WARNING: These Imminent Prop 65 Changes Can Expose You To New Litigation

Prop 65 “bounty hunters” likely will begin stalking branded and third-party e-commerce sites in September when new warning requirements take effect under the bitterly controversial California law.

The state’s Office of Environmental Health Hazard Assessment adopted the new regulations in August 2016, providing businesses with a two-year phase-in period to get their ducks in a row.

Under Prop 65, companies that expose Californians to any of more than 850 chemicals listed by OEHHA as carcinogens or reproductive toxins – based on factors routinely disputed by industry – must furnish “clear and reasonable” warnings to inform consumer choice, or face possible private enforcement actions.

Businesses can take their chances with their own warning language, but to date the OEHHA-approved “safe harbor” warning deemed to comply with the law – and thereby shield firms from litigation – has been fairly simple, if still alarmist in the eyes of critics.

Historically, the warning used by consumer goods companies has identified products as containing a chemical (or chemicals) known to the state of California to cause cancer or other reproductive harm.

The updated provisions, applicable to products manufactured after Aug. 30, 2018, modify safe harbor warning language to:

• emphasize the possibility of a hazardous exposure, including with a yellow, triangular warning symbol enclosing an exclamation point, along with the word “WARNING” in bold-print, capital letters;
• specify at least one listed chemical that prompted the warning; and
• provide individuals with more information about how they can avoid or reduce their exposure by routing them to OEHHA’s new warnings website.

For example, a warning under the new terms might read like this: “WARNING: This product can expose you to toluene, which is known to the State of California to cause reproductive harm. For more information, go to www.P65Warnings.ca.gov.”

Like virtually every other aspect of Prop 65, OEHHA’s warnings website, launched in April 2016, has been the subject of vehement criticism. (Also see "No Joke: Prop 65 Warnings Site Launches To Industry Group's Dismay" - Rose Sheet, 11 Apr, 2016.)

The revised warning language is contentious as well. Industry stakeholders take issue with the arbitrariness of identifying the presence of a single listed chemical in a product that may well contain several chemicals from the sprawling Prop 65 list. (Also see "OEHHA's Updated Prop 65 Draft Reg Still Problematic – Industry Groups" - Rose Sheet, 11 Feb, 2016.)

OEHHA’s new rules do permit use of short-form warnings that omit specific chemical references if they appear directly on product labeling or packaging. This format still must include the warning callout and symbol, specification of the type of exposure hazard represented by the product’s listed ingredient(s) – i.e. cancer and/or reproductive toxicity – and a link to the Prop 65 warnings website.

For example: “WARNING: Cancer - www.P65Warnings.ca.gov.”

The entire on-product warning must be in a type size “no smaller than the largest type size used for other consumer information on the product,” or 6-point type at least, OEHHA says.

Given the warning’s potential obtrusiveness and relative lack of context, which could spook consumers compared with the lengthier types of warnings they’ve grown accustomed to, brands may opt for the longer-form version, either on product or via signage in retail locations.

That approach will require a specific chemical (or more) to be named. This curbs companies’ ability to play it safe by slapping warnings on products when there is any doubt as to whether they contain listed chemicals at levels that lead to exposures above de minimis thresholds – or even on every product they sell in California, eliminating the need to keep up with the ever-growing Prop 65 chemicals list.

Brann & Isaacson attorneys note in a recent article for EHS Daily Advisor that “it is likely illegal to put a warning label on a safe product, but this has not been the subject of class action litigation as products without labeling are those that generally trigger demand letters.”

According to OEHHA, over-warning has diluted the effectiveness of Prop 65. That might be true if there were any meaningful substance left to dilute at this point, given the ubiquity of even legitimate Prop 65 warnings in the Golden State, which appear not only on myriad products and store shelves but also in settings ranging from parking garages and gas stations to restaurants, hotels, dental offices and amusement parks.

