California's Safe Drinking Water and Toxic Enforcement Act of 1986, commonly referred to by its original name of Proposition 65, was intended to protect the state's citizens and drinking water sources from exposure to toxic chemicals. However, many believe its goals have had unintended consequences caused by the private action enforcement provisions, which have resulted in companies doing business in California incurring unexpected additional costs. Indeed, in 2008 alone, companies doing business in California paid more than $17.8 million in settlement of private action claims, most of which was paid directly to the private action plaintiffs as attorneys' fees, penalties and "other" costs. Companies contemplating or currently conducting business in California must be mindful of Proposition 65's warning requirements and discharge prohibitions in order to avoid costly pitfalls down the road.

Among Proposition 65's requirements is a mandate that businesses provide a "clear and reasonable" warning to any individual before knowingly and intentionally exposing that person to a chemical identified by the State of California to cause cancer or reproductive harm. Currently, the list identifies approximately 800 chemicals, some of which may be found in building materials, solvents, drugs, emissions, and by-products of manufacturing processes.

Any business that has violated Proposition 65 shall be liable for up to $2,500 per day for each violation, in addition to plaintiffs' attorneys' fees and costs and any other penalty established by the court. Private action litigants are entitled to recover 25% of the civil penalties directly.

Although the California Attorney General's Office, any district attorney, and many city attorneys may enforce Proposition 65, in most instances a private action is commenced by any person acting in the "public interest," following 60 days notice of the alleged violation to the accused business and the referenced governmental officials and failure of the government officials to initiate an enforcement action. Due to the limited financial resources of government entities and the substantial incentives for private litigants to file actions, we expect to see increased numbers of notices of violations from private parties over the coming years.

Any persons conducting business in California should immediately familiarize themselves with the requirements and prohibitions of Proposition 65 in order to avoid costly compliance issues in the future. Whether or not to settle a demand or to provide preemptive warnings are all economic decisions that should be made with an understanding of the financial impact and legal ramifications. It is important for any business that receives a notice of violation to retain counsel promptly, so that the notice may be evaluated for potential defenses, including those based on procedural defects and exemptions to the statute.


Andrew Nelson is a partner in WFB&M's San Francisco office and can be reached at (415)781-7072, extension 2804, or anelson@wfbm.com. Karol Ingber is an attorney in the Los Angeles office, and can be reached directly at (213)223-2054, or kingber@wfbm.com.

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