Despite a proposal for partial relief, pending regulations likely will make defending Proposition 65 actions in California even more onerous for companies doing business in the state.
In 2018, California regulators proposed to change "safe harbor defense" regulations in ways that would put those already costly defenses out of reach for many Prop 65 defendants.
Modifications proposed by CalEPA's Office of Environmental Health Hazard Assessment (OEHHA) in July 2019 only address one of two major concerns industry commentators have raised. Furthermore, if approved, those modifications would effectively eliminate or significantly limit safe harbor provisions that protect against Prop 65 bounty hunters.
While the proposal affects all consumer product companies, food and beverage companies would be particularly impacted. Such companies, which are subject to Prop 65 if they or their retailers sell into California, are already burdened with Prop 65's unique ultra-low lead (Pb) safe harbor, the Maximum Allowable Dose Level (MADL) of 0.5 micrograms per day, and are already a frequent target for enforcement.
Under Prop 65, bounty hunters ("private attorneys general") may issue Notices of Violation and file lawsuits if they can plausibly allege an exposure to a listed chemical. But businesses have been able to fight back by demonstrating that the exposure is below the daily safe harbor level. For consumer product defendants, this means presenting evidence of the concentration of the chemical in the product and the level of exposure, which is the concentration multiplied by the reasonably anticipated rate of intake or consumption.
OEHHA's October 5, 2018 proposal would have made such evidence much more difficult to produce and less useful by prohibiting the averaging of test results (needed to show concentration levels) from different co-manufacturers of the same product or different facilities producing the same product − both common arrangements in today's complex supply chains. No other regulator imposes such a requirement.
In addition, in a more technical but equally impactful change, OEHHA sought to bar the use of the "geometric mean" to calculate average intake levels and instead to require the "arithmetic mean," which experts recognize as tending to overstate the level of exposure due to the skewed distribution of most consumption datasets.
What has changed?
Unfortunately, OEHHA's changes do not fully address concerns raised by industry groups about the proposed limitation on the ways companies compile product testing from multiple manufacturers or facilities.
But to put the good news first, in its July revision OEHHA has withdrawn the prohibition on the geometric mean, bowing to pressure from industry and academics who argue that the geometric mean should at least be an option to be employed where appropriate. That proposal is thus the second failed attempt by OEHHA to roll back the Court of Appeal's decision in E.L.F. v. Beech-Nut Corp., 235 Cal.App.4th 307 (2015), which sanctioned the use of the geometric mean to calculate daily consumption rates averaged over a two-week period.
But there is bad news for industry, too. OEHHA's recent modifications attempt to clarify that inclusion of ingredients or other components from multiple sources at one manufacturing facility does not bar the averaging of sample data – "where grains are harvested from multiple farms and are then mixed together at a manufacturing facility" is OEHHA's example. But OEHHA's modified proposal retains the prohibition on averaging across different co-manufacturers or different facilities producing the same product. Thus, the changes do nothing to alleviate concerns that the difficulty of collecting and sorting concentration data by facility render the safe harbor defense nearly useless in some situations.
Furthermore, OEHHA's Initial Statement of Reasons explains that data from some facilities "are not necessarily representative of the products an actual California consumer would purchase or use," but it entirely omits guidance as to which data sets are representative or are otherwise properly part of the exposure assessment. The proposal thus fails to deliver clarity and instead offers plaintiffs another opportunity to dispute safe harbor defenses, especially at the Motion for Summary Judgment stage.
In its current form, OEHHA's proposed regulation would require consumer product manufacturers who wish to preserve the possibility of a safe harbor defense to implement testing regimes separately at each individual facility and co-manufacturer and to account for all facility and contract manufacturer changes, even where there is no reason to suspect differences in concentrations of listed chemicals across facilities. A producer without sufficient facility-specific testing data could effectively lose its safe harbor exposure defense.
There is still time to comment and engage with the agency. The comment period for the proposed changes will close on Monday, August 5, 2019, unless a request for an extension is made and granted. Interested parties should consult with counsel regarding the regulations and potential responses.