MUN) which is defined as "uses of water for community, military, or individual water supply systems, including, but not limited to, drinking water supply." In its table of "beneficial uses of inland surface waters", the Plan lists all designated bodies of water for the Los Angeles region. Some of these bodies are further designated as P*. The P indicates that the source of water is designated as having a "potential, beneficial use". The * indicates that some designations may be considered for exemptions at a later date.
According to State Board Resolution No.88-63, and Regional Board Resolution No.89-03, "all surface and ground waters of the state are considered to be suitable, or potentially suitable, for municipal or domestic waters supply and should be so designated by the Regional Boards...[with certain exemptions which must be adopted by the Regional Board]." Based on these policies, all inland surface and groundwaters are designated by the plan as "MUN," presuming at least a potential suitability for such a designation. However, these policies allow Regional Boards to consider the allowance of certain exemptions according to criteria set forth in the State Board and Regional Board resolutions.
On November 2, 1998, the Los Angeles Regional Board issued Resolution No.98-018 entitled "Amendment to the Water Quality Control Plan to Incorporate Changes in Beneficial Use Designations For Selected Waters." Pursuant to this amendment, specific surface waters were removed from the MUN designation because they (1) had no risk of interaction with underlying groundwater resources, (2) they are surface water channels paved prior to 1975 for flood control purposes with a concrete lining, and (3) they meet the exemption criteria in State Board Resolution No.88-63 for channelized surface waters. Therefore, it appears that many bodies of water are still a potential source of drinking water pursuant to Prop. 65 requirements, subject to a predesignation and/or exemption based on a possible future amendment.
Since each discharge of a Prop. 65 chemical results in a separate violation, and since violations are penalized at $2,500 per day, plaintiffs have an economic stake in being able to allege as many discharges over as many days as possible. One creative plaintiffs' theory suggests that after a chemical has been discharged into water or onto or into land, each day it remains there constitutes a new discharge and therefore a new violation. This theory was recently rejected by the Los Angeles Superior Court in Communities for a Better Environment, etc. v. Boeing North American.58
In Boeing, plaintiff alleged violations of Prop. 65 for discharges that occurred in the 1940s and were already the subject of an ongoing soil and groundwater investigation and remediation. The court granted defendant's motion for summary adjudication as to the alleged Prop. 65 violation to the extent it was based on post-discharge contamination. The court held that each day a chemical remains in the water or soil after its discharge while it is being investigated and cleaned up is not a new discharge.59 The Boeing case is useful because it correctly defines and narrows the scope of a discharge violation, while sending the message to enterprising plaintiffs that creative, but absurd, theories of recovery will not be given great credence.
If a defendant has settled a Prop. 65 case, the doctrine of res judicata may apply to subsequently filed actions. Res judicata is intended to protect parties from repetitious litigation brought by plaintiffs. As the California Supreme Court explained:
The doctrine applies when "(1) the issues decided in the prior adjudication are identical with those presented in a later action; (2) there was a final judgment on the merits in the prior action, and (3) the party against whom the plea is raised was a party or was in privity with a party to the prior adjudication."61
The entry of a stipulated judgment among parties to a Prop. 65 case will generally offer the defendant(s) res judicata protection against subsequent Prop. 65 claims on the same issues. This was recently confirmed in American International Industries v. Superior Court (Urbach).62 Among other things, the court in Urbach found that a settlement and stipulated judgment operates as a final judgment and is as conclusive as a judgment rendered after trial. Finding that the other elements of identity of issues and privity were met, the court ruled that defendants' motion for judgment on the pleadings should be granted on res judicata grounds with respect to the applicable Prop. 65 claims.
As previously mentioned, the statute of limitations for a Prop. 65 violation (in the absence of a concurrent Section 17200 claim) is widely conceded to be one year. This relatively short period of time presents a unique opportunity for the regulated community to avoid a Prop. 65 action for violation of the warning requirement. Strategically, a potential Prop. 65 target defendant should investigate the need to place appropriate warning language at its facilities. Many potential targets are not even aware of the warning requirements, let alone the possibility that they may be served with a notice and sued. Placing warnings containing the "safe harbor" language is cheap "insurance" against possible future claims. Once the warnings are in place, the one-year statute technically begins to run. If a year passes and no notice is served, the party has effectively immunized itself from future Prop. 65 actions. And, even if a notice is served and a lawsuit filed within the one-year period, each day that a warning has been in place is one less day that a facility will be penalized. Thus, posting appropriate warnings begins reducing potential penalties from the first day they are put in place.
