California Attorney General Kamala Harris has introduced a series of regulatory changes to Proposition 65 intended to curb “frivolous lawsuits.”
The Attorney General’s proposal seeks to ensure that the lion’s share of civil penalties paid by businesses that settle Proposition 65 enforce-ment actions go to fulfilling the law’s purpose of protecting public health, said Kristin Ford, press secretary for Harris.
“It creates less financial incentive for parties to bring litigation against businesses in ways that are not necessarily in the public interest,” she added.
Businesses paid more than $29 million in settlements last year related to Proposition 65. Of that total, $21 million went for attorney fees and costs, according to the Attorney General’s Office.
In the past five years the total dollar value of settlements has more than doubled from the 2010 total, and the volume of 60-Day Notices and Proposition 65 complaints have also increased substantially.
Ford notes that the state has little oversight in determining how those settlements con-tribute to the public health goals of Proposition 65.
The proposal to amend the regulations marks the first substantial change to the Attorney General’s Proposition 65 regulations since their adoption in 2001-2003.
“California has led the nation for decades in protecting our residents and the environment from pollutants and toxic chemicals,” said Attorney General Harris. “These proposed changes maintain the intent of Proposition 65 and our vital legacy of public
health and environmental protections while eliminating incentives to abuse the system. Good public policy means rejecting the false choice that suggests we must sacrifice our commitment to the environment and public health for California businesses to thrive.”
The change proposed by Harris would require private Prop 65 enforcers to better define and report how they will spend settlement payments. Harris also proposes to cap “in lieu of penalties” payments paid by businesses, so that a greater share of the fines go to the state agency that implements Prop. 65 — the Office of Environmental Health Hazard Assessment (OEHHA).
One area of proposed change is to require plaintiffs filing complaints or reporting settlements to provide copies of the documents to the Attorney General’s office within five days of filing. The proposed regulations would also call on plaintiffs to also provide copies of out-of-court settlements within five days.
The heart of the Attorney General’s proposed regulations are settlement guidelines that cover what constitutes reasonable attorneys’ fees and would impose limits the amount of money that can be allocated in lieu of civil penalties.
While there are some minor changes to the settlement guidelines, the focus appears to be on more rigorous controls on reporting of the distribution and spending of settlement funds.
According to the proposed regulation, the guidelines are intended to be consistent with existing law interpreting Code of Civil Procedure section 1021.5, which controls attorneys’ fees in cases brought in the public interest.
The proposed guidelines would provide assistance to the litigants and the court in applying them to issues commonly arising under Proposition 65. These guidelines apply to settle-ments under which the basis for a fee award is provided by Code of Civil Procedure section 1021.5. The proposed regulation notes that if there is “a different or additional basis for an award of fees, parts of these guide-lines may not apply.”
The Attorney General has been considering new regulations to cap payments made in lieu of civil penalties since 2010, having discussed this issue with attorney’s representing citizen enforcement groups on several occasions.
One provision in the proposed regulation would prevent plaintiffs from collecting in lieu of civil penalties payments in out of court settlements, requiring that these payments “must be subject to ongoing judicial oversight.
The proposed regulations would also require that activities funded by in lieu of penalties payments should have a clear and substantial nexus to the violation alleged, i.e., the activities should address the same public harm as that allegedly caused by the defendant(s) in the particular case. The Attorney General defines a “clear and substantial nexus” as meaning the funded activity be designed to have a direct and primary effect within the State of California.
The Attorney General’s proposed regulations would require the recipient of funds in lieu of civil penalties to “demonstrate how the funds will be spent and can assure that the funds are being spent only for the proper, designated purposes described in the settlement.”
A statement supporting the recipient entity’s accountability should be included in the settlement or in its supporting papers.
In addition, the settlement should describe with specificity the activities to be funded and the amount of funding for each activity.
“It is not sufficient simply to state broadly that the Additional Settlement Payments will be used for future Proposition 65 enforcement, or to reduce exposure to toxic chemicals,” the proposed regulation states. “The settlement should require the plaintiff to obtain and maintain adequate records to document that the funds paid as an ‘Additional Settlement Payment,’ whether to the plaintiff or to a third party, are spent on the activities described in the settlement. The settlement should require the plaintiff to provide to the Attorney General, within thirty days of any request, copies of all documentation demonstrating how such funds have been spent.”
The proposed amendments would also require the tax status of the entities receiving in lieu of penalties funds, and disclosure of any economic interest that a party to the settlement or its counsel has in any entity, besides itself, that will receive all or part of any such payments.
Interested parties may submit public comments on the Attorney General’s proposed regulations through November 9, 2015.
Comments should be submitted to:
Trish Gerken Senior Legal Analyst Office of the Attorney General2550 Mariposa Mall, Rm. 5090 Fresno, CA 93721 Fax: (559) 488-7387