California's Prop 65 is Dangerous to Your Store
By Marc Ullman, Esq. and Todd H. Halpern
Imagine having to explain to customers why they should buy products you are offering for sale when they contain carcinogens and reproductive toxins, even though they are completely natural and contain no added chemicals. After all, customers come to you to purchase products that do not contain all of the chemicals and preservatives that they believe are found in products sold in the mainstream. Indeed, the very reason for the existence and booming success of the natural products industry is that it offers consumers a high quality alternative to chemical laden, artificial, vitamin deficient products. It would seem, then, that consumers confronted with warnings that some products sold in health food stores could visit them with the same ills as anything that they could buy in the supermarket would wonder exactly why they should continue to shop in your store.
Believe it or not, this scenario is not far fetched. Recent enforcement actions under a California environmental law known as Proposition 65 ("Prop 65") have opened the door to the possibility that the labels of many supplements sold in California may be required to contain these warnings. Worse yet, a number of other states are actively considering "right to know" legislation that would require similar warnings on products sold in their jurisdiction. It is essential that everyone involved in the marketing of natural products -- including retailers -- understand the challenges presented by this type of law, the faulty logic behind its application without discretion and work together to formulate a cohesive response to Prop 65 and other "right to know" legislation.
What Is Proposition 65?
Passed as a public ballot measure over a decade ago, Prop 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986) was designed to reduce the public's exposure to carcinogens and reproductive toxins by prohibiting two types of activities. First, the law forbids "any person in the course of doing business"1 from knowingly discharging or releasing a chemical known to the state to cause cancer or reproductive toxicity (a Prop 65 chemical) either directly into water or onto or into land where such chemical passes or probably will pass into any source of drinking water. Second, businesses are prohibited from "knowingly and intentionally" exposing any individual to any amount of a Prop 65 chemical without first providing a "clear and reasonable warning" to that individual. Under the latter provision, the sale of a product containing a Prop 65 chemical without giving adequate warning to consumers could potentially subject your business to fines as high as $2,500 for each unit of product sold. Liability for a violation can reach through the entire distribution chain of a substance--from the harvester of an herb to the retail outlet where it is sold.
A substance officially becomes a "Prop 65 chemical" when it is included on a list that is published and periodically updated by the state. To date, approximately 1,000 chemicals have been listed by California. Once a chemical is listed, all companies selling products containing the listed chemical have twelve months to provide all purchasers with a "clear and reasonable warning." The warning must be prominently placed on a product's label or labeling, or displayed at the retail outlet, in a manner that will "render it likely to be read and understood by an ordinary individual under customary conditions of purchase or use." The warning must include the following language:
Warning: This product contains a chemical known to the state of California to cause (cancer) (birth defects) (or other reproductive toxicity.)
Although a business is not liable unless it "knowingly" exposes an individual to a Prop 65 chemical, it is not necessary to prove that the business had actual knowledge that it was causing an exposure. Courts have ruled that the knowledge requirement can be satisfied merely by showing the existence of a publicly available document stating that a Prop 65 chemical is present in a product. Hence, the manufacturer, distributor or retailer of a product can be found to "knowingly" cause an exposure based on something as obscure as a posting found on the internet.
If found to have knowingly exposed an individual to a Prop 65 chemical, the only way an alleged violator can avert liability is to establish that it qualifies for one of four extremely limited exemptions. The first applies in cases where federal law requires a warning for the specific exposure in a manner that preempts (i.e.supersedes) state authority. This exemption has been so narrowly construed that, for example, in a case brought against manufacturers of certain paint strippers and removers containing methylene chloride (a Prop 65 chemical), a state court ruled that Prop 65 was not preempted by a federally mandated warning that methylene chloride has "been shown to cause cancer in certain laboratory animals," merely because that warning did not clearly communicate that the chemical was known to the State of California to cause cancer. The defendants in that case had to pay over $500,000 in fines and attorneys fees.
The remaining exemptions relate to the amount of the Prop 65 chemical to which individuals were exposed. For carcinogens, an exposure is exempt if it is at or below a level that "poses no significant risk assuming lifetime exposure at the level in question" (the NSRL). Similarly, exposures to "reproductive toxins" are exempt if they are at or below a level "that will have no observable effect assuming exposure at one thousand (1000) times the level in question" (the NOEL). Finally, an exposure to any Prop 65 chemical by a food product is exempt if the exposure was at a level which "naturally occurs" in the food consumed (i.e., where the chemical is present in the food due to no known human activity).
