California’s Safe Drinking Water and Toxic Enforcement Act of 1986—also known as Proposition 65—is widely considered to be a driver of chemical regulation through litigation. And because anyone who provides an alleged violator the requisite notice can bring suit to enforce the Act, including Proposition 65 “bounty hunters,” it also is viewed as a source of significant windfalls for private plaintiffs and their counsel. Despite these financial incentives and an ever-expanding list of Proposition 65 chemicals, the number of notices of alleged violations and resulting settlements largely have remained steady over the last couple of years. This is owing to at least two factors: (1) repeat players using the same, proven playbook to extract quick settlements; and (2) a limited supply of products that allegedly violate Proposition 65 given product reformulations and warnings.
Background
Proposition 65 requires businesses to provide warnings to Californians regarding certain exposures to chemicals known to the state of California to cause cancer, birth defects, or other reproductive harm. It also prohibits California businesses from knowingly discharging the chemicals into sources of drinking water. For certain chemicals, businesses have “safe harbor,” meaning they are exempt from Proposition 65 warning requirements or discharge prohibitions, if exposure to one of the listed chemicals occurs at or below the published No Significant Risk Level (NSRL) for chemicals listed as causing cancer, or the Maximum Allowable Dose Level (MADL) for those listed as causing reproductive toxicity.
After giving a 60-day written notice of violation to an alleged violator and public prosecutors, anyone can sue to enforce Proposition 65, purportedly in the public interest, provided prosecutors fail to initiate an action within 60 days. The Act requires that putative plaintiffs—also known as “enforcers”–support their notices of violation with a certificate of merit, representing that the potential plaintiffs reasonably believe that their claims are meritorious. Generally, putative plaintiffs also must possess test results showing the presence of a Proposition 65 chemical in the alleged violating product above the threshold set for that chemical.
Most notices of violation are resolved prior to the filing of a complaint; these settlements do not require judicial scrutiny. Settlements reached after a complaint is filed, however, require court approval. Whether resolved out of court or following judicial scrutiny, Proposition 65 claims offer lucrative financial incentives: successful enforcers can receive 25% of any civil penalty settlement, along with their attorneys’ fees and costs.
Trends
As reflected in the chart below (current as of April 3, 2023), the number of notices of violation sent by enforcers since 2021 largely has remained the same, with 3,185 notices issued in 2021 and enforcers sending 3,169 notices in 2022. So, too, have the number and total amount of court-approved and out-of-court settlements. Indeed, the total number of settlements in 2022 was 886, up from 826 in 2021. The total amount of settlements in 2021 and 2022 was $25,555,656 and $26,296,461, respectively. Notably, attorneys’ fees and costs accounted for at least 60% of court-approved settlements since 2021 and more than 85% of out-of-court settlements for that same time frame.
The constant number of notices of violations in the face of a Proposition 65 list that has grown to more than 1,000 chemicals and chemical families is likely due to routine: the same putative plaintiffs are using the same attorneys to target the same chemicals in hopes of obtaining quick and relatively easy settlements. Indeed, a review of Proposition 65 notices reveals that a large percentage of matters is brought by a small number of enforcers and their counsel. And they overwhelmingly focused their efforts in 2021 and 2022 on three chemicals: cadmium, di(2-ethylhexyl)phthalate (DEHP), and lead. This continuity allows putative plaintiffs to identify products that potentially run afoul of Proposition 65 and then leverage existing notices of violation and even complaints to quickly obtain settlements—which in all but the most extreme cases are less expensive than the costs of defending against these claims. This focus on a small number of chemicals also limits the number of products that putative plaintiffs can pull into their ambit given that companies have chosen to reformulate products or add warnings to shield themselves from Proposition 65 liability.
What’s Next
Although it remains to be seen what 2023 holds relative to Proposition 65, all signs point to a continued uptick of notices of violation and resulting settlements. As of April 3, 2023, enforcers have issued 917 notices of violation, compared to 849 notices for this same period in 2021 and 658 notices for 2022.
Although the number of violation notices and settlements have remained steady the last few years, there are signs that this trend is shifting, largely due to the addition to the Proposition 65 list of two per-and polyfluoroalkyl substances (PFAS)—perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS)—that currently are the subject of intense scrutiny by regulators and the public. Proposition 65 provides that warnings take effect one year after a chemical is added to the Proposition 65 list. Where the allegations involve cancer, that one-year period expired on February 25, 2023, for PFOA and December 24, 2022, for PFOS. Given the global attention that PFAS are receiving, additional notices of violation, particularly where enforcers allege exposure to PFOA and PFOS as cancer-causing chemicals, are expected.