At any rate, unless companies opt for the short-form version, they now will be under greater pressure to commit to costly testing to determine whether products containing listed chemicals truly warrant exposure warnings.

Coming lawsuits could test whether companies are liable for needless warnings, in instances for example where a warning about a specific chemical exposure allegedly steers consumers to pricier products that do not contain the chemical of concern and associated Prop 65 warning.

Plaintiff Attorneys Now Free To Hunt At Home

Arguably the most significant change for consumer product firms under the new regulations is that related to online warnings in e-commerce contexts.

Foley & Lardner attorneys Erik Swanholt and Alyssa Titche note in a May 30 post to the firm’s blog that “historically, for product purchases made over the internet, a company needed to provide only a general broad warning at the bottom of the company website to comply with Prop 65 or have a compliant label on the product being sold (even if not seen by the purchaser).”

Starting in September, products sold online that require warnings must have the warning “closely associated” with them. Brands can do this on product display pages by featuring the warning in full or by using a clearly marked “WARNING” hyperlink, taking shoppers for example to a shot of the warning on product labeling.

Alternatively, online sellers can provide the warning to consumers – in a way that clearly ties the warning to the product(s) at issue – prior to the completion of their purchase, for example via a pop-up that appears when a California zip code is entered.

If a short-form warning is used on-product, the same can be used online.

OEHHA notes in the regulation that a warning is not considered prominently displayed if the purchaser must search for it in the general content of the website.

Companies that sell products by way of catalogs also should take note of new safe harbor warning requirements, another subject covered – in addition to internet warnings – in updated guidance issued by OEHHA in March.

“The new regulations – particularly the new requirements for internet safe harbor warnings and the relative ease of hunting for noncompliant websites – are likely to bring a significant uptick in the 2019 private enforcement numbers,” Foley & Lardner attorneys warn.

Prop 65 has given rise to a cottage industry of plaintiff attorneys – aka bounty hunters – whose primary aim, critics say, is to strongarm well-intentioned, even compliant product marketers into making settlement payouts.

“Now with the new internet and catalog warning requirements, these individuals can ‘hunt’ from the comfort of their own homes,” the Foley attorneys point out.

Notably, the new regulations place the onus of Prop 65 warnings more squarely on manufacturers, as opposed to retailers, including in third-party e-commerce settings.

George Gigounas, a partner at DLA Piper, observes in a November 2017 product liability alert that manufacturers cannot simply affix warning labels to their products, but also must provide notice about necessary warnings (and corresponding language) to online retailers that carry their offerings.

“Some stakeholders have complained that this places an unfair burden on manufacturers or other upstream entities to pass along notice that an internet warning is needed if the product is sold online, since upstream entities sometimes do not know where their goods will be ultimately sold, or whether they will be sold online,” Gigounas relates.

He encourages upstream entities to closely review their indemnity agreements with direct customers and clarify as needed specific obligations relative to Prop 65.

Bottom Line: Increased Litigation Likely

Foley’s Swanholt and Titche note that private Prop 65 enforcement actions and total payouts have remained relatively flat over the past three years, with roughly 700 actions per year accounting for around $50m to $60m in settlements and judgments.

They predict that “the new regulations – particularly the new requirements for internet safe harbor warnings and the relative ease of hunting for noncompliant websites – are likely to bring a significant uptick in the 2019 private enforcement numbers.”

With the compliance clock ticking, “businesses need to act now to understand the risks and complexities associated with the new Prop 65 regulations and to take steps to comply,” they say.

DLA Piper’s Gigounas extends a similar message.

Particularly for smaller retailers, “the new regulations give tools that proactive companies can use to reduce their Prop 65 exposure,” he says. “But potential pitfalls under the new regulations require companies to pay close attention to how the new rules work.”

(Also see "California's Prop 65 Gets Pro-Biz Amendments, But Upshot Remains To Be Seen" - Rose Sheet, 17 Oct, 2017.)