Both the NSRL and the NOEL are determined by a state agency, the Office of Environmental Health Hazard Assessment (OEHHA), at levels which, in some cases, are set so low that they fall below that which current technology can reliably detect. To qualify for the "naturally occurring" exemption, an alleged violator has to show that the chemical is not present due to any known human activity. Thus, if a chemical were present in an herb due to the residual presence of pesticides used many years ago, the alleged violator would not qualify for exemption--even if it were impossible, or economically unfeasible, to remove those chemicals from the soil.
Bounty Hunters
While vesting the California Attorney General with principal enforcement responsibilities, the statute also permits "any person in the public interest" to sue. Victorious plaintiffs can collect 25% of all penalties imposed and, pursuant to another California law, attorneys fees if the suit is found to have been brought in the public interest.2 Indeed, the financial incentive for plaintiffs is so great that the law has spawned a virtual cottage industry of organizations and private citizens specializing in commencing Prop 65 actions--many times at the expense of legitimate businesses and in cases that may actually harm the public. Such plaintiffs have become known as "bounty hunters."
Private citizens wishing to start an enforcement action must first send a 60 day notice to the Attorney General, the district attorney and any city attorney in whose jurisdiction the violation is alleged to have occurred, and to the alleged violator. If no government prosecutor begins a case within 60 days of receiving the notice, a bounty hunter may take action on its own, even if the government states outright that it would not be in the public interest to commence an enforcement action. The California Attorney General has stated that it considers one of every five private enforcement actions to be meritless.
Proposition 65 and the Natural Products Industry
While nearly all industries are affected by Prop 65, an action involving several manufacturers of fish oil supplements illustrates the special threat that the law may pose to the natural products industry. In July 1997, the Mateel Environmental Justice Foundation (a well known bounty hunter organization) served a 60 day notice alleging that a number of fish oil supplements contained over 15 different Prop 65 chemicals. Incredibly, instead of testing the supplements for the presence of any of the named chemicals, Mateel relied solely on a study by the government of the United Kingdom (posted on the Internet) which acknowledged the presence of many of these chemicals in the oceans and fish oil consumed in the UK. The study also noted that the chemicals were present at levels so low that they posed no health risk.
However, Mateel took the position that it was not necessary for it to test any of the specific products named in its 60 day notice. Rather, it contended that Prop 65 permitted it to base its allegations on a "background pollution" theory. In essence, such a theory argues that presence of the Prop 65 chemicals in the water in which the fish swim inevitably results in those chemicals being absorbed in the fish's systems and finding their way into the fish oil sold to consumers.
If such a theory is found sufficient to support an allegation of liability for failure to warn, defendants would have to establish that their products contain levels of the chemicals that either fall beneath the NSRL or NOEL, or "naturally occur" in the fish. This would be an extremely expensive undertaking that would include hiring a laboratory capable of detecting microscopic amounts of the chemicals. Further complicating matters is the possibility that technology capable of testing these chemicals at Prop 65 levels may not exist. Hence, defendants may be completely incapable of rebutting an argument based on the background pollution theory.
A ruling which upheld the validity of the background pollution theory could have profound consequences on the natural products industry. A bounty hunter could begin an enforcement action against any product containing an ingredient harvested from the land or the water, without having to go through the expense of having the product tested. On the other hand, the difficulty and high costs associated with defending such actions would place defendants in the unenviable position of either paying the high costs of litigation, or settling.
Fortunately, the California Attorney General conducted its own tests of the products named by Mateel. Based upon the results of those tests, the Attorney General has determined not to commence a general enforcement action, and to pursue the matter with only one company. Confronted with favorable test results, Mateel apparently has decided not to pursue an independent action, and to wait for a more favorable set of circumstances to press the "background pollution" theory.
Another case of significance involved an action against calcium manufacturers. In early 1997, the Natural Resources Defense Council (NRDC) served a 60 day notice on a variety of manufacturers and marketers of calcium supplements alleged to contain amounts of lead in excess of the NOEL (.5 ug. of lead per day, per maximum dose of the calcium supplement). In response, the Attorney General commenced an action against all of the alleged violators except for Leiner Health Products Group Inc. (Leiner), which settled with the NRDC for approximately $250,000. All of the remaining defendants (except for one) agreed to a settlement which: (1) would require companies to obtain calcium only from the commercial source containing the smallest quantity of lead; and (2) pay fines and incrementally reduce the level of lead contained in their products over time. This agreement has the potential to lead to there being only a single source of calcium carbonate that can be marketed in California without the Prop 65 warning. Remarkably, arguing that the terms of the settlement are not strict enough, the NRDC is attempting in court to have it overturned and declared "contrary to the public interest."