It is considerably more difficult to use a statute of limitations defense in the discharge context. Discharge prohibitions cannot be addressed simply through the placement of warnings, and the discharger would have to cease all activity that could be characterized as a discharge in order for the statute to commence. Although this may not be a practical alternative, it is still a worthwhile exercise to evaluate a facility for potential violations of the discharge prohibition. This first step may reveal ways to avoid liability by controlling or eliminating discharges in the long term. Obviously, the sooner this analysis is undertaken, the sooner a violator can bring itself into compliance, and the sooner it can start the clock running on the limitations defense.
*William W. Funderburk, Jr. (Yale, B.A.; Georgetown, J.D.) is a founding partner of, and practices environmental law in the Los Angeles office of Stanzler Funderburk & Castellon LLP, where he counsels corporate clients regarding regulatory matters, Superfund and Proposition 65 litigation, and other environmental issues. He can be contacted by telephone at (213) 623-7515, or by e-mail at firstname.lastname@example.org.
**Peter Muthig received his JD from Stanford Law School in 1992, and a B.S. in Business Management from Ithaca College in 1982. Mr. Muthig currently practices environmental law and general commercial litigation with Radcliff Frandsen & Dongell in Los Angeles.
2. Attempted amendments to the law have included revisions to the enforcement provisions (Assembly Bill 1332), requirements that citizen enforcers first obtain consent from the Attorney General's office (Assembly Bill 3160) and efforts to modify the level of exposure deemed to present a "significant risk" (an unusually high 1,000-fold safety margin).
9. In re Tobacco Cases II, Judicial Council Coordinated Proceeding, #JCCP-4042, San Diego Superior Court (coordinated actions of L.A. Superior Court case number BC 194217 and S.F. Superior Court case number 996781) (hereinafter "Tobacco II"). Information on the Tobacco II litigation can be found on the Internet at www.sandiego.courts.ca.gov/jccp/tobacco.
21. See Hallstrom v. Tillamook County (1989) 493 U.S. 20, 31 (due process requires that the alleged violator, as well as the public enforcement agency, must be provided with specific information concerning the alleged violation prior to initiation of the lawsuit).
26. The exemption from liability for a discharge incorporates the maximum allowable exposure levels set forth in the warning requirement by virtue of the definition of "significant amount" found at Cal. Health & Safety Code § 25249.11 (c).
28. SF Sup. Ct., Case No.984562. The briefs are available from the authors. Mr. Funderburk represents two of the three early settling defendants in this case. The case recently settled in a $2.8 million payment by recalcitrant defendants to plaintiffs. Earlier, settling defendants agreed to pay a total of $110,000.
30. Initially, one method by which the regulated community can protect itself from attack on Prop. 65 grounds is to make sure all locations that might be subjected to Prop. 65 scrutiny and possible suit are in compliance with Prop. 65 warning requirements. At the very least, this will prevent future Prop. 65 advocates from targeting these locations.
32. See Citizens for a Better Environment and International Ladies' Garment Workers' Union v. Sawyer of Napa, Inc. (Napa Sup. CT, Case No- 61687, May 28,1992) ("Sawyer of Napa") ; Nicolle-Wagner v. Deukmejian ( 1991 ) 230 Cal.App. 3d 652 ("Nicolle-Wagner II"); Corporation for Clean Air, Inc. v. General Motors Corp., et al. (SF Sup. CT, Case No.987208, Sept. 14, 1998). An exhaustive and instructive discussion of Sawyer of Napa and Nicolle-Wagner II, as well as the "knowingly and intentionally" requirement in general, can be found in R. Carrick, Proposition 65 Handbook, pp. 113-121 (2d ed. 1998).
56. As an alternative argument in support of their position that faucets were not "sources of drinking water," appellees and defendants (faucet manufacturers) argued that because Prop. 65 is penal in nature, it must be strictly construed. This argument only prompted the court to examine the issue closely and hold in favor of the plaintiffs, finding that the statute was actually remedial in nature.
59. The court held that the Prop. 65 claim failed to the extent it was based on historic discharges pre-dating 1997, since these claims were time-barred. The court also held that an injunctive relief would not be appropriate to the extent plaintiff sought a cleanup of the post-discharge contamination because Prop. 65 is a discharge statute and not a cleanup statute.
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