The California Office of the Attorney General is seeking to limit certain payment provisions common in Prop. 65 plaintiffs’ settlements with defendants. The proposed rulemaking, published September 25, 2015, would limit the sums payable to the plaintiffs “in lieu of” civil penalties (often referred to as “Additional Settlement Payments”), as well as require ongoing judicial supervision of how plaintiffs actually expend these funds. The proposal would also permit award of plaintiff’s attorneys’ fees and costs only in cases where there a “significant” public benefit was obtained. The Attorney General’s office stated that the proposals are intended to bring Prop. 65 practice more in line with the drafters’ intent, as well as increase public accountability of the plaintiffs’ bar.

The proposal would specifically amend Cal. Code Regs. tit. 11, § 3204 to state that plaintiffs cannot receive as payments “in lieu of” civil penalties/“Additional Settlement Payments” an amount of money greater than that paid to OEEHA as civil penalties under the settlement. The Attorney General’s office claims that this is to ensure that monies paid directly to plaintiffs do not undermine a central goal of Prop. 65: namely to fund OEHHA’s scientific evaluation of risks posed to the public by hazardous substances. Additional amendments to Cal. Code Regs. tit. 11, § 3204 would, among other things, require that activities funded by Additional Settlement Payments have a “clear and substantial nexus” to the violation alleged. This would be enforced by ongoing judicial supervision under the proposed regulations, meaning that “out-of-court” settlements could not include such provisions.

Furthermore, by seeking to refine the interpretation of what constitutes a “significant” public benefit, the regulations would also limit — in theory — when the payment of attorneys’ fees and costs are appropriate. Specifically, attorneys’ fees and costs are awarded to Prop. 65 plaintiffs, pursuant to Cal. Civ. Proc. Code § 1021.5, where the action conferred a “significant” public benefit. See Cal. Code Regs. tit. 11, § 3201. Among other things, the proposal would state that reformulation would constitute a “significant” public benefit where “(a) at least some of the products in controversy in the action either are, or at some time were, above the warning level, and (b) such products will be below the warning level as reformulated, or else the mere fact of reformulation may not establish the existence of a significant public benefit.” Cal. Code Regs. tit. 11, § 3201(b)(2) (proposed text). This is consistent with the existing regulatory provision that considers the implementation of warnings a “significant” public benefit, unless “there is no evidence of an exposure for which a warning is plausibly required[.]” Cal. Code Regs. Tit. 11, § 3201(b)(1).

Although greater oversight into settlement payments to Prop. 65 plaintiffs may be a step in the right direction, these proposed changes will not reduce Prop. 65 litigation. Also, we caution that the proposed change regarding payment amounts could have the undesirable effect of increasing the amount of penalties to OEHHA (to justify the payments that are being made to Prop. 65 plaintiffs).

More information about these proposals can be found here.