All members of the natural products industry should be greatly concerned that this could happen to a mineral that has been found by the FDA, and other prominent scientific organizations, as being an effective tool for combatting lead poisoning by reducing lead absorption in the body, in addition to its widely accepted role in reducing the risk of osteoporosis--a billion dollar health problem in this country. In the end, the only "accomplishment" of the NRDC's action may be to cause fewer women to ingest calcium because they are frightened by the Prop 65 warning statement and thereby increase their risk of osteoporosis.
Responding to Proposition 65 and Other "Right to Know" Laws
Legislators in Connecticut, Hawaii, and Massachusetts, have introduced legislation modeled on Prop 65 which provide for private rights of action. Although the bills failed to pass last legislative session, all are capable of being reintroduced this fall. In these states and any other that considers "right to know" legislation based on Prop 65, lobbying efforts to alert legislators to the history of abuses by bounty hunters in California are imperative. Industry efforts along these lines in Massachusetts last year proved effective. Effective responses to Prop 65, however, present a far more significant challenge. Because the California legislature has the authority to amend Prop 65, lobbying is a viable option. However, such changes must be "consistent with the purpose" of Prop 65, and be approved by a 2/3 majority of the state legislature. All proposals to modify Prop 65 have been opposed by the state's environmental lobby and bounty hunters. Moreover, the California Supreme Court recently rejected a constitutional challenge to the law's "bounty hunter" provision, suggesting that the state courts would be an inhospitable forum.
Legislative and judicial action could also be sought on the federal level. A bill recently introduced in both the House and the Senate, the "National Uniformity for Food Labeling Act," which might result in the preemption of many Prop 65 warnings applicable to foods and supplements suggests that certain members of Congress recognize the extreme burden that "bounty hunter" "right to know laws" place on commerce. However, the recently enacted Food and Drug Administration Modernization Act contained a provision specifically exempting Prop 65 warnings on over-the-counter drugs from preemption; something that does not bode well for legislation designed to exempt Prop 65.
Another option is the filing of a Citizen's Petition with the FDA requesting that it make a statement preempting Prop 65. However, FDA has not given any sign that it would act favorably on any such request from the dietary supplement industry. The NRDC filed an FDA Citizen's Petition seeking establishment of a national lead tolerance for maximum daily dose of calcium products of .5 ug. The Council For Responsible Nutrition (CRN) filed a counter-petition opposing such a national standard almost two years ago, but the matter is still pending before FDA. If FDA will not act on behalf of calcium, it is difficult to imagine the agency taking any general action to preempt Prop 65.
Conclusion
After a decade of relative immunity, FDA regulated products, including dietary supplements, have come onto the radar screen of Prop 65 bounty hunters. The successful enforcement action against marketers of calcium carbonate products, and the threatened action against fish oil supplements, vividly illustrate the very real threat that this law can pose to the natural products industry.
The chance of additional successful prosecution of other enforcement actions and the validation of the background pollution theory warrant the attention of every member of the dietary supplement industry. While both the calcium and the fish oil matters directly involved only suppliers and manufacturers of these products, retailers cannot forget that they are also potential defendants. And, even if they are not targeted directly, the burden of explaining the meaning of warnings on product labels or shelf notices will fall upon the retailer in their store.
It is incumbent upon all in the natural products industry to actively express their concern with Prop 65 and similar laws to their elected representatives. Unified action against any proposed legislation modeled on Prop 65 in other states is also required. It is imperative that all affected parties work together in order to formulate an effective, creative solution to the challenges posed by Prop 65 and other "right to know" legislation.
- This includes all business entities with 10 or more employees. Government entities and businesses with fewer employees are exempt.
- At least one state appellate court has ruled that successful Proposition 65 cases are presumed to be in the public interest.
Marc Ullman, Esq., is of counsel to New York-based Bass & Ullman, P.C, which has been practicing food and drug law for almost 50 years. Todd H. Halpern is an associate at the firm.